N-CSRS 1 d83426dncsrs.htm AB CAP FUND, INC. AB Cap Fund, Inc.

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM N-CSR

 

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-01716

 

 

AB CAP FUND, INC.

(Exact name of registrant as specified in charter)

 

 

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

(Address of principal executive offices) (Zip code)

 

 

Joseph J. Mantineo

AllianceBernstein L.P.

1345 Avenue of the Americas

New York, New York 10105

(Name and address of agent for service)

 

 

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

Date of fiscal year end: May 31, 2016

Date of reporting period: November 30, 2015

 

 

 

ITEM 1. REPORTS TO STOCKHOLDERS.

NOV    11.30.15

LOGO

 

SEMI-ANNUAL REPORT

AB LONG/SHORT

MULTI-MANAGER FUND

 

 

Investment Products Offered

 

• Are Not FDIC Insured

• May Lose Value

• Are Not Bank Guaranteed

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

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

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

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

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

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

January 16, 2016

 

Semi-Annual Report

This report provides management’s discussion of fund performance for AB Long/Short Multi-Manager Fund (the “Fund”) for the semi-annual reporting period ended November 30, 2015. Effective January 20, 2015, the Fund’s name changed from AllianceBernstein Long/Short Multi-Manager Fund to AB Long/Short Multi-Manager Fund.

Investment Objectives and Policies

The Fund’s investment objective is to seek long-term capital appreciation. The Fund seeks to achieve its investment objective primarily by utilizing a long/short equity strategy (“Long/Short Strategy”). In order to implement the Long/Short Strategy, AllianceBernstein L.P. (the “Adviser”) will allocate the Fund’s assets among multiple investment sub-advisers (each a “Sub-Adviser”) that the Adviser believes have substantial experience managing assets in the global securities markets.

A Long/Short Strategy typically involves buying and/or selling securities believed to be significantly under- or over-priced by the market in relation to their potential value. The Adviser and the Sub-Advisers generally will seek to buy securities in the expectation that they will increase in value (called “going long”) and/or sell securities short in the expectation that they will decrease in value (called “going short”). The Adviser and the Sub-Advisers may invest in one or more countries, including developed and emerging market countries, and may specialize in a specific sector, industry or market capitalization.

Many of the Sub-Advisers hedge portfolios through the use of short sales and/or the use of index options and futures and other derivative products.

When the Fund sells securities short, it sells a stock that it does not own (but has borrowed) at its current market price in anticipation that the price of the stock will decline. To complete, or close out, the short sale transaction, the Fund buys the same stock in the market at a later date and returns it to the lender. While the Fund is generally expected to have a net long bias over time (the net long exposure of the Fund, i.e. long exposure minus short exposure, is generally expected to range between 40% and 60%), the individual Sub-Advisers may be net long, market neutral, or net short at any given time depending upon their individual strategies and/or their view of market conditions. In addition, certain Sub-Advisers are expected to focus primarily on long strategies while others may focus on short strategies.

The Adviser intends to hire and terminate Sub-Advisers in accordance with the terms of an exemptive order that the Fund and the Adviser have received from the Securities and Exchange Commission (the “SEC” or the “Commission”). This order permits the Adviser, subject to the supervision and approval by the Board of Directors of the Fund (the “Board”), to enter into sub-advisory agreements with Sub-Advisers, and to materially amend or terminate those agreements, in each case without seeking the approval of the Fund’s shareholders. The Sub-Advisers will not be affiliated

 

 

AB LONG/SHORT MULTI-MANAGER FUND  •     1   

with the Adviser. The initial shareholder of the Fund approved the Fund’s operation in this manner and reliance by the Fund on this exemptive order.

The Adviser identifies potential Sub-Advisers through a variety of sources. The Sub-Adviser selection process is driven by both quantitative and qualitative analysis. For each prospective allocation to a new Sub-Adviser, the Adviser will first conduct an evaluation of the Sub-Adviser and its strategy, team, and approach through analysis of, among other criteria, the prior investment returns of similar strategies (if any), portfolio exposures, current assets under management, and strategy outlook. The Adviser may also (i) conduct background checks; (ii) analyze whether the Sub-Adviser has the personnel, research and technology resources to effectively implement its Strategy; and (iii) conduct additional due diligence as the Adviser deems appropriate.

The Adviser expects to allocate the Fund’s assets to the Sub-Advisers but may from time to time manage a portion of the Fund’s assets directly. The Adviser may cause the Fund to invest in securities, options, futures, options on futures, swap contracts, or other derivatives or financial instruments.

Under normal circumstances, the Fund primarily invests in equity securities and instruments with similar characteristics, including common stock, preferred stock, convertible securities, rights and warrants, depositary receipts, and securities or other instruments whose price

is linked to the value of common or preferred stock. The Fund’s principal investments may include currencies and restricted securities eligible for resale pursuant to Rule 144A under the Securities Act of 1933.

The Fund may also invest in fixed income and/or floating rate securities, including debt issued by corporations, debt issued by governments (including the US and foreign governments), their agencies, instrumentalities, sponsored entities, and political subdivisions, notes, debentures, debt participations, convertible bonds, non-investment grade securities (commonly known as “junk bonds”), and bank loans (including senior secured loans) and other direct indebtedness.

The Fund’s investments may be publicly traded or privately issued or negotiated. The Fund may invest without restriction as to issuer capitalization, country, currency, maturity or credit rating. The Fund’s investments may include securities of US and foreign issuers, including securities of issuers in emerging countries and securities denominated in a currency other than the US dollar. From time to time, the Fund may invest in shares of companies through initial public offerings.

The Fund expects to use derivatives, such as options, futures, forwards and swaps, to a significant extent. Derivatives may provide a more efficient and economical exposure to market segments than direct investments, and may also be a quicker and more efficient way to alter the Fund’s exposure. For example, Sub-Advisers utilizing a long/short strategy

 

 

2   •  AB LONG/SHORT MULTI-MANAGER FUND

may use various types of derivatives to take both a long and short position in securities or market segments. The Sub-Advisers or the Adviser may use derivatives to effectively leverage the Fund by creating aggregate exposure substantially in excess of the Fund’s net assets.

The Fund also may, from time to time, make investments in public investment vehicles, including other investment companies (including registered investment companies), exchange-traded funds (“ETFs”), European registered investment funds, real estate investment trusts, private investment funds, and partnership interests, including master limited partnerships.

The Fund is considered to be “non-diversified,” which means that the Investment Company Act of 1940, as amended, does not limit the percentage of its assets that it may invest in any one company (subject to certain limitations under the Internal Revenue Code of 1986, as amended).

Investment Results

The table on page 11 shows the Fund’s performance compared with its primary benchmark, the Morgan Stanley Capital International (“MSCI”) World Index (net) and the HFRX Equity Hedge Index, for the six- and 12-month periods ended November 30, 2015. As of November 30, 2015, the Fund was managed by five Long/Short Equity Sub-Advisers.

For the six-month period, all share classes of the Fund generated negative absolute returns but outperformed the

primary benchmark and the HFRX Equity Hedge Index, before sales charges.

There was wide dispersion of returns among Sub-Advisers in the six-month period. In absolute terms, two Sub-Advisers produced positive returns and three produced negative returns. During a period marked by equity weakness, it is not surprising that the Fund’s short-only Sub-Adviser generated strong performance. In particular, being short China and energy helped performance. On the negative side, weakness in value equities took a toll on the Fund’s deep value-focused Sub-Adviser.

For the 12-month period, all but one share class of the Fund generated positive absolute returns, and all share classes outperformed the primary benchmark and the HFRX Equity Hedge Index, before sales charges.

There was less dispersion of returns among Sub-Advisers during the 12-month period, relative to the benchmark. In absolute terms, five of six Sub-Advisers produced positive returns, and one produced negative returns. The strongest contribution to Fund-level returns came from the short-only Sub-Adviser. The only detractor came from the Fund’s deep value-focused Sub-Adviser.

The Fund utilized derivatives in the form of total return swaps, purchased options and written options for hedging and investment purposes. Forwards were used for hedging purposes. For both periods, forwards, purchased

 

 

AB LONG/SHORT MULTI-MANAGER FUND  •     3   

options and written options had an immaterial impact on absolute performance. Total return swaps had an immaterial impact on performance for the six-month period, and added for the 12-month period.

Market Review and Investment Strategy

Macroeconomic and geopolitical concerns, particularly about the implications of potentially slower growth in China, weighed on investor sentiment in the 12-month period. More recently, neg-

ative company-specific headlines caused segments of the market to trade down sharply. This negatively impacted performance for some long/short equity Sub-Advisers including those to which the Fund had exposure.

While some of the Fund’s Sub-Advisers were hurt by the difficult equity environment at different points during the 12-month period, the Fund outperformed the HFRX Equity Hedge Index for both periods.

 

 

4   •  AB LONG/SHORT MULTI-MANAGER FUND

DISCLOSURES AND RISKS

Benchmark Disclosure

The unmanaged MSCI World Index and the HFRX Equity Hedge Index do not reflect fees and expenses associated with the active management of a mutual fund portfolio. The MSCI World Index (free float-adjusted, market capitalization weighted) represents the equity market performance of developed markets. Net returns reflect the reinvestment of dividends after deduction of non-US withholding tax. MSCI makes no express or implied warranties or representations, and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices, any securities or financial products. This report is not approved, reviewed or produced by MSCI. The HFRX Equity Hedge Index measures the performance of funds which maintain at least 50% or more exposure to both long and short positions in primarily equity and equity derivative securities. An investor cannot invest directly in an index or average, and their results are not indicative of the performance for any specific investment, including the Fund.

A Word About Risk

Market Risk: The value of the Fund’s investments will fluctuate as the stock or bond market fluctuates. The value of its investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events that affect large portions of the market. Market risk includes the risk that a particular Strategy, such as global macro, may underperform the market generally.

Allocation and Management Risk: The Adviser will invest the assets of the Fund primarily by allocating Fund assets to the Sub-Advisers. The success of the Fund depends, in part, upon the ability of the Sub-Advisers to develop and implement Strategies to achieve the Fund’s investment objective. There is no assurance that the Adviser’s allocation decisions will result in the desired effects. Subjective decisions made by the Adviser (e.g., with respect to allocation among Strategies) and/or the Sub-Advisers may cause the Fund to incur losses or to miss profit opportunities on which it might otherwise have capitalized. The success of the Fund’s investment program depends primarily on the trading and investing skills of the Sub-Advisers rather than on the trading and investing skills of the Adviser itself. To the extent that the Adviser is unable to select, manage, allocate appropriate levels of capital to, and invest with Sub-Advisers that, in the aggregate, are able to produce consistently positive returns for the Fund, the performance of the Fund may be impaired.

Some Sub-Advisers have little experience managing registered investment companies which, unlike the private investment funds these Sub-Advisers have been managing, are subject to daily inflows and outflows of investor cash and are subject to certain legal and tax-related restrictions on their investments and operations. Subject to the overall supervision of the Fund’s investment program by the Adviser, each Sub-Adviser is responsible, with respect to the portion of the Fund’s assets it manages, for compliance with the Fund’s investment strategies and applicable law. Strategies implemented by the Sub-Advisers may fail to produce the intended results. The success of a particular Sub-Adviser is dependent on the expertise of its portfolio managers. Certain Sub-Advisers may have only one or a limited number of key individuals responsible for managing the Fund’s assets. The loss of one or more key individuals from a Sub-Adviser could have a materially adverse effect on the performance of the Fund.

Short Sales Risk: The Fund may engage in short-selling, which involves the sale of a security that the Fund does not own in the hope of purchasing the same or equivalent security at a later date at a lower price. A short sale involves the risk of an increase in the market price of the security, and therefore the possibility of a theoretically unlimited loss. The Fund must borrow the security to initiate the short sale, and

 

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AB LONG/SHORT MULTI-MANAGER FUND  •     5   

Disclosures and Risks

DISCLOSURES AND RISKS

(continued from previous page)

 

it may be difficult and costly to effect the purchase of the security in order to return it to the lender, particularly if the security is illiquid. The Fund may for a number of reasons be forced to unwind a short sale at a disadvantageous price.

Counterparty Risk: The Fund is expected to establish relationships with third parties to engage in derivative transactions and obtain prime and other brokerage services that permit the Fund to trade in any variety of markets or asset classes. If the Fund is unable to establish or maintain such relationships, such inability may limit the Fund’s transactions and trading activity, prevent it from trading at optimal rates and terms, and result in losses.

Some of the markets in which the Fund may effect transactions are not “exchange-based,” including “over-the-counter” or “interdealer” markets. The participants in these markets are typically not subject to the credit evaluation and regulatory oversight to which members of “exchange-based” markets are subject. This exposes the Fund to the risk that a counterparty will not settle a transaction in accordance with its terms and conditions. Such “counterparty risk” is heightened for contracts with longer maturities where events may intervene to prevent settlement, or where the Fund has concentrated its transactions with a single or small group of counterparties. Furthermore, there is a risk that any of the Fund’s counterparties could become insolvent and/or the subject of insolvency proceedings. If one or more of the Fund’s counterparties were to become insolvent or the subject of insolvency proceedings, there exists the risk that the recovery of the Fund’s assets from the counterparty will be delayed or be of a value less than the value of the assets originally entrusted to the counterparty.

Hedging Transactions Risk: The Fund may invest in securities and utilize financial instruments to seek to hedge fluctuations in the values of the Fund’s positions. However, hedging transactions will typically limit the opportunity for gain if the value of such positions should increase, and may not work as intended and actually compound losses. It may not be possible to hedge against certain price fluctuations at a reasonable cost. The Fund generally is not required to enter into hedging transactions and may choose not to do so.

Volatility Risk: The Fund will frequently be subject to substantial volatility, which could result from a number of causes. Furthermore, there is the risk that a disproportionate share of the Fund’s assets may be committed to one or more investment strategies or techniques, which would result in less diversification than would be suggested by the number of Sub-Advisers being employed. The allocation of Fund assets to Sub-Advisers in response to particular market conditions could increase volatility and potential for loss if such market conditions continue to worsen or react in a manner not anticipated by the Adviser.

Portfolio Turnover Risk: Certain Sub-Advisers may invest and trade securities on the basis of certain short-term market considerations. The resultant high portfolio turnover could potentially involve substantial brokerage commissions and fees.

Fixed-Income Securities Risk: The Fund may invest in debt or other fixed-income securities of US and non-US issuers. The value of fixed-income securities will change in response to fluctuations in interest rates and changes in market perception of the issuer’s creditworthiness or other factors. The Fund may invest to a substantial degree in debt securities rated below investment-grade, otherwise known as high-yield securities or “junk bonds.” High-yield securities may rank junior to other outstanding securities and obligations of the issuer. Moreover, high-yield securities may not be protected by financial covenants or limitations on additional indebtedness. Companies that issue high-yield securities are often highly leveraged and may not have available to them more traditional methods of financing. High-yield securities face ongoing uncertainties and

 

6   •  AB LONG/SHORT MULTI-MANAGER FUND

Disclosures and Risks

 

(Disclosures, Risks and Note about Historical Performance continued on next page)

DISCLOSURES AND RISKS

(continued from previous page)

 

exposure to adverse business, financial or economic conditions that could lead to the issuer’s inability to meet timely interest and principal payments.

Distressed Investments Risk: The Fund may invest in companies that are in poor financial condition, lack sufficient capital or that are involved in bankruptcy or reorganization proceedings. Securities and obligations of such distressed companies often trade at a discount to the expected enterprise value that could be achieved through a restructuring and an investor in such securities is exposed to risk that a restructuring will not occur, or will occur on unfavorable terms. Debt obligations of distressed companies are typically unrated, lower-rated or close to default. Securities of distressed companies are generally more likely to become worthless than securities of more financially stable companies.

Derivative Instruments Risk: The Fund may enter into options, futures, forwards, swaps and other derivative instrument contracts. Derivative instruments may be subject to various types of risks, including market risk, liquidity risk, the risk of nonperformance by the counterparty, including risks relating to the financial soundness and creditworthiness of the counterparty, legal risk and operations risk. The prices of derivative instruments can be highly volatile. Depending on the nature of the derivative, price movements may be influenced by interest rates, changing supply and demand relationships, trade, fiscal, monetary and exchange control programs and policies of governments, and national and international political and economic events and policies.

Small Capitalization and Recently Organized Companies Risk: Fund assets may be exposed, long and short, to securities of small capitalization companies and recently organized companies. Historically, such securities have been more volatile in price than those of larger capitalized, more established companies. These companies may have limited product lines, distribution channels and financial and managerial resources. Further, there is often less publicly available information concerning such companies than for larger, more established businesses. The equity securities of small capitalization companies may be traded in volumes that are lower than are typical of larger company securities.

Non-US Investments Risk: The Fund may invest in securities of non-US companies and foreign countries. Investing in the securities of such companies and countries involves political and economic considerations, such as: the potential difficulty of repatriating funds, general social, political and economic instability and adverse diplomatic developments; the possibility of imposition of withholding or other taxes on income or capital gains; the small size of the securities markets in such countries and the low volume of trading, resulting in potential lack of liquidity and price volatility; fluctuations in the rate of exchange between currencies and costs associated with currency conversion; and certain government policies that may restrict the Fund’s investment opportunities. The economies of non-US countries may differ favorably or unfavorably from the United States economy in such respects as growth of gross domestic product, rate of inflation, currency depreciation, asset reinvestment, resource self-sufficiency and balance of payments position. In addition, accounting and financial reporting standards that prevail in non-US countries generally are not equivalent to US standards and, consequently, less information may be available to investors in companies located in non-US countries than is available to investors in companies located in the United States.

Currency Risk: The Fund may invest a portion of its assets in instruments denominated in currencies other than the US dollar, the prices of which are determined with reference to currencies other than the US dollar. The Fund, however, generally values its securities and other assets in US dollars. To the extent unhedged, the value of the Fund’s assets will fluctuate with currency exchange rates as well as with the price changes of the Fund’s investments. Thus, an increase in the value of the US dollar

 

AB LONG/SHORT MULTI-MANAGER FUND  •     7   

Disclosures and Risks

 

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DISCLOSURES AND RISKS

(continued from previous page)

 

compared to the other currencies in which the Fund makes its investments will reduce the effect of increases and magnify the effect of decreases in the prices of the Fund’s securities in their local markets. The Fund may utilize financial instruments such as currency options and forward contracts to hedge currency fluctuations, but there can be no assurance that such hedging transactions (if implemented) will be effective.

Emerging Markets Risk: Investment in emerging market securities involves a greater degree of risk than investment in securities of issuers based in developed countries. Among other things, emerging market securities investments may carry the risks of less publicly available information, more volatile markets, less strict securities market regulation, less favorable tax provisions, and a greater likelihood of severe inflation, unstable currency, war and expropriation of personal property than investments in securities of issuers based in developed countries.

Undervalued Securities Risk: The Fund may make certain investments in securities that the Sub-Advisers believe to be undervalued. However, there are no assurances that the securities will in fact be undervalued. In addition, it may take a substantial period of time before the securities realize their anticipated value, and such securities may never appreciate to the level anticipated by the Sub-Advisers.

Quantitative Investment Risk: Certain Sub-Advisers may attempt to execute strategies for the Fund using proprietary quantitative models. Investments selected using these models may perform differently than expected as a result of the factors used in the models, the weight placed on each factor, changes from the factors’ historical trends, and technical issues in the construction and implementation of the models (including, for example, data problems and/or software issues). There is no guarantee that a Sub-Adviser’s use of quantitative models will result in effective investment decisions for the Fund. The success of a Sub-Adviser’s quantitative investment models is heavily dependent on the mathematical models used by the Sub-Adviser. Models that have been formulated on the basis of past market data may not be predictive of future price movements. Models also may have hidden biases or exposure to broad structural or sentiment shifts. Furthermore, the effectiveness of such models tends to deteriorate over time as more traders seek to exploit the same market inefficiencies through the use of similar models.

Multi-Manager Risk: The multi-manager strategy employed by the Fund involves special risks, which include:

 

•  

Offsetting positions. Sub-Advisers may make investment decisions which conflict with each other; for example, at any particular time, one Sub-Adviser may be purchasing shares of an issuer whose shares are being sold by another Sub- Adviser. Consequently, the Fund could indirectly incur transaction costs without accomplishing any net investment result.

 

•  

Proprietary investment strategy risk. Sub-Advisers may use proprietary or licensed investment strategies that are based on considerations and factors that are not fully disclosed to the Board or the Adviser. Moreover, these proprietary or licensed investment strategies, which may include quantitative mathematical models or systems, may be changed or refined over time. A Sub-Adviser (or the licensor of the strategies used by the Sub-Adviser) may make certain changes to the strategies the Sub-Adviser has previously used, may not use such strategies at all (or the Sub-Adviser’s license may be revoked), and may use additional strategies, where such changes or discretionary decisions, and the reasons for such changes or decisions, are also not fully disclosed to the Board or the Adviser. These strategies may involve risks under some market conditions that are not anticipated by the Adviser or the Fund.

 

 

8   •  AB LONG/SHORT MULTI-MANAGER FUND

Disclosures and Risks

 

(Disclosures, Risks and Note about Historical Performance continued on next page)

DISCLOSURES AND RISKS

(continued from previous page)

 

Non-Diversification Risk: The Fund is a “non-diversified” investment company, which means that the Fund may invest a larger portion of its assets in a smaller number of issuers than a diversified investment company. This increases the risks of investing in the Fund because the performance of each security in which the Fund invests has a greater impact on the Fund’s performance. To the extent that the Fund invests a relatively high percentage of its assets in securities of a limited number of companies, the Fund may also be more susceptible than a diversified investment company to any single economic, political or regulatory occurrence.

Leverage Risk: Leverage creates exposure to gains and losses in a greater amount than the dollar amount made in an investment by attempting to enhance return or value without increasing the investment amount. Leverage can magnify the effects of changes in the value of the Fund’s investments and make the Fund more volatile. The use of leverage may cause the Fund to liquidate portfolio positions when it may not be advantageous to do so.

Liquidity Risk: Liquidity risk exists when particular investments are difficult to purchase or sell, possibly preventing the Fund from selling out of these illiquid securities at an advantageous price. Illiquid securities may also be difficult to value. Derivatives and securities involving substantial market and credit risk tend to involve greater liquidity risk.

Real Estate Related Securities Risk: The Fund may invest in real estate related securities and may indirectly invest in real assets, such as real estate, natural resources and commodities, and infrastructure assets. Investing in real estate related securities includes, among others, the following risks: possible declines in the value of real estate; risks related to general and local economic conditions, including increases in the rate of inflation; possible lack of availability of mortgage funds; overbuilding; extended vacancies of properties; increases in competition, property taxes and operating expenses; changes in zoning laws; costs resulting from the clean-up of, and liability to third parties for damages resulting from, environmental problems; casualty or condemnation losses; uninsured damages from floods, earthquakes or other natural disasters; limitations on and variations in rents; and changes in interest rates. Investments in real assets involve a substantial degree of risk, including significant financial, operating and competitive risks. Investing in real estate investment trusts (“REITs”) involves certain unique risks in addition to those risks associated with investing in the real estate industry in general. REITs are dependent upon management skills, are not diversified, and are often subject to heavy cash flow dependency, default by borrowers and self-liquidation.

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

An Important Note About Historical Performance

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

All fees and expenses related to the operation of the Fund have been deducted. Net Asset Value (“NAV”) returns do not reflect sales charges; if sales charges were reflected, the Fund’s quoted performance would be lower. SEC returns reflect the applicable sales charges for each share class: a 4.25% maximum front-end sales charge for Class A shares; a 1% 1-year contingent deferred sales charge

 

AB LONG/SHORT MULTI-MANAGER FUND  •     9   

Disclosures and Risks

 

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DISCLOSURES AND RISKS

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for Class C shares. Returns for the different share classes will vary due to different expenses associated with each class. Performance assumes reinvestment of distributions and does not account for taxes.

 

10   •  AB LONG/SHORT MULTI-MANAGER FUND

Disclosures and Risks

HISTORICAL PERFORMANCE

 

        
THE FUND VS. ITS BENCHMARKS
PERIODS ENDED NOVEMBER 30, 2015 (unaudited)		   NAV Returns      
  6 Months        12 Months       
AB Long/Short Multi-Manager Fund         

Class A

     -1.43%           0.58%     

 

Class C

     -1.82%           -0.10%     

 

Advisor Class*

     -1.33%           0.88%     

 

Class R*

     -1.53%           0.39%     

 

Class K*

     -1.43%           0.58%     

 

Class I*

     -1.33%           0.88%     

 

Class Z*

     -1.33%           0.88%     

 

Primary Benchmark: MSCI World Index (net)     -3.97%           -0.72%     

 

HFRX Equity Hedge Index     -4.34%           -1.78%     

 

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

        

 

See Disclosures, Risks and Note about Historical Performance on pages 5-10.

(Historical Performance continued on next page)

 

AB LONG/SHORT MULTI-MANAGER FUND  •     11   

Historical Performance

HISTORICAL PERFORMANCE

(continued from previous page)

 

AVERAGE ANNUAL RETURNS AS OF NOVEMBER 30, 2015 (unaudited)  
     NAV Returns       

SEC Returns

(reflects applicable
sales charges)

  
       
Class A Shares        

1 Year

      0.58 %         -3.73 % 

Since Inception*

      2.82 %         -0.90 % 
       
Class C Shares        

1 Year

      -0.10 %         -1.10 % 

Since Inception*

      2.05 %         2.05 % 
       
Advisor Class Shares†        

1 Year

      0.88 %         0.88 % 

Since Inception*

      3.08 %         3.08 % 
       
Class R Shares†        

1 Year

      0.39 %         0.39 % 

Since Inception*

      2.56 %         2.56 % 
       
Class K Shares†        

1 Year

      0.58 %         0.58 % 

Since Inception*

      2.82 %         2.82 % 
       
Class I Shares†        

1 Year

      0.88 %         0.88 % 

Since Inception*

      3.08 %         3.08 % 
       
Class Z Shares†        

1 Year

      0.88 %         0.88 % 

Since Inception*

      3.08 %         3.08 % 

The Fund’s current prospectus fee table shows the Fund’s total annual operating expense ratios as 6.65%, 7.62%, 6.46%, 6.99%, 6.73, 6.44% and 6.38% for Class A, Class C, Advisor Class, Class R, Class K, Class I and Class Z shares, respectively, gross of any fee waivers or expense reimbursements. Contractual fee waivers and/or expense reimbursements limit the Fund’s annual operating expense ratios exclusive of interest expense, dividend expense, borrowing costs and brokerage expense on securities sold short to 2.24%, 2.99%, 1.99%, 2.49%, 2.24%, 1.99% and 1.99% for Class A, Class C, Advisor Class, Class R, Class K, Class I and Class Z shares, respectively. These waivers/reimbursements may not be terminated before September 30, 2016 and may be extended by the Adviser for additional one-year terms. Absent reimbursements or waivers, performance would have been lower. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.

 

*   Inception date: 9/30/2014.

 

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

See Disclosures, Risks and Note about Historical Performance on pages 5-10.

(Historical Performance continued on next page)

 

12   •  AB LONG/SHORT MULTI-MANAGER FUND

Historical Performance

HISTORICAL PERFORMANCE

(continued from previous page)

 

SEC AVERAGE ANNUAL RETURNS

AS OF THE MOST RECENT CALENDAR QUARTER-END

DECEMBER 31, 2015 (unaudited)

  
     SEC Returns
(reflects applicable
sales charges)		  
  
Class A Shares   

1 Year

      -4.78 % 

Since Inception*

      -1.49 % 
  
Class C Shares   

1 Year

      -2.28 % 

Since Inception*

      1.16 % 
  
Advisor Class Shares†   

1 Year

      -0.24 % 

Since Inception*

      2.20 % 
  
Class R Shares†   

1 Year

      -0.82 % 

Since Inception*

      1.64 % 
  
Class K Shares†   

1 Year

      -0.53 % 

Since Inception*

      1.96 % 
  
Class I Shares†   

1 Year

      -0.24 % 

Since Inception*

      2.20 % 
  
Class Z Shares†   

1 Year

      -0.33 % 

Since Inception*

      2.20 % 

 

*   Inception date: 9/30/2014.

 

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

See Disclosures, Risks and Note about Historical Performance on pages 5-10.

 

AB LONG/SHORT MULTI-MANAGER FUND  •     13   

Historical Performance

EXPENSE EXAMPLE

(unaudited)

 

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

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

Actual Expenses

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

Hypothetical Example for Comparison Purposes

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

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

 

     Beginning
Account Value
June 1, 2015		      Ending
Account Value
November 30, 2015		      Expenses Paid
During Period*		      Annualized
Expense Ratio*		  
Class A            

Actual

    $ 1,000       $ 985.70       $ 14.15         2.85 % 

Hypothetical**

    $     1,000       $     1,010.75       $     14.33         2.85 % 
Class C            

Actual

    $ 1,000       $ 981.80       $ 18.23         3.68 % 

Hypothetical**

    $ 1,000       $ 1,006.60       $ 18.46         3.68 % 
Advisor Class            

Actual

    $ 1,000       $ 986.70       $ 13.41         2.70 % 

Hypothetical**

    $ 1,000       $ 1,011.50       $ 13.58         2.70 % 
Class R            

Actual

    $ 1,000       $ 984.70       $ 15.83         3.19 % 

Hypothetical**

    $ 1,000       $ 1,009.05       $ 16.02         3.19 % 
Class K            

Actual

    $ 1,000       $ 985.70       $ 14.59         2.94 % 

Hypothetical**

    $ 1,000       $ 1,010.30       $ 14.78         2.94 % 
Class I            

Actual

    $ 1,000       $ 986.70       $ 13.36         2.69 % 

Hypothetical**

    $ 1,000       $ 1,011.55       $ 13.53         2.69 % 
Class Z            

Actual

    $ 1,000       $ 986.70       $ 13.36         2.69 % 

Hypothetical**

    $ 1,000       $ 1,011.55       $ 13.53         2.69 % 

 

*   Expenses are equal to each classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period).

 

**   Assumes 5% annual return before expenses.

 

14   •  AB LONG/SHORT MULTI-MANAGER FUND

Expense Example

PORTFOLIO SUMMARY

November 30, 2015 (unaudited)

 

PORTFOLIO STATISTICS

Net Assets ($mil): $33.1

SUB-ADVISER ALLOCATION*

 

%     Sub Adviser   Strategy
  22.3%     

Sirios Capital Management LP

  

US Long/Short Large-and Mid-Cap Value Stocks

  21.4%     

Lyrical Asset Management LP

  

US Long/Short Mid- and Large-Cap Stocks

  21.0%     

Impala Asset Management LLC

  

Global Long/Short Cyclical Stocks

  18.5%     

Passport Capital, LLC

  

Global Long/Short Thematic Stocks

  15.5%     

Kynikos Associates LP

  

Global Short-Only Stocks

  1.3%     

Liquidity Sleeve Cash†

  

Cash

SECURITY TYPE BREAKDOWN*

 

 

     Long        Short  

Common Stocks

      66.2 %         -18.3 % 

Depository Receipts

      0.2           -0.7   

Equity Linked Note

      0.4           —   

Options Purchased – Puts

      0.2           —   

R.E. Investment Trust Units

      0.5           -0.2   

Mutual Funds

      —           -6.0   

Warrants

      0.1           —   

 

*   Fund holdings are expressed as a percentage of total net assets and may vary over time. The Fund also enters into derivative transactions, which may be used for hedging or investment purposes (see “Portfolio of Investments” section of the report for additional details).

 

†    Cash maintained on portfolio level for investors’ transactions.

 

AB LONG/SHORT MULTI-MANAGER FUND  •     15   

Portfolio Summary

PORTFOLIO OF INVESTMENTS

November 30, 2015 (unaudited)

 

Company    Shares     U.S. $ Value  

 

  

COMMON STOCKS – 66.2%

     

Consumer Discretionary – 18.8%

     

Auto Components – 1.8%

     

Goodyear Tire & Rubber Co. (The)

      6,280      $ 219,046   

Johnson Controls, Inc.

      6,380        293,480   

Tenneco, Inc.(a)

      1,443        77,749   
    

 

 

  
       590,275   
    

 

 

  

Automobiles – 1.1%

     

Daimler AG (REG)

      885        78,998   

Peugeot SA(a)

      16,886        301,219   
    

 

 

  
       380,217   
    

 

 

  

Hotels, Restaurants & Leisure – 4.0%

     

Buffalo Wild Wings, Inc.(a)

      155        24,837   

Carnival Corp.(b)

      8,088        408,686   

Chipotle Mexican Grill, Inc. – Class A(a)

      154        89,251   

Las Vegas Sands Corp.

      906        39,919   

McDonald’s Corp.(b)

      2,119        241,905   

Starbucks Corp.

      8,256        506,836   
    

 

 

  
       1,311,434   
    

 

 

  

Household Durables – 1.8%

     

CalAtlantic Group, Inc.(a)

      4,663        196,312   

DR Horton, Inc.

      1,141        36,866   

Garmin Ltd.

      173        6,548   

Jarden Corp.(a)

      2,819        131,591   

Mohawk Industries, Inc.(a)

      719        137,127   

PulteGroup, Inc.

      3,866        75,310   
    

 

 

  
       583,754   
    

 

 

  

Internet & Catalog Retail – 1.7%

     

Amazon.com, Inc.(a)

      462        307,138   

Liberty Interactive Corp. QVC Group – Class A(a)

      9,923        262,761   
    

 

 

  
       569,899   
    

 

 

  

Media – 4.3%

     

Comcast Corp. – Class A

      5,186        315,620   

DISH Network Corp. – Class A(a)

      5,256        329,604   

JCDecaux SA

      5,333        197,730   

Liberty Global PLC – Series C(a)(b)

      3,882        159,162   

Time Warner, Inc.

      6,144        429,957   
    

 

 

  
       1,432,073   
    

 

 

  

Multiline Retail – 0.8%

     

Dollar Tree, Inc.(a)(b)

      3,440        259,582   
    

 

 

  

Specialty Retail – 2.2%

     

Advance Auto Parts, Inc.

      613        99,754   

AutoZone, Inc.(a)

      78        61,134   

Home Depot, Inc. (The)

      1,230        164,672   

Industria de Diseno Textil SA

      3,400        122,116   

Lowe’s Cos., Inc.

      1,685        129,071   

MarineMax, Inc.(a)

      2,503        45,429   

Monro Muffler Brake, Inc.

      1,535        113,651   
    

 

 

  
       735,827   
    

 

 

  

 

16   •  AB LONG/SHORT MULTI-MANAGER FUND

Portfolio of Investments

Company        
    
Shares		     U.S. $ Value  

 

  

Textiles, Apparel & Luxury Goods – 1.1%

     

Luxottica Group SpA

      1,132      $ 75,627   

Moncler SpA

      5,344        81,332   

NIKE, Inc. – Class B

      1,161        153,577   

Skechers U.S.A., Inc. – Class A(a)

      1,305        39,411   
    

 

 

  
       349,947   
    

 

 

  
       6,213,008   
    

 

 

  

Information Technology – 11.5%

     

Communications Equipment – 0.5%

     

ARRIS Group, Inc.(a)

      3,319        101,462   

Radware Ltd.(a)

      1,636        26,896   

Ruckus Wireless, Inc.(a)

      3,302        37,808   
    

 

 

  
       166,166   
    

 

 

  

Electronic Equipment, Instruments & Components – 1.8%

     

Corning, Inc.

      14,635        274,114   

TE Connectivity Ltd.

      5,027        337,261   
    

 

 

  
       611,375   
    

 

 

  

Internet Software & Services – 1.6%

     

Facebook, Inc. – Class A(a)(b)

      2,882        300,419   

Rackspace Hosting, Inc.(a)

      561        16,056   

Tencent Holdings Ltd.

      10,248        204,180   
    

 

 

  
       520,655   
    

 

 

  

IT Services – 1.7%

     

Computer Sciences Corp.(b)

      1,701        53,292   

CSRA, Inc.

      1,355        42,696   

Euronet Worldwide, Inc.(a)

      495        38,472   

Visa, Inc. – Class A(b)

      2,430        191,994   

Western Union Co. (The) – Class W

      12,067        227,584   
    

 

 

  
       554,038   
    

 

 

  

Semiconductors & Semiconductor Equipment – 1.4%

     

Avago Technologies Ltd.

      3,169        413,396   

NXP Semiconductors NV(a)

      451        42,150   
    

 

 

  
       455,546   
    

 

 

  

Software – 2.4%

     

Citrix Systems, Inc.(a)(b)

      1,562        119,758   

CommVault Systems, Inc.(a)

      1,010        41,390   

Intuit, Inc.

      503        50,401   

Microsoft Corp.(b)

      2,889        157,017   

PTC, Inc.(a)(b)

      2,083        75,071   

salesforce.com, Inc.(a)

      336        26,776   

Symantec Corp.

      15,554        304,547   

Take-Two Interactive Software, Inc.(a)

      1,164        41,171   
    

 

 

  
       816,131   
    

 

 

  

 

AB LONG/SHORT MULTI-MANAGER FUND  •     17   

Portfolio of Investments

Company        
    
Shares		     U.S. $ Value  

 

  

Technology Hardware, Storage & Peripherals – 2.1%

     

EMC Corp./MA(b)

      6,938      $ 175,809   

Lexmark International, Inc. – Class A

      1,418        48,694   

NCR Corp.(a)

      3,843        104,184   

Western Digital Corp.(b)

      5,761        359,544   
    

 

 

  
       688,231   
    

 

 

  
       3,812,142   
    

 

 

  

Industrials – 8.1%

     

Aerospace & Defense – 1.9%

     

Airbus Group SE

      1,176        84,892   

Honeywell International, Inc.

      883        91,788   

Northrop Grumman Corp.

      201        37,458   

Precision Castparts Corp.(b)

      340        78,724   

Raytheon Co.

      2,764        342,819   
    

 

 

  
       635,681   
    

 

 

  

Air Freight & Logistics – 0.9%

     

FedEx Corp.(b)

      1,778        281,884   
    

 

 

  

Airlines – 0.8%

     

Delta Air Lines, Inc.

      4,456        207,026   

Wizz Air Holdings PLC(a)(c)

      2,787        74,046   
    

 

 

  
       281,072   
    

 

 

  

Construction & Engineering – 0.4%

     

AECOM(a)

      2,413        76,806   

Fluor Corp.

      1,316        63,957   
    

 

 

  
       140,763   
    

 

 

  

Electrical Equipment – 0.8%

     

Eaton Corp. PLC

      4,477        260,382   
    

 

 

  

Industrial Conglomerates – 0.6%

     

General Electric Co.(b)

      6,310        188,922   
    

 

 

  

Road & Rail – 1.7%

     

Avis Budget Group, Inc.(a)

      2,380        88,988   

CSX Corp.

      922        26,212   

Hertz Global Holdings, Inc.(a)

      10,243        162,454   

Norfolk Southern Corp.

      1,175        111,696   

Old Dominion Freight Line, Inc.(a)(b)

      1,648        104,994   

Saia, Inc.(a)

      933        22,868   

Swift Transportation Co.(a)

      3,040        48,549   
    

 

 

  
       565,761   
    

 

 

  

Trading Companies & Distributors – 0.8%

     

AerCap Holdings NV(a)

      4,824        219,203   

MRC Global, Inc.(a)

      2,331        34,475   
    

 

 

  
       253,678   
    

 

 

  

Transportation Services – 0.2%

     

Europcar Groupe SA(a)(c)

      6,509        81,674   
    

 

 

  
       2,689,817   
    

 

 

  

 

18   •  AB LONG/SHORT MULTI-MANAGER FUND

Portfolio of Investments

Company        
    
Shares		     U.S. $ Value  

 

  

Financials – 6.3%

     

Banks – 2.2%

     

Bank of America Corp.(b)

      19,851      $ 346,003   

Bank of the Ozarks, Inc.(b)

      2,818        152,961   

JPMorgan Chase & Co.

      676        45,076   

Signature Bank/New York NY(a)(b)

      939        148,503   

Western Alliance Bancorp(a)

      1,377        53,414   
    

 

 

  
       745,957   
    

 

 

  

Capital Markets – 0.9%

     

Ameriprise Financial, Inc.

      2,288        258,430   

OM Asset Management PLC

      1,969        31,917   
    

 

 

  
       290,347   
    

 

 

  

Diversified Financial Services – 0.3%

     

Intercontinental Exchange, Inc.(b)

      361        93,802   
    

 

 

  

Insurance – 2.3%

     

Aflac, Inc.

      4,827        314,913   

AmTrust Financial Services, Inc.

      1,739        108,705   

Assurant, Inc.

      1,626        139,056   

Willis Group Holdings PLC

      4,076        187,333   
    

 

 

  
       750,007   
    

 

 

  

Real Estate Management & Development – 0.6%

     

Realogy Holdings Corp.(a)(b)

      4,462        184,325   
    

 

 

  
       2,064,438   
    

 

 

  

Health Care – 5.9%

     

Biotechnology – 0.5%

     

Celgene Corp.(a)

      537        58,775   

Gilead Sciences, Inc.(b)

      1,190        126,092   
    

 

 

  
       184,867   
    

 

 

  

Health Care Providers & Services – 3.1%

     

Aetna, Inc.

      3,392        348,528   

Anthem, Inc.

      2,309        301,047   

HCA Holdings, Inc.(a)(b)

      1,143        77,792   

UnitedHealth Group, Inc.

      1,291        145,509   

Universal Health Services, Inc. – Class B(b)

      1,204        146,310   
    

 

 

  
       1,019,186   
    

 

 

  

Pharmaceuticals – 2.3%

     

Allergan PLC(a)

      1,246        391,107   

Bristol-Myers Squibb Co.(b)

      2,767        185,417   

Johnson & Johnson

      934        94,558   

Pfizer, Inc.(b)

      2,722        89,200   
    

 

 

  
       760,282   
    

 

 

  
       1,964,335   
    

 

 

  

Consumer Staples – 5.2%

     

Beverages – 2.1%

     

Coca-Cola Co. (The)

      3,591        153,048   

Constellation Brands, Inc. – Class A

      2,196        308,011   

 

AB LONG/SHORT MULTI-MANAGER FUND  •     19   

Portfolio of Investments

Company        
    
Shares		     U.S. $ Value  

 

  

Davide Campari-Milano SpA

      9,563      $ 83,952   

Monster Beverage Corp.(a)

      578        89,365   

PepsiCo, Inc.

      626        62,700   
    

 

 

  
       697,076   
    

 

 

  

Consumer Products – 1.3%

     

Alphabet, Inc. – Class A(a)(b)

      563        429,485   
    

 

 

  

Food & Staples Retailing – 0.5%

     

CVS Health Corp.

      1,847        173,784   
    

 

 

  

Food Products – 1.3%

     

JM Smucker Co. (The)(b)

      2,234        270,738   

Mondelez International, Inc. – Class A

      3,294        143,816   
    

 

 

  
       414,554   
    

 

 

  
       1,714,899   
    

 

 

  

Materials – 4.6%

     

Chemicals – 2.9%

     

Celanese Corp. – Series A

      3,542        250,597   

CF Industries Holdings, Inc.(b)

      6,474        298,710   

LyondellBasell Industries NV – Class A

      1,788        171,326   

PPG Industries, Inc.

      784        82,900   

Sherwin-Williams Co. (The)(b)

      538        148,526   
    

 

 

  
       952,059   
    

 

 

  

Construction Materials – 0.9%

     

Buzzi Unicem SpA(d)

      8,401        150,788   

Eagle Materials, Inc.

      1,537        106,176   

Martin Marietta Materials, Inc.

      314        49,424   
    

 

 

  
       306,388   
    

 

 

  

Containers & Packaging – 0.2%

     

Owens-Illinois, Inc.(a)

      3,758        72,492   
    

 

 

  

Metals & Mining – 0.2%

     

Impala Platinum Holdings Ltd.(a)

      11,771        25,776   

Newmont Mining Corp.

      3,126        57,550   
    

 

 

  
       83,326   
    

 

 

  

Paper & Forest Products – 0.4%

     

Canfor Corp.(a)

      7,469        116,499   
    

 

 

  
       1,530,764   
    

 

 

  

Energy – 3.5%

     

Energy Equipment & Services – 0.6%

     

Baker Hughes, Inc.

      935        50,555   

National Oilwell Varco, Inc.

      3,967        148,128   
    

 

 

  
       198,683   
    

 

 

  

Oil, Gas & Consumable Fuels – 2.9%

     

EOG Resources, Inc.

      2,906        242,448   

Marathon Petroleum Corp.

      2,211        129,145   

Occidental Petroleum Corp.

      2,639        199,482   

Phillips 66

      757        69,288   

 

20   •  AB LONG/SHORT MULTI-MANAGER FUND

Portfolio of Investments

Company        
    
Shares		     U.S. $ Value  

 

  

Suncor Energy, Inc. (New York)

      8,058      $ 222,401   

Williams Cos., Inc. (The)

      2,313        84,563   
    

 

 

  
       947,327   
    

 

 

  
       1,146,010   
    

 

 

  

Utilities – 1.3%

     

Electric Utilities – 0.6%

     

NextEra Energy, Inc.(b)

      1,788        178,550   
    

 

 

  

Multi-Utilities – 0.7%

     

Sempra Energy(b)

      2,404        238,549   
    

 

 

  
       417,099   
    

 

 

  

Telecommunication Services – 1.0%

     

Diversified Telecommunication Services – 0.4%

     

Cellnex Telecom SAU(a)(c)

      3,223        58,430   

Sunrise Communications Group AG(a)(c)

      1,495        88,640   
    

 

 

  
       147,070   
    

 

 

  

Wireless Telecommunication Services – 0.6%

     

T-Mobile US, Inc.(a)(b)

      5,263        186,837   
    

 

 

  
       333,907   
    

 

 

  

Total Common Stocks
(cost $21,158,302)

        21,886,419   
    

 

 

  
    

REAL ESTATE INVESTMENT TRUST UNITS – 0.5%

     

Financials – 0.5%

     

Real Estate Investment Trusts (REITs) – 0.5%

     

NorthStar Realty Europe Corp.(a)

      1,647        18,825   

NorthStar Realty Finance Corp.(b)

      4,943        89,172   

Public Storage

      275        66,017   
    

 

 

  

Total Real Estate Investment Trust Units
(cost $249,838)

        174,014   
    

 

 

  
    

EQUITY LINKED NOTE – 0.4%

     

Financials – 0.4%

     

National Commercial Bank, HSBC Bank PLC
(cost $177,075)

      10,059        143,386   
    

 

 

  
     Contracts        
    

OPTIONS PURCHASED - PUTS – 0.2%

     

COMMON STOCKS – 0.2%

     

Alibaba Group Holding Ltd. Expiration: Dec 2015,
Exercise Price: $ 77.50(a)(e)

      5        306   

Alibaba Group Holding Ltd. Expiration: Jan 2016,
Exercise Price: $ 80.00(a)(e)

      4        1,069   

 

AB LONG/SHORT MULTI-MANAGER FUND  •     21   

Portfolio of Investments

Company        
    
Contracts		     U.S. $ Value  

 

  

athenahealth, Inc. Expiration: Dec 2015,
Exercise Price: $ 160.00(a)(e)

      2      $ 809   

athenahealth, Inc. Expiration: Jan 2016,
Exercise Price: $ 160.00(a)(e)

      1        703   

BofI Holding, Inc. Expiration: Dec 2015,
Exercise Price: $ 20.00(a)(e)

      13        2,106   

Cablevision Systems Corp. Expiration: Dec 2015,
Exercise Price: $ 25.00(a)(e)

      7        44   

Carrizo Oil & Gas, Inc. Expiration: Dec 2015,
Exercise Price: $ 35.00(a)(e)

      11        495   

Cheniere Energy, Inc. Expiration: Dec 2015,
Exercise Price: $ 47.50(a)(e)

      10        2,102   

Cheniere Energy, Inc. Expiration: Dec 2015,
Exercise Price: $ 50.00(a)(e)

      4        1,411   

Cheniere Energy, Inc. Expiration: Jan 2016,
Exercise Price: $ 47.00(a)(e)

      6        1,889   

Continental Resources, Inc./OK Expiration: Dec 2015, Exercise Price: $ 32.00(a)(e)

      24        1,140   

Credit Acceptance Corp. Expiration:
Dec 2015, Exercise Price: $ 160.00(a)(e)

      3        358   

DeVry, Inc. Expiration: Dec 2015,
Exercise Price: $ 22.50(a)(e)

      13        424   

Five Below, Inc. Expiration: Dec 2015,
Exercise Price: $ 28.00(a)(e)

      13        2,143   

Franklin Resources, Inc. Expiration: Dec 2015,
Exercise Price: $ 40.00(a)(e)

      12        260   

GlenCore PLC Expiration: Dec 2015,
Exercise Price: GBP 0.90(a)(f)

      22,639        1,432   

Gogo, Inc. Expiration: Dec 2015,
Exercise Price: $ 15.00(a)(e)

      8        139   

Gogo, Inc. Expiration: Dec 2015,
Exercise Price: $ 16.00(a)(e)

      17        566   

Gogo, Inc. Expiration: Dec 2015,
Exercise Price: $ 18.00(a)(e)

      5        513   

GrubHub, Inc. Expiration: Dec 2015,
Exercise Price: $ 22.50(a)(e)

      12        203   

Hewlett-Packard Co. Expiration: Jan 2016,
Exercise Price: $ 13.00(a)(e)

      19        1,571   

Horizon Pharma PLC Expiration: Dec 2015,
Exercise Price: $ 18.00(a)(e)

      6        286   

Horizon Pharma PLC Expiration: Dec 2015,
Exercise Price: $ 21.00(a)(e)

      8        1,046   

Keurig Green Mountain, Inc. Expiration: Dec 2015,
Exercise Price: $ 50.00(a)(e)

      7        916   

Keurig Green Mountain, Inc. Expiration: Jan 2016,
Exercise Price: $ 50.00(a)(e)

      7        2,031   

Keurig Green Mountain, Inc. Expiration: Jan 2016,
Exercise Price: $ 52.50(a)(e)

      4        1,602   

Lenovo Group Ltd. Expiration: Jan 2016,
Exercise Price: HKD 8.50(a)(f)

      20,600        1,685   

 

22   •  AB LONG/SHORT MULTI-MANAGER FUND

Portfolio of Investments

Company        
    
Contracts		     U.S. $ Value  

 

  

Mallinckrodt PLC Expiration: Dec 2015,
Exercise Price: $ 55.00(a)(e)

      3      $ 167   

Mallinckrodt PLC Expiration: Dec 2015,
Exercise Price: $ 65.00(a)(e)

      3        760   

Mobileye NV Expiration: Jan 2016,
Exercise Price: $ 44.00(a)(e)

      7        2,154   

Oasis Petroleum, Inc. Expiration: Dec 2015,
Exercise Price: $ 11.00(a)(e)

      26        1,617   

Outerwall, Inc. Expiration: Dec 2015,
Exercise Price: $ 65.00(a)(e)

      2        791   

Range Resources Corp. Expiration: Dec 2015,
Exercise Price: $ 30.00(a)(e)

      4        992   

Range Resources Corp. Expiration: Jan 2016,
Exercise Price: $ 27.50(a)(e)

      12        2,634   

Restoration Hardware Holdings, Inc. Expiration:
Jan 2016, Exercise Price: $ 90.00(a)(e)

      3        1,633   

Royal Dutch Shell PLC Expiration: Dec 2015,
Exercise Price: $ 50.00(a)(e)

      10        1,337   

SolarCity Corp. Expiration: Jan 2016,
Exercise Price: $ 24.00(a)(e)

      11        1,475   

SolarCity Corp. Expiration: Jan 2016,
Exercise Price: $ 26.00(a)(e)

      15        2,912   

SolarCity Corp. Expiration: Jan 2016,
Exercise Price: $ 28.00(a)(e)

      6        1,644   

SolarCity Corp. Expiration: Jan 2016,
Exercise Price: $ 30.00(a)(e)

      4        1,508   

Sotheby’s Expiration: Dec 2015,
Exercise Price: $ 29.00(a)(e)

      10        1,256   

Southwestern Energy Co. Expiration: Dec 2015,
Exercise Price: $ 10.00(a)(e)

      17        2,248   

Tesla Motors, Inc. Expiration: Dec 2015,
Exercise Price: $ 210.00(a)(e)

      2        354   

Tesla Motors, Inc. Expiration: Dec 2015,
Exercise Price: $ 230.00(a)(e)

      2        1,512   

Tesla Motors, Inc. Expiration: Jan 2016,
Exercise Price: $ 225.00(a)(e)

      1        1,059   

Valeant Pharmaceuticals International, Inc. Expiration: Dec 2015,
Exercise Price: $ 80.00(a)(e)

      4        850   

Valeant Pharmaceuticals International, Inc. Expiration: Dec 2015,
Exercise Price: $ 85.00(a)(e)

      3        1,090   

Valeant Pharmaceuticals International, Inc. Expiration: Dec 2015,
Exercise Price: $ 90.00(a)(e)

      4        2,317   

Vipshop Holdings Ltd. Expiration: Dec 2015, Exercise Price: $ 13.00(a)(e)

      23        212   

Whiting Petroleum Corp. Expiration: Dec 2015,
Exercise Price: $ 16.00(a)(e)

      12        1,208   

Wynn Resorts Ltd. Expiration: Dec 2015,
Exercise Price: $ 60.00(a)(e)

      4        684   

 

AB LONG/SHORT MULTI-MANAGER FUND  •     23   

Portfolio of Investments

Company        
    
Contracts		     U.S. $ Value  

 

  

Wynn Resorts Ltd. Expiration: Dec 2015,
Exercise Price: $ 65.00(a)(e)

      6      $ 2,502   

Zillow Group, Inc. Expiration: Dec 2015,
Exercise Price: $ 22.50(a)(e)

      7        191   

Zillow Group, Inc. Expiration: Dec 2015,
Exercise Price: $ 24.00(a)(e)

      5        347   

Zillow Group, Inc. Expiration: Dec 2015,
Exercise Price: $ 25.00(a)(e)

      26        3,021   
    

 

 

  

Total Options Purchased – Puts
(premiums paid $114,618)

        65,724   
    

 

 

  
     Shares        

DEPOSITORY RECEIPTS – 0.2%

     

Health Care – 0.2%

     

Pharmaceuticals – 0.2%

     

GlaxoSmithKline PLC (Sponsored ADR)
(cost $58,374)

      1,512        61,251   
    

 

 

  
    

WARRANTS – 0.1%

     

Financials – 0.1%

     

Banks – 0.1%

     

JPMorgan Chase & Co., expiring 10/28/18(a)
(cost $19,471)

      1,119        27,583   
    

 

 

  
    

SHORT-TERM INVESTMENTS – 20.3%

     

Investment Companies – 20.3%

     

AB Fixed Income Shares, Inc. – Government STIF Portfolio, 0.16%(g)(h)
(cost $6,699,452)

      6,699,452        6,699,452   
    

 

 

  

Total Investments Before Security Lending
Collateral for Securities Loaned – 87.9%
(cost $28,477,130)

        29,057,829   
    

 

 

  
    

INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED – 0.5%

     

Investment Companies – 0.5%

     

AB Exchange Reserves – Class I, 0.15%(g)(h)
(cost $146,497)

      146,497        146,497   
    

 

 

  

Total Investments Before Securities
Sold Short – 88.4%
(cost $28,623,627)

        29,204,326   
    

 

 

  
    

SECURITIES SOLD SHORT – (25.2)%

     

COMMON STOCKS – (18.3)%

     

Consumer Discretionary – (5.0)%

     

Auto Components – (0.2)%

     

Autoliv, Inc.

      (574 )      (72,227 ) 
    

 

 

  

 

24   •  AB LONG/SHORT MULTI-MANAGER FUND

Portfolio of Investments

Company        
    
Shares		     U.S. $ Value  

 

  

Automobiles – (0.6)%

     

General Motors Co.

      (3,066 )    $ (110,989 ) 

Tesla Motors, Inc.(a)

      (423 )      (97,400 ) 
    

 

 

  
       (208,389 ) 
    

 

 

  

Distributors – (0.1)%

     

LKQ Corp.(a)

      (708 )      (20,879 ) 
    

 

 

  

Diversified Consumer Services – (0.2)%

     

DeVry Education Group, Inc.

      (1,047 )      (24,866 ) 

Grand Canyon Education, Inc.(a)

      (485 )      (19,216 ) 

LifeLock, Inc.(a)

      (1,710 )      (24,692 ) 

Sotheby’s

      (406 )      (11,494 ) 
    

 

 

  
       (80,268 ) 
    

 

 

  

Hotels, Restaurants & Leisure – (0.3)%

     

Diamond Resorts International, Inc.(a)

      (1,417 )      (39,832 ) 

Hyatt Hotels Corp. – Class A(a)

      (518 )      (25,532 ) 

Restaurant Brands International, Inc.

      (653 )      (23,893 ) 
    

 

 

  
       (89,257 ) 
    

 

 

  

Household Durables – (0.1)%

     

GoPro, Inc. – Class A(a)

      (745 )      (15,198 ) 
    

 

 

  

Internet & Catalog Retail – (0.1)%

     

Netflix, Inc.(a)

      (135 )      (16,649 ) 

Zalando SE(a)(c)

      (465 )      (15,751 ) 
    

 

 

  
       (32,400 ) 
    

 

 

  

Leisure Products – (0.2)%

     

BRP, Inc./CA(a)

      (1,294 )      (21,172 ) 

Polaris Industries, Inc.

      (475 )      (50,079 ) 
    

 

 

  
       (71,251 ) 
    

 

 

  

Media – (0.2)%

     

Altice NV – Class A(a)

      (1,743 )      (26,703 ) 

Live Nation Entertainment, Inc.(a)

      (611 )      (15,513 ) 

World Wrestling Entertainment, Inc. – Class A

      (2,192 )      (37,242 ) 
    

 

 

  
       (79,458 ) 
    

 

 

  

Multiline Retail – (1.6)%

     

Canadian Tire Corp. Ltd. – Class A

      (3,444 )      (322,673 ) 

Dollar General Corp.

      (1,689 )      (110,477 ) 

Target Corp.

      (1,182 )      (85,695 ) 
    

 

 

  
       (518,845 ) 
    

 

 

  

Specialty Retail – (0.5)%

     

CarMax, Inc.(a)

      (560 )      (32,088 ) 

Five Below, Inc.(a)

      (748 )      (20,951 ) 

Guess?, Inc.

      (843 )      (16,599 ) 

Hennes & Mauritz AB – Class B

      (987 )      (36,550 ) 

Restoration Hardware Holdings, Inc.(a)

      (318 )      (28,579 ) 

RONA, Inc.

      (1,864 )      (18,606 ) 
    

 

 

  
       (153,373 ) 
    

 

 

  

 

AB LONG/SHORT MULTI-MANAGER FUND  •     25   

Portfolio of Investments

Company        
    
Shares		     U.S. $ Value  

 

  

Textiles, Apparel & Luxury Goods – (0.9)%

     

adidas AG

      (597 )    $ (57,662 ) 

lululemon Athletica, Inc.(a)

      (884 )      (42,273 ) 

Luxottica Group SpA

      (548 )      (36,611 ) 

Pandora A/S

      (262 )      (31,009 ) 

Steven Madden Ltd.(a)

      (711 )      (22,681 ) 

Swatch Group AG (The)

      (306 )      (107,294 ) 
    

 

 

  
       (297,530 ) 
    

 

 

  
       (1,639,075 ) 
    

 

 

  

Industrials – (3.5)%

     

Aerospace & Defense – (0.3)%

     

Boeing Co. (The)

      (744 )      (108,215 ) 
    

 

 

  

Air Freight & Logistics – (0.1)%

     

United Parcel Service, Inc. – Class B

      (205 )      (21,117 ) 
    

 

 

  

Airlines – (0.7)%

     

American Airlines Group, Inc.

      (791 )      (32,637 ) 

Deutsche Lufthansa AG(a)

      (7,939 )      (113,633 ) 

Hawaiian Holdings, Inc.(a)

      (689 )      (24,942 ) 

Japan Airlines Co., Ltd.

      (2,029 )      (69,330 ) 
    

 

 

  
       (240,542 ) 
    

 

 

  

Construction & Engineering – (0.1)%

     

Fluor Corp.

      (274 )      (13,316 ) 
    

 

 

  

Electrical Equipment – (0.1)%

     

Sensata Technologies Holding NV(a)

      (415 )      (19,011 ) 

SolarCity Corp.(a)

      (775 )      (22,289 ) 
    

 

 

  
       (41,300 ) 
    

 

 

  

Machinery – (1.6)%

     

Caterpillar, Inc.

      (3,534 )      (256,745 ) 

Cummins, Inc.

      (1,402 )      (140,719 ) 

Deere & Co.

      (205 )      (16,312 ) 

MAN SE

      (252 )      (24,986 ) 

PACCAR, Inc.

      (973 )      (50,557 ) 

WABCO Holdings, Inc.(a)

      (319 )      (34,286 ) 
    

 

 

  
       (523,605 ) 
    

 

 

  

Marine – (0.1)%

     

AP Moeller – Maersk A/S – Class B

      (26 )      (39,576 ) 
    

 

 

  

Trading Companies & Distributors – (0.5)%

     

Fastenal Co.

      (2,327 )      (94,429 ) 

Noble Group Ltd.

      (141,500 )      (42,537 ) 

United Rentals, Inc.(a)

      (319 )      (25,096 ) 
    

 

 

  
       (162,062 ) 
    

 

 

  
       (1,149,733 ) 
    

 

 

  

Energy – (2.5)%

     

Energy Equipment & Services – (0.3)%

     

National Oilwell Varco, Inc.

      (2,247 )      (83,903 ) 
    

 

 

  

 

26   •  AB LONG/SHORT MULTI-MANAGER FUND

Portfolio of Investments

Company        
    
Shares		     U.S. $ Value  

 

  

Oil, Gas & Consumable Fuels – (2.2)%

     

Apache Corp.

      (526 )    $ (25,869 ) 

Cabot Oil & Gas Corp.

      (1,088 )      (20,487 ) 

Canadian Natural Resources Ltd.

      (1,108 )      (26,814 ) 

Carrizo Oil & Gas, Inc.(a)

      (759 )      (30,648 ) 

Cheniere Energy, Inc.(a)

      (810 )      (38,516 ) 

Chevron Corp.

      (1,262 )      (115,246 ) 

Concho Resources, Inc.(a)

      (271 )      (29,658 ) 

Continental Resources, Inc./OK(a)

      (1,310 )      (47,553 ) 

Devon Energy Corp.

      (569 )      (26,180 ) 

EOG Resources, Inc.

      (401 )      (33,455 ) 

EQT Corp.

      (296 )      (16,937 ) 

Exxon Mobil Corp.

      (393 )      (32,092 ) 

Hess Corp.

      (344 )      (20,296 ) 

Oasis Petroleum, Inc.(a)

      (3,694 )      (42,444 ) 

ONEOK, Inc.

      (983 )      (28,979 ) 

Pioneer Natural Resources Co.

      (218 )      (31,556 ) 

Polski Koncern Naftowy Orlen SA

      (3,199 )      (53,732 ) 

Range Resources Corp.

      (1,047 )      (29,923 ) 

Southwestern Energy Co.(a)

      (2,875 )      (25,904 ) 

Ultra Petroleum Corp.(a)

      (4,858 )      (19,481 ) 

Whiting Petroleum Corp.(a)

      (1,979 )      (32,673 ) 
    

 

 

  
       (728,443 ) 
    

 

 

  
       (812,346 ) 
    

 

 

  

Information Technology – (2.4)%

     

Internet Software & Services – (0.4)%

     

CoStar Group, Inc.(a)

      (141 )      (29,503 ) 

Gogo, Inc.(a)

      (400 )      (7,180 ) 

GrubHub, Inc.(a)

      (1,625 )      (41,665 ) 

Yelp, Inc.(a)

      (761 )      (22,929 ) 

Zillow Group, Inc. – Class C(a)

      (2,197 )      (54,156 ) 
    

 

 

  
       (155,433 ) 
    

 

 

  

IT Services – (0.6)%

     

Alliance Data Systems Corp.(a)

      (91 )      (26,103 ) 

International Business Machines Corp.

      (744 )      (103,728 ) 

Western Union Co. (The)

      (1,944 )      (36,664 ) 

Wirecard AG

      (832 )      (40,724 ) 
    

 

 

  
       (207,219 ) 
    

 

 

  

Semiconductors & Semiconductor
Equipment – (0.5)%

     

Applied Materials, Inc.

      (823 )      (15,448 ) 

Intel Corp.

      (811 )      (28,198 ) 

Micron Technology, Inc.(a)

      (5,510 )      (87,774 ) 

Qorvo, Inc.(a)

      (438 )      (25,435 ) 
    

 

 

  
       (156,855 ) 
    

 

 

  

Software – (0.7)%

     

Mobileye NV(a)

      (2,060 )      (89,816 ) 

Oracle Corp.

      (817 )      (31,839 ) 

Red Hat, Inc.(a)

      (769 )      (62,604 ) 

 

AB LONG/SHORT MULTI-MANAGER FUND  •     27   

Portfolio of Investments

Company        
    
Shares		     U.S. $ Value  

 

  

salesforce.com, Inc.(a)

      (344 )    $ (27,413 ) 

SAP SE

      (260 )      (20,532 ) 
    

 

 

  
       (232,204 ) 
    

 

 

  

Technology Hardware, Storage &
Peripherals – (0.2)%

     

HP, Inc.

      (2,406 )      (30,171 ) 

Logitech International SA

      (2,006 )      (30,111 ) 
    

 

 

  
       (60,282 ) 
    

 

 

  
       (811,993 ) 
    

 

 

  

Materials – (1.4)%

     

Chemicals – (0.9)%

     

LyondellBasell Industries NV – Class A

      (1,395 )      (133,669 ) 

Mosaic Co. (The)

      (2,700 )      (85,428 ) 

Potash Corp. of Saskatchewan, Inc.

      (2,829 )      (57,202 ) 

Wacker Chemie AG

      (395 )      (35,441 ) 
    

 

 

  
       (311,740 ) 
    

 

 

  

Metals & Mining – (0.5)%

     

First Quantum Minerals Ltd.

      (9,128 )      (33,219 ) 

GlenCore PLC(a)

      (65,054 )      (94,718 ) 

Grupo Mexico SAB de CV – Series B

      (8,153 )      (17,798 ) 

ThyssenKrupp AG

      (805 )      (17,099 ) 
    

 

 

  
       (162,834 ) 
    

 

 

  
       (474,574 ) 
    

 

 

  

Consumer Staples – (1.2)%

     

Beverages – (0.2)%

     

Coca-Cola Co. (The)

      (660 )      (28,129 ) 

Monster Beverage Corp.(a)

      (196 )      (30,304 ) 
    

 

 

  
       (58,433 ) 
    

 

 

  

Food & Staples Retailing – (0.5)%

     

United Natural Foods, Inc.(a)

      (485 )      (21,296 ) 

Wal-Mart Stores, Inc.

      (995 )      (58,546 ) 

Whole Foods Market, Inc.

      (574 )      (16,732 ) 

Woolworths Ltd.

      (3,535 )      (60,309 ) 
    

 

 

  
       (156,883 ) 
    

 

 

  

Food Products – (0.4)%

     

Archer-Daniels-Midland Co.

      (665 )      (24,266 ) 

Bunge Ltd.

      (349 )      (23,247 ) 

Chocoladefabriken Lindt & Spruengli AG

      (3 )      (18,094 ) 

JM Smucker Co. (The)

      (367 )      (44,476 ) 

Keurig Green Mountain, Inc.

      (417 )      (21,851 ) 
    

 

 

  
       (131,934 ) 
    

 

 

  

Household Products – (0.1)%

     

Kimberly-Clark Corp.

      (334 )      (39,796 ) 
    

 

 

  
       (387,046 ) 
    

 

 

  

Financials – (1.1)%

     

Banks – (0.3)%

     

Canadian Imperial Bank of Commerce/Canada

      (1,271 )      (95,440 ) 
    

 

 

  

 

28   •  AB LONG/SHORT MULTI-MANAGER FUND

Portfolio of Investments

Company        
    
Shares		     U.S. $ Value  

 

  

Capital Markets – (0.4)%

     

Affiliated Managers Group, Inc.(a)

      (208 )    $ (36,864 ) 

Franklin Resources, Inc.

      (859 )      (36,009 ) 

Goldman Sachs Group, Inc. (The)

      (335 )      (63,657 ) 
    

 

 

  
       (136,530 ) 
    

 

 

  

Consumer Finance – (0.1)%

     

Credit Acceptance Corp.(a)

      (150 )      (30,063 ) 

Santander Consumer USA Holdings, Inc.(a)

      (1,162 )      (20,498 ) 
    

 

 

  
       (50,561 ) 
    

 

 

  

Insurance – (0.2)%

     

CNP Assurances

      (4,500 )      (62,636 ) 
    

 

 

  

Thrifts & Mortgage Finance – (0.1)%

     

BofI Holding, Inc.(a)

      (1,236 )      (24,757 ) 
    

 

 

  
       (369,924 ) 
    

 

 

  

Health Care – (1.1)%

     

Health Care Equipment & Supplies – (0.7)%

     

Intuitive Surgical, Inc.(a)

      (246 )      (127,925 ) 

Varian Medical Systems, Inc.(a)

      (788 )      (63,655 ) 

Zeltiq Aesthetics, Inc.(a)

      (1,088 )      (33,053 ) 
    

 

 

  
       (224,633 ) 
    

 

 

  

Health Care Providers & Services – 0.0%

     

Express Scripts Holding Co.(a)

      (165 )      (14,104 ) 
    

 

 

  

Health Care Technology – (0.1)%

     

athenahealth, Inc.(a)

      (104 )      (17,446 ) 
    

 

 

  

Pharmaceuticals – (0.3)%

     

Endo Health Solutions, Inc.(a)

      (531 )      (32,646 ) 

Horizon Pharma PLC(a)

      (1,041 )      (22,413 ) 

Mallinckrodt PLC(a)

      (350 )      (23,768 ) 

Valeant Pharmaceuticals International, Inc.(a)

      (310 )      (27,888 ) 
    

 

 

  
       (106,715 ) 
    

 

 

  
       (362,898 ) 
    

 

 

  

Telecommunication Services – (0.1)%

     

Diversified Telecommunication
Services – (0.1)%

     

AT&T, Inc.

      (1,147 )      (38,620 ) 
    

 

 

  

Total Common Stocks
(proceeds $6,515,526)

        (6,046,209 ) 
    

 

 

  
    

MUTUAL FUNDS – (6.0)%

     

Index – (6.0)%

     

Index – (6.0)%

     

Consumer Discretionary Select Sector SPDR Fund

      (1,601 )      (129,329 ) 

Consumer Staples Select Sector SPDR Fund

      (1,495 )      (73,883 ) 

Financial Select Sector SPDR Fund

      (1,117 )      (27,433 ) 

Health Care Select Sector SPDR Fund

      (1,905 )      (135,465 ) 

 

AB LONG/SHORT MULTI-MANAGER FUND  •     29   

Portfolio of Investments

Company        
    
Shares		     U.S. $ Value  

 

  

Industrial Select Sector SPDR Fund

      (3,077 )    $ (168,435 ) 

iShares MSCI Brazil Capped ETF

      (4,213 )      (94,877 ) 

iShares MSCI Emerging Markets ETF

      (5,153 )      (175,150 ) 

Materials Select Sector SPDR Fund

      (2,642 )      (120,819 ) 

SPDR S&P 500 ETF Trust

      (3,294 )      (687,425 ) 

SPDR S&P Biotech ETF

      (854 )      (61,736 ) 

SPDR S&P Regional Banking ETF

      (2,840 )      (129,646 ) 

Technology Select Sector SPDR ETF

      (892 )      (39,212 ) 

Utilities Select Sector SPDR Fund

      (2,966 )      (127,004 ) 
    

 

 

  

Total Mutual Funds
(proceeds $1,863,875)

        (1,970,414 ) 
    

 

 

  
    

DEPOSITORY RECEIPTS – (0.7)%

     

Energy – (0.3)%

     

Oil, Gas & Consumable Fuels – (0.3)%

     

Royal Dutch Shell PLC (Sponsored ADR) – Class A

      (1,571 )      (78,173 ) 
    

 

 

  

Financials – (0.2)%

     

Banks – (0.2)%

     

Banco Bradesco SA (ADR)

      (7,462 )      (39,996 ) 

Siam Commercial Bank PCL (The) (NVDR)

      (9,800 )      (35,982 ) 
    

 

 

  
       (75,978 ) 
    

 

 

  

Consumer Discretionary – (0.2)%

     

Internet & Catalog Retail – (0.2)%

     

Alibaba Group Holding Ltd. (ADR)(a)

      (576 )      (48,430 ) 

Vipshop Holdings Ltd. (ADR)(a)

      (1,001 )      (16,546 ) 
    

 

 

  
       (64,976 ) 
    

 

 

  

Total Depository Receipts
(proceeds $228,597)

        (219,127 ) 
    

 

 

  
    

REAL ESTATE INVESTMENT TRUST
UNITS – (0.2)%

     

Financials – (0.2)%

     

Real Estate Investment Trusts (REITs) – (0.2)%

     

Host Hotels & Resorts, Inc.

      (1,514 )      (25,133 ) 

Iron Mountain, Inc.

      (1,985 )      (55,143 ) 
    

 

 

  

Total Real Estate Investment Trust Units
(proceeds $87,430)

        (80,276 ) 
    

 

 

  

Total Securities Sold Short
(proceeds $8,695,428)

        (8,316,026 ) 
    

 

 

  

Total Investments, Net of Securities Sold
Short – 63.2%
(cost $19,928,199)

        20,888,300   

Other assets less liabilities – 36.8%

        12,173,633   
    

 

 

  

Net Assets – 100.0%

      $ 33,061,933   
    

 

 

  

 

30   •  AB LONG/SHORT MULTI-MANAGER FUND

Portfolio of Investments

 

 

FORWARD CURRENCY EXCHANGE CONTRACTS (see Note D)

 

Counterparty    Contracts to
Deliver
(000)		     

In Exchange
For

(000)

      Settlement
Date		      Unrealized
Appreciation/
(Depreciation)		  

Morgan Stanley Co., Inc.

    CHF  91       USD  93         12/18/15       $ 4,846   

Morgan Stanley Co., Inc.

    EUR  407       USD   453         12/18/15         23,049   

Morgan Stanley Co., Inc.

    USD  125       EUR 111         12/18/15         (7,768 ) 

Morgan Stanley Co., Inc.

    CAD 37       USD 28         12/22/15         87   

Morgan Stanley Co., Inc.

    EUR     1,024       USD     1,135         12/22/15         51,640   

Morgan Stanley Co., Inc.

    GBP 43       USD 67         12/22/15         1,537   

Morgan Stanley Co., Inc.

    GBP 23       USD 35         12/22/15         (33 ) 

Morgan Stanley Co., Inc.

    USD 271       CAD 357         12/22/15         (3,518 ) 

Morgan Stanley Co., Inc.

    USD 352       EUR 325         12/22/15         (8,884 ) 

Morgan Stanley Co., Inc.

    USD 25       GBP 17         12/22/15         (94 ) 

Morgan Stanley Co., Inc.

    USD 49       JPY 6,085         12/22/15         61   

Morgan Stanley Co., Inc.

    USD 23       JPY 2,863         12/22/15         (123 ) 

Morgan Stanley Co., Inc.

    USD 37       SEK 310         12/22/15         (1,274 ) 

Morgan Stanley Co., Inc.

    USD 20       ZAR 283         12/22/15         (575 ) 

Morgan Stanley Co., Inc.

    ZAR 650       USD 48         12/22/15         3,044   
           

 

 

  
            $     61,995   
           

 

 

  

TOTAL RETURN SWAPS (see Note D)

 

Counterparty &
Referenced Obligation		   # of Shares
or Units		     Rate Paid/
Received		   Notional
Amount
(000)		     Maturity
Date		     Unrealized
Appreciation/
(Depreciation)		  

Receive Total Return on Reference Obligation

  

Morgan Stanley Co., Inc.

  

        

Alaska Air Group, Inc.

     2,403      FedFundEffective
Plus 0.35%		   USD  178        7/24/17      $ 14,442   

Brunswick Corp.

     1,972      FedFundEffective
Plus 0.35%		     99        7/24/17        5,364   

Constellation Brands, Inc.

     1,983      FedFundEffective
Plus 0.50%		     255        7/24/17        23,651   

Costco Wholesale Corp.

     1,594      FedFundEffective
Plus 0.35%		     243        7/24/17        14,762   

Kroger Co. (The)

     8,820      FedFundEffective
Plus 0.35%		     329        7/24/17        3,374   

Louisiana-Pacific Corp.

     5,562      FedFundEffective
Plus 0.50%		     93        7/24/17        9,198   

Marriott International, Inc.

     1,644      BBA 1 Month LIBOR Plus 0.50%     117        5/22/17        352   

NVR, Inc.

     206      BBA 1 Month LIBOR Plus 0.50%     284        5/22/17        62,419   

Ryanair Holdings PLC

     7,614      EURIBOR 1 Month
Plus 0.50%		   EUR 97        4/10/17        14,893   

United Continental Holdings, Inc.

     3,306      FedFundEffective
Plus 0.50%		   USD 190        7/24/17        (5,924 ) 

Wizz Air Holdings PLC

     877      BBA 1 Month LIBOR Plus 0.50%   GBP 16        1/16/17        (1,051 ) 

Wizz Air Holdings PLC

     1,492      BBA 1 Month LIBOR Plus 0.50%     25        3/3/17        1,956   

Wyndham Worldwide Corp.

     1,600      BBA 1 Month LIBOR Plus 0.50%   USD 138        5/22/17            (15,884 ) 

 

AB LONG/SHORT MULTI-MANAGER FUND  •     31   

Portfolio of Investments

 

 

Counterparty &
Referenced Obligation		   # of Shares
or Units		     Rate Paid/
Received		   Notional
Amount
(000)		     Maturity
Date		     Unrealized
Appreciation/
(Depreciation)		  

Pay Total Return on Reference Obligation

  

Morgan Stanley Co., Inc.

  

        

Agile Property Holdings Ltd.

     2,200      HK Overnight Index
Swap Ref Rate
Minus 2.00%		   HKD 11        8/1/16      $ 202   

Agile Property Holdings Ltd.

     1,000      HK Overnight Index Swap Ref Rate
Minus 2.00%		     5        8/1/16        90   

Agile Property Holdings Ltd.

     15,000      HK Overnight Index Swap Ref Rate
Minus 1.50%-2.00%		     77        8/1/16        1,848   

Air China Ltd.

     86,196      HONIX Minus 0.50%     564        7/24/17        3,349   

Airbus Group SE

     1,204      EONIA Minus 0.40%   EUR 68        8/21/17            (15,594 ) 

Antofagasta PLC

     1,280      SONIA Overnight Deposit Rate
Minus 0.30%		   GBP 10        8/1/16        5,635   

Antofagasta PLC

     1,984      SONIA Overnight Deposit Rate
Minus 0.30%		     11        8/1/16        1,416   

ASOS PLC

     465      SONIA Overnight Deposit Rate
Minus 0.40%		     13        8/1/16        (4,387 ) 

Asustek Computer, Inc.

     5,540      FedFundEffective Minus 0.51%   USD 54        8/1/16        7,966   

Banco do Brasil SA

     6,839      FedFundEffective Minus 1.80%     33        8/1/16        3,853   

Bank of East Asia

     200      HK Overnight Index Swap Ref Rate
Minus 0.40%		   HKD 6        8/1/16        43   

Bank of East Asia

     400      HK Overnight Index Swap Ref Rate
Minus 0.40%		     12        8/1/16        82   

Bank of East Asia

     500      HK Overnight Index Swap Ref Rate
Minus 0.50%		     15        8/1/16        103   

Bank of East Asia

     4,474      HK Overnight Index Swap Ref Rate
Minus 0.40%-0.50%		     139        8/1/16        1,991   

Bank of East Asia

     500      HK Overnight Index Swap Ref Rate
Minus 0.40%		     15        8/1/16        89   

BYD Co., Ltd.

     3,600      HK Overnight Index Swap Ref Rate
Minus 1.75%		     178        8/1/16        3,559   

BYD Co., Ltd.

     1,600      HK Overnight Index Swap Ref Rate
Minus 1.74%		     65        8/1/16        (215 ) 

Canon, Inc.

     940      MUTSCALM
Minus 0.40%		   JPY 3,752        8/1/16        2,073   

Canon, Inc.

     700      MUTSCALM
Minus 0.40%		     2,529        8/1/16        (613 ) 

 

32   •  AB LONG/SHORT MULTI-MANAGER FUND

Portfolio of Investments

 

 

Counterparty &
Referenced Obligation		   # of Shares
or Units		     Rate Paid/
Received		   Notional
Amount
(000)		     Maturity
Date		     Unrealized
Appreciation/
(Depreciation)		  

China Cinda Asset Management Co., Ltd.

     8,700      HK Overnight Index Swap Ref Rate
Minus 0.75%		   HKD 35        8/1/16      $ 1,330   

China Cinda Asset Management Co., Ltd.

     4,600      HK Overnight Index Swap Ref Rate
Minus 0.75%		     17        8/1/16        534   

China Cinda Asset Management Co., Ltd.

     21,000      HK Overnight Index Swap Ref Rate
Minus 0.75%		      101        8/1/16        5,298   

China CITIC Bank Corp., Ltd.

     34,700      HK Overnight Index Swap Ref Rate
Minus 0.40%		     172        8/1/16        261   

China CITIC Bank Corp., Ltd.

     12,600      HK Overnight Index Swap Ref Rate
Minus 0.40%		     57        8/1/16        (615 ) 

China Communications Construction Co., Ltd.

     13,800      HK Overnight Index Swap Ref Rate
Minus 0.48%		     174        8/1/16        6,488   

China Communications Construction Co., Ltd.

     8,600      HK Overnight Index Swap Ref Rate
Minus 0.45%		     86        8/1/16        1,148   

China Cosco Holdings

     5,600      HK Overnight Index Swap Ref Rate
Minus 7.07%		     28        8/1/16        32   

China Everbright Bank Co.

     47,100      HK Overnight Index Swap Ref Rate
Minus 0.40%		     222        8/1/16        7,402   

China Everbright Bank Co.

     23,000      HK Overnight Index Swap Ref Rate
Minus 0.40%		     81        8/1/16        3   

China Merchants Bank

     22,000      HK Overnight Index Swap Ref Rate
Minus 0.40%		     452        8/1/16        6,669   

China Minsheng Banking Corp., Ltd.

     26,700      HK Overnight Index Swap Ref Rate
Minus 0.40%		     235        8/1/16        4,577   

China Pacific Insurance (Group) Co., Ltd.

     3,800      HK Overnight Index Swap Ref Rate
Minus 0.40%		     121        8/1/16        (1 ) 

China Shipping Container

     54,100      HK Overnight Index Swap Ref Rate
Minus 1.50%		     159        8/1/16            (1,131 ) 

China Southern Airlines Co., Ltd.

     49,163      HONIX Minus 0.50%     289        7/10/17        1,269   

CITIC Securities Co., Ltd.

     4,500      HK Overnight Index Swap Ref Rate
Minus 0.40%		     125        8/1/16        5,833   

CITIC Securities Co., Ltd.

     6,900      HK Overnight Index Swap Ref Rate
Minus 0.40%		     112        8/1/16        (1,363 ) 

 

AB LONG/SHORT MULTI-MANAGER FUND  •     33   

Portfolio of Investments

 

 

Counterparty &
Referenced Obligation		   # of Shares
or Units		     Rate Paid/
Received		   Notional
Amount
(000)		     Maturity
Date		     Unrealized
Appreciation/
(Depreciation)		  

Country Garden Holdings Co., Ltd.

     5,800      HK Overnight Index Swap Ref Rate
Minus 0.40%		   HKD  18        8/1/16      $ 203   

Country Garden Holdings Co., Ltd.

     31,600      HK Overnight Index Swap Ref Rate
Minus 0.40%		     93        8/1/16        91   

Evergrande Real Estate Group Ltd.

     400      HK Overnight Index Swap Ref Rate
Minus 8.56%		      1        8/1/16        (160 ) 

Evergrande Real Estate Group Ltd.

     20,200      HK Overnight Index Swap Ref Rate
Minus 8.56%		     110        8/1/16        (1,795 ) 

Evergrande Real Estate Group Ltd.

     19,200      HK Overnight Index Swap Ref Rate
Minus 8.51%		     122        8/1/16        576   

Fast Retailing Co., Ltd.

     55      MUTSCALM
Minus 0.40%		   JPY 3,041        8/1/16        2,408   

Fast Retailing Co., Ltd.

     20      MUTSCALM
Minus 0.40%		     969        8/1/16        (204 ) 

FirstRand Bank Ltd.

     9,572      South Africa Benchmark Overnight Rate
Minus 0.95%		   ZAR 501        8/1/16        3,576   

Fosun International Ltd.

     15,200      HK Overnight Index Swap Ref Rate
Minus 1.50%		   HKD 226        8/1/16        2,021   

Fosun International Ltd.

     5,300      HK Overnight Index Swap Ref
Minus 1.73%		     70        8/1/16        (389 ) 

Glencore PLC

     7,794      SONIA Overnight Deposit Rate
Minus 0.30%		   GBP 26        8/1/16            28,021   

Glencore PLC

     300      SONIA Overnight Deposit Rate
Minus 0.30%		     1        8/1/16        1,140   

Glencore PLC

     231      SONIA Overnight Deposit Rate
Minus 0.30%		     1        8/1/16        771   

Hyundai Heavy Industries Co., Ltd.

     265      FedFundEffective
Minus 0.40%		   USD 26        8/1/16        4,910   

ICAP PLC

     3,616      SONIA Overnight Deposit Rate
Minus 0.30%		   GBP 17        8/1/16        (1,889 ) 

Imerys SA

     275      EURIBOR 1 Month Minus 0.35   EUR 19        8/1/16        1,309   

Imerys SA

     54      EONIA Minus 0.35%     3        8/1/16        (70 ) 

INPEX Corp.

     3,790      MUTSCALM
Minus 0.40%		   JPY 5,192        8/1/16        4,245   

INPEX Corp.

     800      MUTSCALM
Minus 0.40%		     913        8/1/16        (520 ) 

J Sainsbury PLC

     8,919      SONIA Overnight Deposit Rate
Minus 0.30%		   GBP 20        8/1/16        (4,113 ) 

 

34   •  AB LONG/SHORT MULTI-MANAGER FUND

Portfolio of Investments

 

 

Counterparty &
Referenced Obligation		   # of Shares
or Units		     Rate Paid/
Received		   Notional
Amount
(000)		     Maturity
Date		     Unrealized
Appreciation/
(Depreciation)		  

JFE Holdings, Inc.

     1,930      MUTSCALM
Minus 0.30%		   JPY 3,388        8/1/16      $ (3,235 ) 

Just Eat PLC

     3,436      SONIA Overnight Deposit Rate
Minus 0.30%		   GBP 14        8/1/16            (1,091 ) 

Kering

     191      EONIA Minus 0.35%   EUR 31        8/1/16        (387 ) 

Kroton Educational SA

     6,580      FedFundEffective
Minus 1.00%		   USD 17        8/1/16        1,354   

Lenovo Group Ltd.

     19,100      HK Overnight Index Swap Ref Rate
Minus 0.40%		   HKD 193        8/1/16        4,584   

Lenovo Group Ltd.

     21,100      HK Overnight Index Swap Ref Rate
Minus 0.40%		     165        8/1/16        (1,084 ) 

Li & Fung Ltd.

     22,800      HK Overnight Index Swap Ref Rate
Minus 0.40%		     174        8/1/16        6,710   

Li & Fung Ltd.

     17,900      HK Overnight Index Swap Ref Rate
Minus 0.40%		     108        8/1/16        1,518   

Malayan Banking Bhd

     7,928      FedFundEffective
Minus 4.00%		   USD 15        8/1/16        (671 ) 

MITSUI & Co., Ltd.

     1,690      MUTSCALM
Minus 0.40%		   JPY 3,087        8/1/16        3,591   

MITSUI & Co., Ltd.

     600      MUTSCALM
Minus 0.40%		     797        8/1/16        (881 ) 

Mitsui O.S.K Lines Ltd.

     16,500      MUTSCALM
Minus 0.40%		     4,953        8/1/16        (2,790 ) 

MTN Group Ltd.

     3,322      South Africa Benchmark Overnight Rate
Minus 0.95%		   ZAR 728        8/1/16        17,156   

Nintendo Co., Ltd.

     133      MUTSCALM
Minus 0.40%		   JPY 2,552        8/1/16        286   

Ocado Group PLC

     3,185      SONIA Overnight Deposit Rate
Minus 0.40%		   GBP 12        8/1/16        345   

Ocado Group PLC

     200      SONIA Overnight Deposit Rate
Minus 0.30%		     1        8/1/16        184   

Ocado Group PLC

     100      SONIA Overnight Deposit Rate
Minus 0.40%		     – 0  –*      8/1/16        66   

Ocado Group PLC

     100      SONIA Overnight Deposit Rate
Minus 0.40%		     – 0  –*      8/1/16        63   

Ocado Group PLC

     560      SONIA Overnight Deposit Rate
Minus 0.40%		     2        8/1/16        233   

Ocado Group PLC

     633      SONIA Overnight Deposit Rate
Minus 0.30%		     2        8/1/16        114   

 

AB LONG/SHORT MULTI-MANAGER FUND  •     35   

Portfolio of Investments

 

 

Counterparty &
Referenced Obligation		   # of Shares
or Units		     Rate Paid/
Received		   Notional
Amount
(000)		     Maturity
Date		     Unrealized
Appreciation/
(Depreciation)		  

Old Mutual PLC

     10,651      SONIA Overnight Deposit Rate
Minus 0.30%		   GBP  21        8/1/16      $ (2,604 ) 

Ping An Insurance (Group) Co. of China Ltd.

     3,000      HK Overnight Index Swap Ref Rate
Minus 0.40%		   HKD 120        8/1/16        (922 ) 

Repsol SA

     4,543      FedFundEffective
Minus 0.50%		   USD 58        9/20/17        (1,015 ) 

Sasol Ltd.

     869      South Africa Benchmark Overnight Rate
Minus 0.95%		   ZAR 357        8/1/16        523   

Shoprite Holdings Ltd.

     2,700      South Africa Benchmark Overnight Rate
Minus 0.95%		     364        8/1/16        (1,338 ) 

Standard Bank Group Ltd.

     2,419      South Africa Benchmark Overnight Rate
Minus 0.95%		      356        8/1/16        2,917   

Standard Bank Group Ltd.

     400      South Africa Benchmark Overnight Rate
Minus 0.95%		     55        8/1/16        193   

Standard Bank Group Ltd.

     651      South Africa Benchmark Overnight Rate
Minus 0.95%		     94        8/1/16        690   

Standard Chartered PLC

     4,265      SONIA Overnight Deposit Rate
Minus 0.30%		   GBP 31        8/1/16        10,780   

Steinhoff International Holdings Ltd.

     3,507      South Africa Benchmark Overnight Rate
Minus 0.95%		   ZAR 288        8/1/16        (624 ) 

Woodside Petroleum Ltd.

     2,664      RBA Daily Cash Rate Target Minus 0.40%   AUD 97        8/1/16        12,365   

Woolworth Holdings Ltd.

     2,776      South Africa Benchmark Overnight Rate
Minus 0.95%		   ZAR 289        8/1/16        392   

Zhuzhou CSR Times Electric Co., Ltd.

     5,700      HK Overnight Index Swap Ref Rate
Minus 0.40%		   HKD 318        8/1/16        2,617   

Zoomlion Heavy Industry Science & Technology Co., Ltd.

     31,200      HK Overnight Index Swap Ref Rate
Minus 2.50%-3.50%		     164        8/1/16        9,029   
         

 

 

  
          $     275,975   
         

 

 

  

 

36   •  AB LONG/SHORT MULTI-MANAGER FUND

Portfolio of Investments

 

 

 

*   Notional amount less than $500.

 

(a)   Non-income producing security.

 

(b)   Position, or a portion thereof, has been segregated to collateralize OTC derivatives outstanding.

 

(c)   Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At November 30, 2015, the aggregate market value of these securities amounted to $287,039 or 0.9% of net assets.

 

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

 

(e)   One contract relates to 100 shares.

 

(f)   One contract relates to 1 share.

 

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

 

(h)   Investment in affiliated money market mutual fund. The rate shown represents the 7-day yield as of period end.

Currency Abbreviations:

AUD – Australian Dollar

CAD – Canadian Dollar

CHF – Swiss Franc

EUR – Euro

GBP – Great British Pound

HKD – Hong Kong Dollar

JPY – Japanese Yen

SEK – Swedish Krona

USD – United States Dollar

ZAR – South African Rand

Glossary:

ADR – American Depositary Receipt

BBA – British Bankers Association

EONIA – Euro OverNight Index Average

ETF – Exchange Traded Fund

EURIBOR – Euro Interbank Offered Rate

FedFundEffective – Federal Funds Effective Rate

HK – Hong Kong

HONIX – Hong Kong Overnight Index Rate

LIBOR – London Interbank Offered Rates

MSCI – Morgan Stanley Capital International

MTN – Medium Term Note

MUTSCALM – Bank of Japan Estimated Unsecured Overnight Call Rate

NVDR – Non Voting Depositary Receipt

RBA – Reserve Bank of Australia

REG – Registered Shares

SONIA – Sterling Overnight Index Average

SPDR – Standard & Poor’s Depository Receipt

See notes to financial statements.

 

AB LONG/SHORT MULTI-MANAGER FUND  •     37   

Portfolio of Investments

STATEMENT OF ASSETS & LIABILITIES

November 30, 2015 (unaudited)

 

Assets   

Investments in securities, at value

   

Unaffiliated issuers (cost $21,777,678)

    $     22,358,377   

Affiliated issuers (cost $6,845,949—including investment of cash collateral for securities loaned of $146,497)

      6,845,949 (a) 

Deposit at broker for securities sold short

      10,449,990   

Cash collateral due from broker

      810,000   

Foreign currencies, at value (cost $682,841)

      656,787 (b) 

Unrealized appreciation on total return swaps

      348,535   

Receivable for investment securities sold and foreign currency transactions

      292,209   

Unrealized appreciation on forward currency exchange contracts

      84,264   

Dividends and interest receivable

      52,468   

Receivable due from Adviser

      23,870   

Receivable for terminated total return swaps

      21,513   

Receivable for capital stock sold

      500   
  

 

 

  

Total assets

      41,944,462   
  

 

 

  
Liabilities   

Due to custodian

      9,344   

Payable for securities sold short, at value (proceeds received $8,695,428)

      8,316,026   

Payable for investment securities purchased and foreign currency transactions

      210,141   

Payable for collateral received on securities loaned

      146,497   

Unrealized depreciation on total return swaps

      72,560   

Unrealized depreciation on forward currency exchange contracts

      22,269   

Dividends payable

      17,214   

Payable for terminated total return swaps

      12,761   

Distribution fee payable

      146   

Accrued expenses

      75,571   
  

 

 

  

Total liabilities

      8,882,529   
  

 

 

  

Net Assets

    $ 33,061,933   
  

 

 

  
Composition of Net Assets   

Capital stock, at par

    $ 319   

Additional paid-in capital

      31,887,632   

Accumulated net investment loss

      (195,259 ) 

Accumulated net realized gain on investment
and foreign currency transactions

      97,317   

Net unrealized appreciation on investments and foreign currency denominated assets and liabilities

      1,271,924   
  

 

 

  
   $     33,061,933   
  

 

 

  

 

(a)   Includes securities on loan with a value of $137,668 (see Note E).

 

(b)   Includes $682,681 on deposit with the broker for securities sold short.

See notes to financial statements.

 

38   •  AB LONG/SHORT MULTI-MANAGER FUND

Statement of Assets & Liabilities

 

 

Net Asset Value Per Share—10 billion shares of capital stock authorized, $.0001 par value

 

Class   Net Assets        Shares
Outstanding		        Net Asset
Value		  

 

  
A   $ 548,349           53,091         $ 10.33 * 

 

  
C   $ 41,761           4,078         $ 10.24   

 

  
Advisor   $   32,430,475           3,131,468         $   10.36   

 

  
R   $ 10,299           1,001         $ 10.30   

 

  
K   $ 10,330           1,001         $ 10.33   

 

  
I   $ 10,360           1,000         $ 10.36   

 

  
Z   $ 10,359           1,000         $ 10.36   

 

  

 

 

*   The maximum offering price per share for Class A shares was $10.79 which reflects a sales charge of 4.25%.

See notes to financial statements.

 

AB LONG/SHORT MULTI-MANAGER FUND  •     39   

Statement of Assets & Liabilities

STATEMENT OF OPERATIONS

Six Months Ended November 30, 2015 (unaudited)

 

Investment Income    

Dividends

    

Unaffiliated issuers (net of foreign taxes withheld of $2,292)

   $     196,711     

Affiliated issuers

     3,318     

Interest

     11,534     

Securities lending income

     678      $     212,241   
 

 

 

    
Expenses    

Advisory fee (see Note B)

     306,619     

Distribution fee—Class A

     277     

Distribution fee—Class C

     156     

Distribution fee—Class R

     26     

Distribution fee—Class K

     13     

Transfer agency—Class A

     73     

Transfer agency—Class C

     17     

Transfer agency—Advisor Class

     6,757     

Transfer agency—Class R

     3     

Transfer agency—Class K

     3     

Transfer agency—Class I

     1     

Transfer agency—Class Z

     1     

Custodian

     259,871     

Amortization of offering expenses

     122,525     

Audit and tax

     44,656     

Printing

     20,184     

Registration fees

     16,321     

Legal

     12,472     

Directors’ fees

     9,020     

Miscellaneous

     3,768     
 

 

 

    

Total operating expenses (see Note B)

     802,763     

Interest expense

     1,295     

Dividend expense on securities sold short

     89,280     

Broker fee on securities sold short

     23,933     
 

 

 

    

Total expenses

     917,271     

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

     (481,148 )   
 

 

 

    

Net expenses

       436,123   
   

 

 

  

Net investment loss

       (223,882 ) 
   

 

 

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

Net realized gain (loss) on:

    

Investment transactions

       (27,764 ) 

Securities sold short

       544,167   

Swaps

       (128,083 ) 

Foreign currency transactions

       (61,735 ) 

Net change in unrealized appreciation/depreciation of:

    

Investments

         (1,322,535 ) 

Securities sold short

       304,248   

Swaps

       427,599   

Foreign currency denominated assets and liabilities

       82,487   
   

 

 

  

Net loss on investment and foreign currency transactions

       (181,616 ) 
   

 

 

  

Net Decrease in Net Assets from Operations

     $     (405,498 ) 
   

 

 

  

See notes to financial statements.

 

40   •  AB LONG/SHORT MULTI-MANAGER FUND

Statement of Operations

STATEMENT OF CHANGES IN NET ASSETS

 

 

     Six Months Ended
November 30, 2015
(unaudited)		     September 30,
2014(a)  to
May 31, 2015		  
Increase (Decrease) in Net Assets from Operations     

Net investment loss

    $ (223,882 )    $ (320,896 ) 

Net realized gain on investment transactions and foreign currency transactions

      326,585        17,386   

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

      (508,201 )      1,780,125   
  

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      (405,498 )      1,476,615   
Capital Stock Transactions     

Net increase

      1,368,641        30,622,175   
  

 

 

    

 

 

  

Total increase

      963,143        32,098,790   
Net Assets     

Beginning of period

      32,098,790        – 0  – 
  

 

 

    

 

 

  

End of period (including accumulated net investment loss of ($195,259) and undistributed net investment income of $28,623, respectively)

    $     33,061,933      $     32,098,790   
  

 

 

    

 

 

  

 

 

(a)   Commencement of operations.

See notes to financial statements.

 

AB LONG/SHORT MULTI-MANAGER FUND  •     41   

Statement of Changes in Net Assets

NOTES TO FINANCIAL STATEMENTS

November 30, 2015 (unaudited)

 

NOTE A

Significant Accounting Policies

AB Cap Fund, Inc. (the “Company”), which is a Maryland corporation, is registered under the Investment Company Act of 1940 as an open-end management investment company. Prior to January 20, 2015, the Company was known as AllianceBernstein Cap Fund, Inc. The Company operates as a series company currently comprised of 28 portfolios: AB Small Cap Growth Portfolio, AB Market Neutral Strategy—U.S., AB Emerging Markets Multi-Asset Portfolio, AB Select US Equity Portfolio, AB All Market Growth Portfolio, AB Select US Long/Short Portfolio, AB Concentrated Growth Fund, AB Multi-Manager Alternative Strategies Fund, AB Long/Short Multi-Manager Fund, AB Global Core Equity Portfolio, AB Emerging Markets Growth 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 Small Cap Value Portfolio, AB All Market Income Portfolio, AB All Market Alternative Return Portfolio, AB Concentrated International Growth Fund, AB International Strategic Core Portfolio and AB Emerging Markets Core Portfolio (the “Portfolios”). The AB Small Cap Growth Portfolio, AB Market Neutral Strategy—U.S., AB Emerging Markets Multi-Asset Portfolio, AB Select US Equity Portfolio and AB Select US Long/Short Portfolio are each diversified Portfolios. Each of the other Portfolios is non-diversified. AB Concentrated Growth Fund commenced operations on February 28, 2014. AB Multi-Manager Alternative Strategies Fund commenced operations on July 31, 2014. AB Long/Short Multi-Manager Fund commenced operations on September 30, 2014. AB Global Core Equity Portfolio commenced operations on November 12, 2014. AB Emerging Markets Growth Portfolio commenced operations on November 13, 2014. AB Small Cap Value Portfolio commenced operations on December 3, 2014. AB Multi-Manager Select Retirement Allocation Fund and AB Multi-Manager Select 2010-2055 Funds commenced operations on December 15, 2014. AB All Market Income Portfolio commenced operations on December 18, 2014. AB All Market Alternative Return Portfolio commenced operations on March 9, 2015. AB Concentrated International Growth Fund commenced operations on April 15, 2015. AB International Strategic Core Portfolio commenced operations on July 29, 2015. AB Emerging Markets Core Portfolio commenced operations on September 9, 2015. Each Portfolio is considered to be a separate entity for financial reporting and tax purposes. This report relates only to the AB Long/Short Multi-Manager Fund (the “Fund”). Prior to January 20, 2015, the Fund was known as AllianceBernstein Long/Short Multi-Manager Fund. The Fund has authorized the issuance of Class A, Class B, Class C, Advisor Class, Class R, Class K, Class I, Class 1, Class 2 and Class Z shares. Class B, Class 1 and Class 2 shares are not currently being offered. As of November 30, 2015, AllianceBernstein L.P. (the “Adviser”), was the sole shareholder of Class R,

 

42   •  AB LONG/SHORT MULTI-MANAGER FUND

Notes to Financial Statements

 

 

Class K, Class I, and Class Z shares. Class A shares are sold with a front-end sales charge of up to 4.25% for purchases not exceeding $1,000,000. Class C shares are subject to a contingent deferred sales charge of 1% on redemptions made within the first year after purchase. Advisor Class, Class R, Class K, Class I, and Class Z shares are sold without an initial or contingent deferred sales charge. All ten classes of shares have identical voting, dividend, liquidation and other rights, except that the classes bear different distribution and transfer agency expenses. Each class has exclusive voting rights with respect to its distribution plan. The Fund seeks to achieve its investment objective primarily by utilizing a long/short equity strategy (“Long/Short Strategy”). In order to implement the Long/Short Strategy, the Adviser will allocate the Fund’s assets among multiple investment sub-advisers (each a “Sub-Adviser”) that the Adviser believes have substantial experience managing assets in the global securities markets. The Adviser may also manage a portion of the Fund’s assets directly. The Sub-Advisers are not affiliated with the Adviser. The Adviser currently allocates assets to the following Sub-Advisers: Passport Capital, LLC, Impala Asset Management LLC, Lyrical Asset Management LP, Sirios Capital Management, L.P. and Kynikos Associates LP. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The Fund is an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the Fund.

1. Security Valuation

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

In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national securities exchange (other than securities listed on the NASDAQ Stock Market, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (“OTC”) market put or call options are valued at the mid level between the current bid and ask prices. If either a current bid or current ask price is unavailable, the “Adviser” will have discretion to

 

AB LONG/SHORT MULTI-MANAGER FUND  •     43   

Notes to Financial Statements

 

 

determine the best valuation (e.g. last trade price in the case of listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; U.S. Government securities and any other debt instruments having 60 days or less remaining until maturity are generally valued at market by an independent pricing vendor, if a market price is available. If a market price is not available, the securities are valued at amortized cost. This methodology is commonly used for short term securities that have an original maturity of 60 days or less, as well as short term securities that had an original term to maturity that exceeded 60 days. In instances when amortized cost is utilized, the Valuation Committee (the “Committee”) must reasonably conclude that the utilization of amortized cost is approximately the same as the fair value of the security. Such factors the Committee will consider include, but are not limited to, an impairment of the creditworthiness of the issuer or material changes in interest rates. Fixed-income securities, including mortgage-backed and asset-backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker-dealers. In cases where broker-dealer quotes are obtained, the Adviser may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security. Swaps and other derivatives are valued daily, primarily using independent pricing services, independent pricing models using market inputs, as well as third party broker-dealers or counterparties. Investment companies are valued at their net asset value each day.

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

2. Fair Value Measurements

In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of

 

44   •  AB LONG/SHORT MULTI-MANAGER FUND

Notes to Financial Statements

 

 

inputs to the valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.

 

  •  

Level 1—quoted prices in active markets for identical investments

  •  

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

  •  

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

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

Options are valued using market-based inputs to models, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency, where such inputs and models are available. Alternatively the values may be obtained through unobservable management determined inputs and/or management’s proprietary models. Where models are used, the selection of a particular model to value an option depends upon the contractual terms of, and specific risks inherent in, the option as well as the availability of pricing information in the market. Valuation models require a variety of inputs, including contractual terms, market prices, measures of volatility and correlations of such inputs. Exchange traded options generally will be classified as Level 2. For options that do not trade on exchange but trade in liquid markets, inputs can generally be verified and model selection does not involve significant management judgment. Options are classified within Level 2 on the fair value hierarchy when all of the significant inputs can be corroborated to market evidence. Otherwise such instruments are classified as Level 3.

 

AB LONG/SHORT MULTI-MANAGER FUND  •     45   

Notes to Financial Statements

 

 

The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of November 30, 2015:

 

Investments in
Securities:

   Level 1     Level 2     Level 3     Total  

Assets:

        

Common Stocks:

        

Consumer Discretionary

   $ 5,355,986      $ 857,022      $ – 0  –    $ 6,213,008   

Information Technology

     3,607,962        204,180        – 0  –      3,812,142   

Industrials

     2,449,205        240,612        – 0  –      2,689,817   

Financials

     2,064,438        – 0  –      – 0  –      2,064,438   

Health Care

     1,964,335        – 0  –      – 0  –      1,964,335   

Consumer Staples

     1,630,947        83,952        – 0  –      1,714,899   

Materials

     1,354,200        176,564        – 0  –      1,530,764   

Energy

     1,146,010        – 0  –      – 0  –      1,146,010   

Utilities

     417,099        – 0  –      – 0  –      417,099   

Telecommunication Services

     186,837        147,070        – 0  –      333,907   

Real Estate Investment Trust Units

     174,014        – 0  –      – 0  –      174,014   

Equity Linked Notes

     – 0  –      – 0  –      143,386        143,386   

Options Purchased – Puts

     – 0  –      65,724        – 0  –      65,724   

Depository Receipts

     61,251        – 0  –      – 0  –      61,251   

Warrants

     27,583        – 0  –      – 0  –      27,583   

Short-Term Investments

     6,699,452        – 0  –      – 0  –      6,699,452   

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

     146,497        – 0  –      – 0  –      146,497   

Liabilities:

        

Common Stocks:

        

Consumer Discretionary

     (1,327,495 )      (311,580 )      – 0  –      (1,639,075 ) 

Industrials

     (859,671 )      (290,062 )      – 0  –      (1,149,733 ) 

Energy

     (758,614 )      (53,732 )      – 0  –      (812,346 ) 

Information Technology

     (720,626 )      (91,367 )      – 0  –      (811,993 ) 

Materials

     (327,316 )      (147,258 )      – 0  –      (474,574 ) 

Consumer Staples

     (308,643 )      (78,403 )      – 0  –      (387,046 ) 

Financials

     (307,288 )      (62,636 )      – 0  –      (369,924 ) 

Health Care

     (362,898 )      – 0  –      – 0  –      (362,898 ) 

Telecommunication Services

     (38,620 )      – 0  –      – 0  –      (38,620 ) 

Mutual Funds

     (1,970,414 )      – 0  –      – 0  –      (1,970,414 ) 

Depository Receipts

     (183,145 )      (35,982 )      – 0  –      (219,127 ) 

Real Estate Investment Trust Units

     (80,276 )      – 0  –      – 0  –      (80,276 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Total Investments in Securities

     20,040,810        704,104        143,386        20,888,300   

Other Financial Instruments*:

        

Assets:

        

Forward Currency Exchange Contracts

     – 0  –      84,264        – 0  –      84,264   

Total Return Swaps

     – 0  –      348,535        – 0  –      348,535   

Liabilities:

        

Forward Currency Exchange Contracts

     – 0  –      (22,269 )      – 0  –      (22,269 ) 

Total Return Swaps

     – 0  –      (72,560 )      – 0  –      (72,560 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Total+

   $   20,040,810      $   1,042,074      $   143,386      $   21,226,270   
 

 

 

    

 

 

    

 

 

    

 

 

  

 

*   Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/depreciation on the instrument.

 

+   There were de minimis transfers under 1% of net assets between Level 1 and Level 2 during the reporting period.

 

46   •  AB LONG/SHORT MULTI-MANAGER FUND

Notes to Financial Statements

 

 

The Fund recognizes all transfers between levels of the fair value hierarchy assuming the financial instruments were transferred at the beginning of the reporting period.

The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value.

 

      Equity Linked Notes     Total  

Balance as of 5/31/15

    $ 246,374      $ 246,374   

Accrued discounts/(premiums)

      – 0  –      – 0  – 

Realized gain (loss)

      (11,225 )      (11,225 ) 

Change in unrealized appreciation/depreciation

      (35,478 )      (35,478 ) 

Purchases

      – 0 –      – 0  – 

Sales

      (56,285 )      (56,285 ) 

Transfers in to Level 3

      – 0  –      – 0  – 

Transfers out of Level 3

      – 0  –      – 0  – 
  

 

 

    

 

 

  

Balance as of 11/30/15

    $   143,386      $   143,386   
  

 

 

    

 

 

  

Net change in unrealized appreciation/depreciation from investments held as of 11/30/15*

    $ (35,478 )    $ (35,478 ) 
  

 

 

    

 

 

  

 

*   The unrealized appreciation/depreciation is included in net change in unrealized appreciation/depreciation on investments and other financial instruments in the accompanying statement of operations.

The Adviser established the Committee to oversee the pricing and valuation of all securities held in the Fund. The Committee operates under pricing and valuation policies and procedures established by the Adviser and approved by the Board, including pricing policies which set forth the mechanisms and processes to be employed on a daily basis to implement these policies and procedures. In particular, the pricing policies describe how to determine market quotations for securities and other instruments. The Committee’s responsibilities include: 1) fair value and liquidity determinations (and oversight of any third parties to whom any responsibility for fair value and liquidity determinations is delegated), and 2) regular monitoring of the Adviser’s pricing and valuation policies and procedures and modification or enhancement of these policies and procedures (or recommendation of the modification of these policies and procedures) as the Committee believes appropriate.

The Committee is also responsible for monitoring the implementation of the pricing policies by the Adviser’s Pricing Group (the “Pricing Group”) and a third party which performs certain pricing functions in accordance with the pricing policies. The Pricing Group is responsible for the oversight of the third party on a day-to-day basis. The Committee and the Pricing Group perform a series of activities to provide reasonable assurance of the accuracy of prices including: 1) periodic vendor due diligence meetings, review of methodologies, new developments and processes at vendors, 2) daily comparison of security valuation versus prior day for all securities that exceeded established thresholds, and 3) daily review of unpriced, stale, and variance reports with exceptions reviewed by senior management and the Committee.

 

AB LONG/SHORT MULTI-MANAGER FUND  •     47   

Notes to Financial Statements

 

 

In addition, several processes outside of the pricing process are used to monitor valuation issues including: 1) performance and performance attribution reports are monitored for anomalous impacts based upon benchmark performance, and 2) the Adviser reviews all portfolios for performance and analytics (which are generated using the Adviser’s prices).

3. Currency Translation

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

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

4. Taxes

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

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

5. Investment Income and Investment Transactions

Dividend income (or dividend expense) is recorded on the ex-dividend date or as soon as the Fund is informed of the dividend. Interest income (or interest expense) is accrued daily. Investment transactions are accounted for on the date

 

48   •  AB LONG/SHORT MULTI-MANAGER FUND

Notes to Financial Statements

 

 

the securities are purchased or sold. Investment gains or losses are determined on the identified cost basis. The Fund amortizes premiums and accretes discounts as adjustments to interest income.

6. Class Allocations

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

7. Dividends and Distributions

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

8. Offering Expenses

Offering expenses of $366,573 were deferred and amortized on a straight line basis over a one year period starting from September 30, 2014 (commencement of operations).

NOTE B

Advisory Fee and Other Transactions with Affiliates

Under the terms of the investment advisory agreement, the Fund paid the Adviser an annual rate of 1.90% of the Fund’s average daily net assets. The Adviser compensates the Sub-Advisers out of the investment advisory fee it receives from the Fund. The fee is accrued daily and paid monthly. The Adviser has agreed to waive its fees and bear certain expenses to the extent necessary to limit total operating expenses (excluding expenses associated with securities sold short, acquired fund fees and expenses other than the advisory fees of any AllianceBernstein Mutual Funds in which the Fund may invest, except advisory fees borne by the Fund in connection with the investment of securities lending collateral, interest expense, taxes, extraordinary expenses, and brokerage commissions and other transaction costs) on an annual basis (the “Expense Caps”) to 2.24%, 2.99%, 1.99%, 2.49%, 2.24%, 1.99% and 1.99% of daily average net assets for Class A, Class C, Advisor Class, Class R, Class K, Class I and Class Z shares, respectively. Any fees waived and expenses borne by the Adviser through May 31, 2015 are subject to repayment by the Fund until May 31, 2018. Any fees waived and expenses borne by the Adviser from June 1, 2015 through September 30, 2015 are subject to repayment by the Fund until May 31, 2019. In each case, no repayment will be made that would cause the

 

AB LONG/SHORT MULTI-MANAGER FUND  •     49   

Notes to Financial Statements

 

Fund’s total annual operating expenses to exceed the net fee percentage set forth per the Expense Caps. The Expense Caps may not be terminated by the Adviser before September 30, 2016. For the six months ended November 30, 2015, such reimbursements/waivers amounted to $481,148, of which $329,884 is subject to repayment.

The Fund compensates AllianceBernstein Investor Services, Inc. (“ABIS”), a wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Fund. ABIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. Such compensation retained by ABIS amounted to $9,021 for the six months ended November 30, 2015.

AllianceBernstein Investments, Inc. (the “Distributor”), a wholly-owned subsidiary of the Adviser, serves as the distributor of the Fund’s shares. The Distributor has advised the Fund that it has retained front-end sales charges of $245 from the sale of Class A shares and received $0 in contingent deferred sales charges imposed upon redemptions by shareholders of Class C shares for the six months ended November 30, 2015.

The Fund may invest in the AB Fixed-Income Shares, Inc.—Government STIF Portfolio (“Government STIF Portfolio”), an open-end management investment company managed by the Adviser. The Government STIF Portfolio is offered as a cash management option to mutual funds and other institutional accounts of the Adviser, and is not available for direct purchase by members of the public. The Government STIF Portfolio pays no investment management fees but does bear its own expenses. A summary of the Fund’s transactions in shares of the Government STIF Portfolio for the six months ended November 30, 2015 is as follows:

 

Market Value

May 31, 2015

(000)

   Purchases
at Cost
(000)		     Sales
Proceeds
(000)		     Market Value
November 30, 2015
(000)		     Dividend
Income
(000)		  
$    6,348   $     13,575      $     13,224      $     6,699      $     3   

Brokerage commissions paid on investment transactions for the six months ended November 30, 2015 amounted to $40,261, of which $0 and $0, respectively, was paid to Sanford C. Bernstein & Co. LLC and Sanford C. Bernstein Limited, affiliates of the Adviser.

NOTE C

Distribution Services Agreement

The Fund has adopted a Distribution Services Agreement (the “Agreement”) pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Agreement, the Fund pays distribution and servicing fees to the Distributor at an

 

50   •  AB LONG/SHORT MULTI-MANAGER FUND

Notes to Financial Statements

 

 

annual rate of up to .25% of the Fund’s average daily net assets attributable to Class A shares, 1% of the Fund’s average daily net assets attributable to Class C shares, .50% of the Fund’s average daily net assets attributable to Class R shares and .25% of the Fund’s average daily net assets attributable to Class K shares. There are no distribution and servicing fees on the Advisor Class, Class I and Class Z shares. The fees are accrued daily and paid monthly. The Agreement provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. Since the commencement of the Fund’s operations, the Distributor has incurred expenses in excess of the distribution costs reimbursed by the Fund in the amounts of $– 0 – , $– 0 – and $– 0 – for Class C, Class R and Class K shares, respectively. While such costs may be recovered from the Fund in future periods so long as the Agreement is in effect, the rate of the distribution and servicing fees payable under the Agreement may not be increased without a shareholder vote. In accordance with the Agreement, there is no provision for recovery of unreimbursed distribution costs incurred by the Distributor beyond the current fiscal year for Class A shares. The Agreement also provides that the Adviser may use its own resources to finance the distribution of the Fund’s shares.

NOTE D

Investment Transactions

Purchases and sales of investment securities (excluding short-term investments) for the six months ended November 30, 2015, were as follows:

 

    Purchases     Sales     Securities
Sold Short		     Covers on
Securities
Sold Short		  

Investment securities (excluding U.S. government securities)

   $    16,386,894      $    15,680,005      $    13,961,406      $    11,333,286   

U.S. government securities

     – 0  –      – 0  –      – 0  –      – 0  – 

The cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes. Accordingly, gross unrealized appreciation and unrealized depreciation (excluding foreign currency and swap transactions) are as follows:

 

Gross Unrealized     Net
Unrealized
Appreciation
on Investments		     Net
Unrealized
Appreciation
on  Securities
Sold Short		     Net
Unrealized
Appreciation/
(Depreciation)		  

Appreciation
on Investments

     Depreciation
on Investments		        
  $    1,889,389      $     (1,308,690 )    $     580,699      $     379,402 (a)    $     960,101   

 

(a)   

Gross unrealized appreciation was $747,966 and gross unrealized depreciation was $(368,564), resulting in net unrealized appreciation of $379,402.

 

AB LONG/SHORT MULTI-MANAGER FUND  •     51   

Notes to Financial Statements

 

 

1. Derivative Financial Instruments

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

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

 

  •  

Forward Currency Exchange Contracts

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

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

During the six months ended November 30, 2015, the Fund held forward currency exchange contracts for hedging purposes.

 

  •  

Option Transactions

For hedging and investment purposes, the Fund may purchase and write (sell) put and call options on U.S. and foreign securities, including government securities, and foreign currencies that are traded on U.S. and foreign securities exchanges and over-the-counter markets. Among other things, the Fund may use options transactions for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under “Currency Transactions” and may use options strategies involving the purchase and/or writing of various combinations of call and/or put options, for hedging and investment purposes.

The risk associated with purchasing an option is that the Fund pays a premium whether or not the option is exercised. Additionally, the Fund bears the risk of loss of the premium and change in market value should the counterparty not perform under the contract. Put and call options purchased are accounted for in the same manner as portfolio securities.

 

52   •  AB LONG/SHORT MULTI-MANAGER FUND

Notes to Financial Statements

 

 

The cost of securities acquired through the exercise of call options is increased by premiums paid. The proceeds from securities sold through the exercise of put options are decreased by the premiums paid.

When the Fund writes an option, the premium received by the Fund is recorded as a liability and is subsequently adjusted to the current market value of the option written. Premiums received from written options which expire unexercised are recorded by the Fund on the expiration date as realized gains from options written. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium received is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium received is added to the proceeds from the sale of the underlying security or currency in determining whether the Fund has realized a gain or loss. If a put option is exercised, the premium received reduces the cost basis of the security or currency purchased by the Fund. In writing an option, the Fund bears the market risk of an unfavorable change in the price of the security or currency underlying the written option. Exercise of an option written by the Fund could result in the Fund selling or buying a security or currency at a price different from the current market value.

During the six months ended November 30, 2015, the Fund held purchased options for hedging and non-hedging purposes.

For the six months ended November 30, 2015, the Fund had no transactions in written options.

 

  •  

Swaps

The Fund may enter into swaps to hedge its exposure to interest rates, credit risk, equity markets and currencies. The Fund may also enter into swaps for non-hedging purposes as a means of gaining market exposures, including by making direct investments in foreign currencies, as described below under “Currency Transactions” or in order to take a “long” or “short” position with respect to an underlying referenced asset described below under “Total Return Swaps”. A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. The payment flows are usually netted against each other, with the difference being paid by one party to the other. In addition, collateral may be pledged or received by the Fund in accordance with the terms of the respective swaps to provide value and recourse to the Fund or its counterparties in the event of default, bankruptcy or insolvency by one of the parties to the swap.

Risks may arise as a result of the failure of the counterparty to the swap to comply with the terms of the swap. The loss incurred by the failure of a

 

AB LONG/SHORT MULTI-MANAGER FUND  •     53   

Notes to Financial Statements

 

 

counterparty is generally limited to the net interim payment to be received by the Fund, and/or the termination value at the end of the contract. Therefore, the Fund considers the creditworthiness of each counterparty to a swap in evaluating potential counterparty risk. This risk is mitigated by having a netting arrangement between the Fund and the counterparty and by the posting of collateral by the counterparty to the Fund to cover the Fund’s exposure to the counterparty. Additionally, risks may arise from unanticipated movements in interest rates or in the value of the underlying securities. The Fund accrues for the interim payments on swaps on a daily basis, with the net amount recorded within unrealized appreciation/depreciation of swaps on the statement of assets and liabilities, where applicable. 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 swaps. Upfront premiums paid or received are recognized as cost or proceeds on the statement of assets and liabilities and are amortized on a straight line basis over the life of the contract. Amortized upfront premiums are included in net realized gain/(loss) from swaps on the statement of operations. Fluctuations in the value of swaps are recorded as a component of net change in unrealized appreciation/depreciation of swaps on the statement of operations.

Total Return Swaps:

The Fund may enter into total return swaps in order take a “long” or “short” position with respect to an underlying referenced asset. The Fund is subject to market price volatility of the underlying referenced asset. A total return swap involves commitments to pay interest in exchange for a market linked return based on a notional amount. To the extent that the total return of the security, group of securities or index underlying the transaction exceeds or falls short of the offsetting interest obligation, the Fund will receive a payment from or make a payment to the counterparty.

During the six months ended November 30, 2015, the Fund held total return swaps for hedging and non-hedging purposes.

The Fund typically enters into International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreement”) or similar master agreements (collectively, “Master Agreements”) with its derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Fund typically may offset with the counterparty certain derivative financial instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default or termination.

 

54   •  AB LONG/SHORT MULTI-MANAGER FUND

Notes to Financial Statements

 

 

Various Master Agreements govern the terms of certain transactions with counterparties, including transactions such as derivative transactions, repurchase and reverse repurchase agreements. These Master Agreements typically attempt to reduce the counterparty risk associated with such transactions by specifying credit protection mechanisms and providing standardization that improves legal certainty. Cross-termination provisions under Master Agreements typically provide that a default in connection with one transaction between the Fund and a counterparty gives the non-defaulting party the right to terminate any other transactions in place with the defaulting party to create one single net payment due to/due from the defaulting party. In the event of a default by a Master Agreements counterparty, the return of collateral with market value in excess of the Fund’s net liability, held by the defaulting party, may be delayed or denied.

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

At November 30, 2015, the Fund had entered into the following derivatives:

 

    

Asset Derivatives

    

Liability Derivatives

  

Derivative Type

  

Statement of
Assets and
Liabilities
Location

   Fair Value    

Statement of
Assets and
Liabilities
Location

   Fair Value  

Foreign exchange contracts

  

Unrealized appreciation on forward currency exchange contracts

  

$

84,264

  

  

Unrealized depreciation on forward currency exchange contracts

  

$

22,269

  

Equity contracts

   Investments in securities, at value     65,724       

Equity contracts

   Unrealized appreciation on total return swaps     348,535      Unrealized depreciation on total return swaps     72,560   
   

 

 

      

 

 

  

Total

     $   498,523        $   94,829   
   

 

 

      

 

 

  

 

AB LONG/SHORT MULTI-MANAGER FUND  •     55   

Notes to Financial Statements

 

 

The effect of derivative instruments on the statement of operations for the six months ended November 30, 2015:

 

Derivative Type

  

Location of Gain

or (Loss) on
Derivatives

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

Foreign exchange contracts

   Net realized gain (loss) on foreign currency transactions; Net change in unrealized appreciation/depreciation of foreign currency denominated assets and liabilities   $ (37,491 )    $ 88,768   

Equity contracts

   Net realized gain (loss) on investment transactions; Net change in unrealized appreciation/depreciation of investments     36,718        13,751   

Equity contracts

   Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps     (128,083 )      427,599   
   

 

 

    

 

 

  

Total

     $   (128,856 )    $   530,118   
   

 

 

    

 

 

  

The following table represents the average monthly volume of the Fund’s derivative transactions during the six months ended November 30, 2015:

 

Forward Currency Exchange Contracts:

   

Average principal amount of buy contracts

    $ 614,940   

Average principal amount of sale contracts

    $ 1,773,971   
  

Purchased Options:

   

Average monthly cost

    $ 187,932   
  

Total Return Swaps:

   

Average notional amount

    $     3,277,325   

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

 

56   •  AB LONG/SHORT MULTI-MANAGER FUND

Notes to Financial Statements

 

 

All derivatives held at period end were subject to netting arrangements. The following table presents the Fund’s derivative assets and liabilities by counterparty net of amounts available for offset under Master Agreements (“MA”) and net of the related collateral received/ pledged by the Fund as of November 30, 2015:

 

Counterparty

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

Exchange-Traded Derivatives:

  

    

Morgan Stanley Co., Inc.

   $     65,724      $ – 0  –   $     – 0  –   $     – 0  –   $ 65,724   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 65,724      $ – 0  –   $ – 0     $ – 0  –   $ 65,724   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

OTC Derivatives:

  

    

Morgan Stanley Co., Inc.

   $     432,799      $     (94,829 )    $ – 0  –   $     – 0  –   $ 337,970   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 432,799      $ (94,829 )    $     – 0  –   $ – 0  –   $     337,970 ^ 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Counterparty

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

OTC Derivatives:

  

    

Morgan Stanley Co., Inc.

   $     94,829      $     (94,829 )    $     – 0  –   $     – 0  –   $     – 0  –
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 94,829      $ (94,829 )    $ – 0  –    $ – 0  –   $ – 0  –
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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

2. Currency Transactions

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

 

AB LONG/SHORT MULTI-MANAGER FUND  •     57   

Notes to Financial Statements

 

 

3. Short Sales

The Fund may sell securities short. A short sale is a transaction in which the Fund sells securities it does not own, but has borrowed, in anticipation of a decline in the market price of the securities. The Fund is obligated to replace the borrowed securities at their market price at the time of settlement. The Fund’s obligation to replace the securities borrowed in connection with a short sale will be fully secured by collateral deposited with the broker. The Fund is liable to the buyer for any dividends/interest payable on securities while those securities are in a short position. These dividends/interest are recorded as an expense of the Fund. Short sales by the Fund involve certain risks and special considerations. Possible losses from short sales differ from losses that could be incurred from a purchase of a security because losses from short sales may be unlimited, whereas losses from purchases cannot exceed the total amount invested.

NOTE E

Securities Lending

The Fund may enter into securities lending transactions. Under the Fund’s securities lending program, all loans of securities will be collateralized continually by cash. The Fund will be compensated for the loan from a portion of the net return from the income earned on cash collateral after a rebate is paid to the borrower (in some cases, this rebate may be a “negative rebate” or fee paid by the borrower to the Fund in connection with the loan), and payments are made for fees of the securities lending agent and for certain other administrative expenses. It is the policy of the Fund to receive collateral consisting of cash in an amount exceeding the value of the securities loaned. The Fund will have the right to call a loan and obtain the securities loaned at any time on notice to the borrower within the normal and customary settlement time for the securities. While the securities are on loan, the borrower is obligated to pay the Fund amounts equal to any income or other distributions from the securities. The Fund will not have the right to vote on any securities during the existence of a loan, but will have the right to regain ownership of loaned securities in order to exercise voting or other ownership rights. The lending agent has agreed to indemnify the Fund in the case of default of any securities borrower. Collateral received and securities loaned are marked to market daily to ensure that the securities loaned are secured by collateral. The lending agent will invest the cash collateral received in AB Exchange Reserves, an eligible money market vehicle, in accordance with the investment restrictions of the Fund, and as approved by the Board. The collateral received on securities loaned is recorded as an asset as well as a corresponding liability in the statement of assets and liabilities. When the Fund lends securities, its investment performance will continue to reflect changes in the value of the securities loaned. At November 30, 2015, the Fund had securities on loan with a value of $137,668 and had received cash collateral which has been invested into AB Exchange Reserves of $146,497. The cash collateral will be adjusted on the next business day to maintain the required collateral amount. The Fund earned securities lending income of $678 and $3,318 from the borrowers and AB Exchange Reserves, respectively, for the six months ended

 

58   •  AB LONG/SHORT MULTI-MANAGER FUND

Notes to Financial Statements

 

 

November 30, 2015; these amounts are reflected in the statement of operations. A principal risk of lending portfolio securities is that the borrower will fail to return the loaned securities upon termination of the loan and that the collateral will not be sufficient to replace the loaned securities. A summary of the Fund’s transactions in shares of AB Exchange Reserves for the six months ended November 30, 2015 is as follows:

 

Market Value

May 31, 2015

(000)

   Purchases
at Cost
(000)		     Sales
Proceeds
(000)		     Market Value
November 30, 2015
(000)		  
$    200   $     467      $     521      $     146   

NOTE F

Capital Stock

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

 

            
     Shares         Amount      
     Six Months Ended
November 30, 2015
(unaudited)		     September 30,
2014(a) to
May 31, 2015		         Six Months Ended
November 30, 2015
(unaudited)		     September 30,
2014(a) to
May 31, 2015		      
  

 

 

    
Class A             

Shares sold

      50,102        3,273        $ 511,896      $ 33,657     

 

    

Shares redeemed

      (284 )      – 0  –        (2,900 )      – 0  –   

 

    

Net increase

      49,818        3,273        $ 508,996      $ 33,657     

 

    
            
Class C             

Shares sold

      3,078        1,000        $ 32,000      $ 10,003     

 

    

Net increase

      3,078        1,000        $ 32,000      $ 10,003     

 

    
            
Advisor Class             

Shares sold

      85,611        3,050,600        $ 876,040      $ 30,538,503     

 

    

Shares redeemed

      (4,743 )      – 0  –        (48,395 )      – 0  –   

 

    

Net increase

      80,868        3,050,600        $ 827,645      $ 30,538,503     

 

    
            

Class R

             

Shares sold

      – 0  –      1,001        $ – 0  –    $ 10,003     

 

    

Net increase

      – 0  –      1,001        $ – 0  –    $ 10,003     

 

    
            
Class K             

Shares sold

      – 0  –      1,001        $ – 0  –    $ 10,003     

 

    

Net increase

      – 0  –      1,001        $ – 0  –    $ 10,003     

 

    
            
Class I             

Shares sold

      – 0  –      1,000        $ – 0  –    $ 10,003     

 

    

Net increase

      – 0  –      1,000        $ – 0  –    $ 10,003     

 

    
            
Class Z             

Shares sold

      – 0  –      1,000        $ – 0  –    $ 10,003     

 

    

Net increase

      – 0  –      1,000        $ – 0  –    $ 10,003     

 

    

 

(a)   

Commencement of operations.

 

AB LONG/SHORT MULTI-MANAGER FUND  •     59   

Notes to Financial Statements

 

 

NOTE G

Risks Involved in Investing in the Fund

Allocation and Management Risk—The Adviser will invest the assets of the Fund primarily by allocating Fund assets to the Sub-Advisers. The success of the Fund depends, in part, upon the ability of the Sub-Advisers to develop and implement strategies to achieve the Fund’s investment objective. There is no assurance that the Adviser’s allocation decisions will result in the desired effects. Subjective decisions made by the Adviser (e.g., with respect to allocation among Strategies) and/or the Sub-Advisers may cause the Fund to incur losses or to miss profit opportunities on which it might otherwise have capitalized. The success of the Fund’s investment program depends primarily on the trading and investing skills of the Sub-Advisers rather than on the trading and investing skills of the Adviser itself. To the extent that the Adviser is unable to select, manage, allocate appropriate levels of capital to, and invest with Sub-Advisers that, in the aggregate, are able to produce consistently positive returns for the Fund, the performance of the Fund may be impaired.

Some Sub-Advisers have little experience managing registered investment companies which, unlike the private investment funds these Sub-Advisers have been managing, are subject to daily inflows and outflows of investor cash and are subject to certain legal and tax-related restrictions on their investments and operations. Subject to the overall supervision of the Fund’s investment program by the Adviser, each Sub-Adviser is responsible, with respect to the portion of the Fund’s assets it manages, for compliance with the Fund’s investment strategies and applicable law.

The investment strategies implemented by the Sub-Advisers may fail to produce the intended results. The success of a particular Sub-Adviser is dependent on the expertise of its portfolio managers. Certain Sub-Advisers may have only one or a limited number of key individuals responsible for managing the Fund’s assets. The loss of one or more key individuals from a Sub-Adviser could have a materially adverse effect on the performance of the Fund.

Short Sales Risk—It is expected that the Fund will engage in short-selling, which involves the sale of a security that the Fund does not own in the hope of purchasing the same or equivalent security at a later date at a lower price. A short sale involves the risk of an increase in the market price of the security, and therefore the possibility of a theoretically unlimited loss. The Fund must borrow the security to initiate the short sale, and it may be difficult and costly to effect the purchase of the security in order to return it to the lender, particularly if the security is illiquid. The Fund may for a number of reasons be forced to unwind a short sale at a disadvantageous price.

Volatility Risk—The Fund will frequently be subject to substantial volatility, which could result from a number of causes. Furthermore, there is the risk that a disproportionate share of the Fund’s assets may be committed to one or more

 

60   •  AB LONG/SHORT MULTI-MANAGER FUND

Notes to Financial Statements

 

 

investment strategies or techniques, which would result in less diversification than would be suggested by the number of Sub-Advisers being employed. The allocation of Fund assets to Sub-Advisers in response to particular market conditions could increase volatility and potential for loss if such market conditions continue to worsen or react in a manner not anticipated by the Adviser.

Portfolio Turnover Risk—Certain Sub-Advisers may invest and trade securities on the basis of certain short-term market considerations. The resultant high portfolio turnover could potentially involve substantial brokerage commissions and fees.

Derivative Instruments Risk—The Fund may enter into options, futures, forwards, swaps and other derivative instrument contracts. Derivative instruments may be subject to various types of risks, including market risk, liquidity risk, the risk of nonperformance by the counterparty, including risks relating to the financial soundness and creditworthiness of the counterparty, legal risk and operations risk. The prices of derivative instruments can be highly volatile. Depending on the nature of the derivative, price movements may be influenced by interest rates, changing supply and demand relationships, trade, fiscal, monetary and exchange control programs and policies of governments, and national and international political and economic events and policies. Derivative transactions intended to hedge against fluctuations in the value of the Fund positions will typically limit the opportunity for gain if the value of such positions should increase, and may not work as intended and actually compound losses.

Non-U.S. Investments Risk—The Fund may invest in securities of non-U.S. companies and foreign countries. Investing in the securities of such companies and countries involves political and economic considerations, such as: the potential difficulty of repatriating funds, general social, political and economic instability and adverse diplomatic developments; the possibility of imposition of withholding or other taxes on income or capital gains; the small size of the securities markets in such countries and the low volume of trading, resulting in potential lack of liquidity and price volatility; fluctuations in the rate of exchange between currencies and costs associated with currency conversion; and certain government policies that may restrict the Fund’s investment opportunities. The economies of non-U.S. countries may differ favorably or unfavorably from the United States economy in such respects as growth of gross domestic product, rate of inflation, currency depreciation, asset reinvestment, resource self-sufficiency and balance of payments position. In addition, accounting and financial reporting standards that prevail in non-U.S. countries generally are not equivalent to U.S. standards and, consequently, less information may be available to investors in companies located in non-U.S. countries than is available to investors in companies located in the United States.

Currency Risk—The Fund may invest a portion of its assets in instruments denominated in currencies other than the U.S. dollar, the prices of which are determined with reference to currencies other than the U.S. dollar. The Fund,

 

AB LONG/SHORT MULTI-MANAGER FUND  •     61   

Notes to Financial Statements

 

 

however, generally values its securities and other assets in U.S. dollars. To the extent unhedged, the value of the Fund’s assets will fluctuate with currency exchange rates as well as with the price changes of the Fund’s investments. Thus, an increase in the value of the U.S. dollar compared to the other currencies in which the Fund makes its investments will reduce the effect of increases and magnify the effect of decreases in the prices of the Fund’s securities in their local markets. The Fund may utilize financial instruments such as currency options and forward contracts to hedge currency fluctuations, but there can be no assurance that such hedging transactions (if implemented) will be effective.

Multi-Manager Risk—The multi-manager strategy employed by the Fund involves special risks, which include:

• Offsetting positions. Sub-Advisers may make investment decisions which conflict with each other; for example, at any particular time, one Sub-Adviser may be purchasing shares of an issuer whose shares are being sold by another Sub-Adviser. Consequently, the Fund could indirectly incur transaction costs without accomplishing any net investment result.

• Proprietary investment strategy risk—Sub-Advisers may use proprietary or licensed investment strategies that are based on considerations and factors that are not fully disclosed to the Board or the Adviser. Moreover, these proprietary or licensed investment strategies, which may include quantitative mathematical models or systems, may be changed or refined over time. A Sub-Adviser (or the licensor of the strategies used by the Sub-Adviser) may make certain changes to the strategies the Sub-Adviser has previously used, may not use such strategies at all (or the Sub-Adviser’s license may be revoked), and may use additional strategies, where such changes or discretionary decisions, and the reasons for such changes or decisions, are also not fully disclosed to the Board or the Adviser. These strategies may involve risks under some market conditions that are not anticipated by the Adviser or the Fund.

Non-Diversification Risk—The Fund is a “non-diversified” investment company, which means that the Fund may invest a larger portion of its assets in a smaller number of issuers than a diversified investment company. This increases the risks of investing in the Fund because the performance of each security in which the Fund invests has a greater impact on the Fund performance. To the extent that the Fund invests a relatively high percentage of its assets in securities of a limited number of companies, the Fund may also be more susceptible than a diversified investment company to any single economic, political or regulatory occurrence.

Indemnification Risk—In the ordinary course of business, the Fund enters into contracts that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these indemnification provisions and expects

 

62   •  AB LONG/SHORT MULTI-MANAGER FUND

Notes to Financial Statements

 

 

the risk of loss thereunder to be remote. Therefore, the Fund has not accrued any liability in connection with these indemnification provisions.

NOTE H

Distributions to Shareholders

As of May 31, 2015, the components of accumulated earnings/(deficit) on a tax basis were as follows:

 

Undistributed capital gains

    $ 916   

Accumulated capital and other losses

      (209,030 ) 

Unrealized appreciation/(depreciation)

      1,787,594   
  

 

 

  

Total accumulated earnings/(deficit)

    $     1,579,480   
  

 

 

  

For tax purposes, net capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of May 31, 2015, the Fund did not have any capital loss carryforwards.

NOTE I

Joint Credit Facility

A number of open-end mutual funds managed by the Adviser, including the Fund, participate in a $280 million revolving credit facility (the “Facility”) intended to provide short-term financing, if necessary, subject to certain restrictions in connection with abnormal redemption activity. Commitment fees related to the Facility are paid by the participating funds and are included in miscellaneous expenses in the statement of operations. The Fund was included as part of the facility on July 9, 2015. The Fund did not utilize the Facility during the six months ended November 30, 2015.

NOTE J

New Accounting Pronouncement

In May 2015, the Financial Accounting Standards Board issued an Accounting Standards Update (“ASU”), ASU 2015-07, which removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The ASU also removes the disclosure requirement for investments not valued at net asset value. The ASU is effective for annual periods beginning after December 15, 2015 and interim periods within those annual periods. At this time, management is evaluating the implications of these changes on the financial statements.

NOTE K

Subsequent Events

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

 

AB LONG/SHORT MULTI-MANAGER FUND  •     63   

Notes to Financial Statements

FINANCIAL HIGHLIGHTS

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

 

    Class A  
    Six Months
Ended
November 30,
2015
(unaudited)		     September 30,
2014(a) to
May 31,
2015		  
 

 

 

  

Net asset value, beginning of period

     $  10.48        $  10.00   
 

 

 

  

Income From Investment Operations

    

Net investment loss(b)(c)

     (.06 )      (.12 ) 

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

     (.09 )      .60   
 

 

 

  

Net increase (decrease) in net asset value from operations

     (.15 )      .48   
 

 

 

  

Net asset value, end of period

     $  10.33        $  10.48   
 

 

 

  

Total Return

    

Total investment return based on net asset value(d)

     (1.43 )%      4.80  % 

Ratios/Supplemental Data

    

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

     $549        $35   

Ratio to average net assets of:

    

Expenses, net of waivers/reimbursements(e)^

     2.85  %      3.01  % 

Expenses, before waivers/reimbursements(e)^

     5.85  %      6.65  % 

Net investment loss(c)^

     (1.18 )%      (1.81 )% 

Portfolio turnover rate

     69  %      91  % 

Portfolio turnover rate (including securities sold short)

     90  %      135  % 

 

See footnote summary on page 71.

 

64   •  AB LONG/SHORT MULTI-MANAGER FUND

Financial Highlights

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

 

    Class C  
    Six Months
Ended
November 30,
2015
(unaudited)		     September 30,
2014(a) to
May 31,
2015		  
 

 

 

  

Net asset value, beginning of period

     $  10.42        $  10.00   
 

 

 

  

Income From Investment Operations

    

Net investment loss(b)(c)

     (.12 )      (.17 ) 

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

     (.06 )      .59   
 

 

 

  

Net increase (decrease) in net asset value from operations

     (.18 )      .42   
 

 

 

  

Net asset value, end of period

     $  10.24        $  10.42   
 

 

 

  

Total Return

    

Total investment return based on net asset value(d)

     (1.82 )%      4.30  % 

Ratios/Supplemental Data

    

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

     $42        $10   

Ratio to average net assets of:

    

Expenses, net of waivers/reimbursements(e)^

     3.68  %      3.66  % 

Expenses, before waivers/reimbursements(e)^

     6.83  %      7.62  % 

Net investment loss(c)^

     (2.28 )%      (2.53 )% 

Portfolio turnover rate

     69  %      91  % 

Portfolio turnover rate (including securities sold short)

     90  %      135  % 

 

See footnote summary on page 71.

 

AB LONG/SHORT MULTI-MANAGER FUND  •     65   

Financial Highlights

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

 

    Advisor Class  
    Six Months
Ended
November 30,
2015
(unaudited)		     September 30,
2014(a) to
May 31,
2015		  
 

 

 

  

Net asset value, beginning of period

     $  10.49        $  10.00   
 

 

 

  

Income From Investment Operations

    

Net investment loss(b)(c)

     (.07 )      (.11 ) 

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

     (.06 )      .60   
 

 

 

  

Net increase (decrease) in net asset value from operations

     (.13 )      .49   
 

 

 

  

Net asset value, end of period

     $  10.36        $  10.49   
 

 

 

  

Total Return

    

Total investment return based on net asset value(d)

     (1.33 )%      5.00  % 

Ratios/Supplemental Data

    

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

     $32,431        $32,013   

Ratio to average net assets of:

    

Expenses, net of waivers/reimbursements(e)^

     2.70  %      2.67  % 

Expenses, before waivers/reimbursements(e)^

     5.68  %      6.46  % 

Net investment loss(c)^

     (1.39 )%      (1.55 )% 

Portfolio turnover rate

     69  %      91  % 

Portfolio turnover rate (including securities sold short)

     90  %      135  % 

 

See footnote summary on page 71.

 

66   •  AB LONG/SHORT MULTI-MANAGER FUND

Financial Highlights

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

 

    Class R  
    Six Months
Ended
November 30,
2015
(unaudited)		     September 30,
2014(a) to
May 31,
2015		  
 

 

 

  

Net asset value, beginning of period

     $  10.46        $  10.00   
 

 

 

  

Income From Investment Operations

    

Net investment loss(b)(c)

     (.10 )      (.14 ) 

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

     (.06 )      .60   
 

 

 

  

Net increase (decrease) in net asset value from operations

     (.16 )      .46   
 

 

 

  

Net asset value, end of period

     $  10.30        $  10.46   
 

 

 

  

Total Return

    

Total investment return based on net asset value(d)

     (1.53 )%      4.60  % 

Ratios/Supplemental Data

    

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

     $10        $10   

Ratio to average net assets of:

    

Expenses, net of waivers/reimbursements(e)^

     3.19  %      3.17  % 

Expenses, before waivers/reimbursements(e)^

     6.18  %      6.99  % 

Net investment loss(c)^

     (1.86 )%      (2.04 )% 

Portfolio turnover rate

     69  %      91  % 

Portfolio turnover rate (including securities sold short)

     90  %      135  % 

 

See footnote summary on page 71.

 

AB LONG/SHORT MULTI-MANAGER FUND  •     67   

Financial Highlights

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

 

    Class K  
    Six Months
Ended
November 30,
2015
(unaudited)		     September 30,
2014(a) to
May 31,
2015		  
 

 

 

  

Net asset value, beginning of period

     $  10.48        $  10.00   
 

 

 

  

Income From Investment Operations

    

Net investment loss(b)(c)

     (.08 )      (.12 ) 

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

     (.07 )      .60   
 

 

 

  

Net increase (decrease) in net asset value from operations

     (.15 )      .48   
 

 

 

  

Net asset value, end of period

     $  10.33        $  10.48   
 

 

 

  

Total Return

    

Total investment return based on net asset value(d)

     (1.43 )%      4.80  % 

Ratios/Supplemental Data

    

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

     $10        $10   

Ratio to average net assets of:

    

Expenses, net of waivers/reimbursements(e)^

     2.94  %      2.92  % 

Expenses, before waivers/reimbursements(e)^

     5.94  %      6.73  % 

Net investment loss(c)^

     (1.63 )%      (1.79 )% 

Portfolio turnover rate

     69  %      91  % 

Portfolio turnover rate (including securities sold short)

     90  %      135  % 

 

See footnote summary on page 71.

 

68   •  AB LONG/SHORT MULTI-MANAGER FUND

Financial Highlights

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

 

    Class I  
    Six Months
Ended
November 30,
2015
(unaudited)		     September 30,
2014(a) to
May 31,
2015		  
 

 

 

  

Net asset value, beginning of period

     $  10.49        $  10.00   
 

 

 

  

Income From Investment Operations

    

Net investment loss(b)(c)

     (.07 )      (.11 ) 

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

     (.06 )      .60   
 

 

 

  

Net increase (decrease) in net asset value from operations

     (.13 )      .49   
 

 

 

  

Net asset value, end of period

     $  10.36        $  10.49   
 

 

 

  

Total Return

    

Total investment return based on net asset value(d)

     (1.33 )%      5.00  % 

Ratios/Supplemental Data

    

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

     $10        $11   

Ratio to average net assets of:

    

Expenses, net of waivers/reimbursements(e)^

     2.69  %      2.67  % 

Expenses, before waivers/reimbursements(e)^

     5.65  %      6.44  % 

Net investment loss(c)^

     (1.37 )%      (1.56 )% 

Portfolio turnover rate

     69  %      91  % 

Portfolio turnover rate (including securities sold short)

     90  %      135  % 

 

See footnote summary on page 71.

 

AB LONG/SHORT MULTI-MANAGER FUND  •     69   

Financial Highlights

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

 

    Class Z  
    Six Months
Ended
November 30,
2015
(unaudited)		     September 30,
2014(a) to
May 31,
2015		  
 

 

 

  

Net asset value, beginning of period

     $  10.49        $  10.00   
 

 

 

  

Income From Investment Operations

    

Net investment loss(b)(c)

     (.07 )      (.11 ) 

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

     (.06 )      .60   
 

 

 

  

Net increase (decrease) in net asset value from operations

     (.13 )      .49   
 

 

 

  

Net asset value, end of period

     $  10.36        $  10.49   
 

 

 

  

Total Return

    

Total investment return based on net asset value(d)

     (1.33 )%      5.00  % 

Ratios/Supplemental Data

    

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

     $10        $10   

Ratio to average net assets of:

    

Expenses, net of waivers/reimbursements(e)^

     2.69  %      2.67  % 

Expenses, before waivers/reimbursements(e)^

     5.65  %      6.38  % 

Net investment loss(c)^

     (1.43 )%      (1.55 )% 

Portfolio turnover rate

     69  %      91  % 

Portfolio turnover rate (including securities sold short)

     90  %      135  % 

 

See footnote summary on page 71.

 

70   •  AB LONG/SHORT MULTI-MANAGER FUND

Financial Highlights

(a)   Commencement of operations.

 

(b)   Based on average shares outstanding.

 

(c)   Net of fees and expenses waived/reimbursed by the Adviser.

 

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

 

(e)   The expense ratios presented below exclude expenses on securities sold short:

 

     Six Months Ended
November 30, 2015
(unaudited)		     September 30,
2014(a) to
May 31, 2015		  
Class A     

Net of waivers/reimbursements^

      2.24 %      2.24 % 

Before waivers/reimbursements^

      5.24 %      5.89 % 
Class C     

Net of waivers/reimbursements^

      2.99 %      2.99 % 

Before waivers/reimbursements^

      6.13 %      6.95 % 
Advisor Class     

Net of waivers/reimbursements^

      1.99 %      1.99 % 

Before waivers/reimbursements^

      4.97 %      5.78 % 
Class R     

Net of waivers/reimbursements^

      2.49 %      2.49 % 

Before waivers/reimbursements^

      5.48 %      6.31 % 
Class K     

Net of waivers/reimbursements^

      2.24 %      2.24 % 

Before waivers/reimbursements^

      5.24 %      6.04 % 
Class I     

Net of waivers/reimbursements^

      1.99 %      1.99 % 

Before waivers/reimbursements^

      4.95 %      5.77 % 
Class Z     

Net of waivers/reimbursements^

      1.99 %      1.99 % 

Before waivers/reimbursements^

      4.95 %      5.71 % 

 

^   Annualized.

 

See notes to financial statements.

 

AB LONG/SHORT MULTI-MANAGER FUND  •     71   

Financial Highlights

BOARD OF DIRECTORS

 

Marshall C. Turner, Jr.(1), Chairman

John H. Dobkin(1)

Michael J. Downey(1)

William H. Foulk, Jr.(1)

D. James Guzy(1)

   

Nancy P. Jacklin(1)

Robert M. Keith, President and Chief Executive Officer

Garry L. Moody(1)

Earl D. Weiner(1)

OFFICERS

Philip L. Kirstein,

Senior Vice President and Independent Compliance Officer

Marc H. Gamsin(2), Vice President

Greg Outcalt(2), Vice President

   

Joseph J. Mantineo, Treasurer and Chief Financial Officer

Emilie D. Wrapp, Secretary

Phyllis J. Clarke, Controller

Vincent S. Noto, Chief

Compliance Officer

 

Custodian and Accounting Agent

State Street Bank and Trust Company

State Street Corporation CCB/5

1 Iron Street

Boston, MA 02210

 

Principal Underwriter

AllianceBernstein Investments, Inc.

1345 Avenue of the Americas

New York, NY 10105

 

Transfer Agent

AllianceBernstein Investor Services, Inc.

P.O. Box 786003

San Antonio, TX 78278-6003

Toll-Free (800) 221-5672

   

Independent Registered Public Accounting Firm

Ernst & Young LLP

5 Times Square

New York, NY 10036

 

Legal Counsel

Seward & Kissel LLP

One Battery Park Plaza

New York, NY 10004

 

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

 

(2)   The day-to-day management of, and investment decisions for, the Fund are made by its senior management team. Messrs. Gamsin and Outcalt are the investment professionals with the most significant responsibility for the day-to-day management of the Fund’s portfolio.

 

72   •  AB LONG/SHORT MULTI-MANAGER FUND

Board of Directors

 

 

Consideration of Amendments to Sub-Advisory Agreements

At a meeting of the Board of Directors of AB Cap Fund, Inc. (the “Company”) held on November 3-5, 2015, the Adviser recommended that the termination provisions in each of the Sub-Advisory Agreements between the Adviser and the Sub-Advisers of AB Long/Short Multi-Manager Fund (the “Fund”), a series of the Company, set forth below be amended to provide that they may be terminated (i) by the Board, or by a vote of a majority of the outstanding voting securities of the Fund, upon 60 days’ prior written notice to the Adviser and the Sub-Adviser, (ii) by the Sub-Adviser upon 90 days’ prior written notice to the Adviser and the Fund, or (iii) by the Adviser, without payment of any penalty, upon 60 days’ prior written notice to the Sub-Adviser. The Adviser did not propose any changes to the provisions permitting immediate termination by the Adviser upon the occurrence of any material breach by the Sub-Adviser. Each Sub-Advisory Agreement prior to such amendments permitted termination by the Board, by the Adviser, or by both, on 30 days’ notice. These amendments would affect the Sub-Advisory Agreements with Chilton Investment Company LLC, Kynikos Associates LP, Lyrical Asset Management LP, and Passport Capital, LLC. The Adviser explained that the amendments would relieve the Adviser of a burdensome reporting obligation caused by the shorter notice period without, in its view, having any effect on its ongoing ability to manage the Fund. The Adviser also expressed its belief that the amendments would not be material to an investor’s investment decision in respect of the Fund and noted that a majority of the sub-advisory agreements currently require 60 days’ notice from the Adviser to the sub-adviser for termination. The Adviser had provided the Independent Directors with a memorandum explaining its analysis and the form of amendment prior to the meeting. After discussion with experienced counsel who are independent of the Adviser and with the Adviser, the Independent Directors concluded that the proposed amendments were not material and unanimously approved the proposed amendments to the Sub-Advisory Agreements.

 

AB LONG/SHORT MULTI-MANAGER FUND  •     73   

 

 

THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS

SUMMARY OF SENIOR OFFICER’S EVALUATION OF INVESTMENT ADVISORY AGREEMENT1

The following is a summary of the evaluation of the Investment Advisory Agreement between AllianceBernstein L.P. (the “Adviser”) and AllianceBernstein Cap Fund, Inc. (the “Fund”) in respect of AllianceBernstein Long/Short Multi-Manager Fund (the “Portfolio”),2 prepared by Philip L. Kirstein, the Senior Officer of the Fund for the Directors of the Fund, as required by the August 2004 agreement between the Adviser and the New York State Attorney General (the “NYAG”). The Senior Officer’s evaluation of the Investment Advisory Agreement is not meant to diminish the responsibility or authority of the Board of Directors of the Fund to perform its duties pursuant to Section 15 of the Investment Company Act of 1940 (the “40 Act”) and applicable state law. The purpose of the summary is to provide shareholders with a synopsis of the independent evaluation of the reasonableness of the advisory fees proposed to be paid by the Portfolio which was provided to the Directors in connection with their review of the proposed initial approval of the Investment Advisory Agreement.

The Portfolio is an open end fund that invests primarily in “alternative” or non-traditional investments in portfolio sleeves managed by various unaffiliated sub-advisers (the “Sub-Advisers”) overseen by the Adviser. Sub-Advisers are retained by the Adviser, with the Board of Directors’ approval to manage the individual sleeves in the Portfolio. The Portfolio, to a lesser extent, may invest in registered investment companies sponsored or advised by third party managers.

The Portfolio’s investment objective is to seek long term growth of capital. The Adviser seeks to achieve its investment objective by investing in portfolio sleeves managed by various unaffiliated Long/Short Sub-Advisers, as well as investing primarily in long and short positions in equity securities. The Portfolio may also invest in Class I shares of AllianceBernstein Select US Long/Short Portfolio (“Select US Long Short Portfolio”). The Portfolio is expected to generally maintain 40%-60% net long exposure (long minus short). The Portfolio will generally have a global approach; a substantial portion of its assets will frequently be invested in foreign securities.

 

1   The Senior Officer’s fee evaluation was completed on April 25, 2014 and discussed with the Board of Directors on May 6-8, 2014.

 

2   Future references to the Portfolio do not include “AllianceBernstein.” References in the fee summary pertaining to performance and expense ratios refer to the Class A shares of the Portfolio.

 

74   •  AB LONG/SHORT MULTI-MANAGER FUND

 

 

The Adviser proposed the MSCI World Index as the Portfolio’s benchmark. The Adviser anticipates that Lipper will place the Portfolio in its Alternative Long/Short Equity category, and that Morningstar will place the Portfolio in its Long/Short Equity category.

The Senior Officer’s evaluation considered the following factors:

 

  1. Advisory fees charged to institutional and other clients of the Adviser for like services;

 

  2. Advisory fees charged by other mutual fund companies for like services;

 

  3. Costs to the Adviser and its affiliates of supplying services pursuant to the advisory agreement, excluding any intra-corporate profit;

 

  4. Profit margins of the Adviser and its affiliates from supplying such services;

 

  5. Possible economies of scale as the Portfolio grows larger; and

 

  6. Nature and quality of the Adviser’s services including the performance of the Portfolio.

These factors, with the exception of the first factor, are generally referred to as the “Gartenberg factors,” which were articulated by the United States Court of Appeals for the Second Circuit in 1982. Gartenberg v. Merrill Lynch Asset Management, Inc., 694 F. 2d 923 (2d Cir. 1982). On March 30, 2010, the Supreme Court held the Gartenberg decision was correct in its basic formulation of what Section 36(b) requires: to face liability under Section 36(b), “an investment adviser must charge a fee that is so disproportionately large that it bears no reasonable relationship to the services rendered and could not have been the product of arm’s length bargaining.” Jones v. Harris Associates L.P., 130 S. Ct. 1418 (2010). In the Jones decision, the Court stated the Gartenberg approach fully incorporates the correct understanding of fiduciary duty within the context of Section 36(b) and noted with approval that “Gartenberg insists that all relevant circumstances be taken into account” and “uses the range of fees that might result from arm’s length bargaining as the benchmark for reviewing challenged fees.”3

 

3   Jones v. Harris at 1427.

 

AB LONG/SHORT MULTI-MANAGER FUND  •     75   

 

 

INVESTMENT ADVISORY FEES, NET ASSETS, & EXPENSE RATIOS

The Adviser proposed that the Portfolio pays the advisory fee set forth below for receiving the services to be provided pursuant to the Investment Advisory Agreement.

 

Portfolio   Advisory Fee
Long/Short Multi-Manager Fund4   1.90% of average daily net assets5

The Adviser will pay the investment advisory fee earned by each of the Sub-Advisers out of the investment advisory fee it receives from the Portfolio. The Adviser has indicated that it expects to pay each of the original Sub-Advisers 1.00% for managing the Portfolio’s assets within its respective sleeve. It is possible that in the future, the Adviser will pay one or more Sub-Advisers an amount that is more or less than 1.00%. As a result, the Adviser has a potential conflict of interest since the less advisory fees it pays to the Sub-Advisers the more revenue it retains. Accordingly, the conditions of the exemptive relief, which the Adviser has requested from the SEC, attempt to address this potential conflict. For example, whenever a Sub-Adviser is hired or terminated, the Adviser will provide the Board with information disclosing the expected impact the Sub-Adviser’s hiring or termination on the Adviser’s profitability. In addition, on a quarterly basis, the Adviser will provide the Board with information regarding the impact of hiring or terminating any Sub-Adviser during the year on the Adviser’s profitability.

The Portfolio may invest in Class I shares of AllianceBernstein Select US Long/Short Portfolio, which has a management fee of 1.70% plus other non-management fee expenses of 0.25%. In this regard, the Adviser has indicated that it plans to voluntarily waive its fee from the Portfolio equal to the management fee charged to Select US Long/Short Portfolio proportional to the assets allocated to Select US Long/Short Portfolio. This fee arrangement has a conflict of interest since the Adviser will keep the resulting difference of 20 basis points from Portfolio’s management fee while being compensated 170 basis points from the Select US Long/Short Portfolio. In other words, with respect to assets

 

4   Since the Portfolio does not fall within any NYAG specific category, the Portfolio is considered, by default, in the Specialty category. The proposed advisory fee for the Portfolio has a higher effective fee rate than the advisory fee schedule of the Specialty category, in which the Portfolio would have been categorized, had the Adviser proposed to implement the NYAG related fee schedule. The advisory fee schedule of the Specialty category is as follows: 75 bp on the first $2.5 billion, 65 bp on the next $2.5 billion, and 60 bp on the balance.

 

5   The advisory fee schedule proposed for the Portfolio is identical to that proposed for AllianceBernstein Multi-Manager Alternative Strategies Fund (“Multi- Manager Alternative Strategies Fund”), which is managed similarly by the Adviser. Like the Portfolio, Multi-Manager Alternative Strategies Fund invests primarily in alternative investments in portfolio sleeves managed by various unaffiliated sub-advisers overseen by the Adviser. However, Multi-Manager Alternative Strategies Fund’s investment style differs from the Portfolio in terms of the number of primary strategies employed by the portfolio: Multi-Manager Alternative Strategies Fund’s primary strategies include Long/Short Equity in addition to Special Situations, Credit and Global Macro.

 

76   •  AB LONG/SHORT MULTI-MANAGER FUND

 

 

invested in Select US Long/Short Portfolio, the Portfolio shareholders will pay the full advisory fee rate of 1.90% (all retained by the Adviser) even though the Adviser is not selecting and monitoring a third party Sub-Adviser.

One possible solution to avoid this conflict of interest is for the Adviser to be paid an advisory fee of 1.70% on the Portfolio’s assets invested in Select US Long/Short Portfolio, instead of the advisory fee rate of 1.90%.

Another conflict of interest is to the extent the Adviser allocates the Portfolio’s assets to itself (i.e. invest directly in long/short positions of equity securities) instead of a Sub-Adviser, it will allow the Adviser to retain the entire fee of 100 basis points that it would have paid to the Sub-Adviser, plus the 90 basis points the Adviser generally retains.

The Portfolio‘s Expense Limitation Agreement calls for the Adviser to establish expense caps, set forth below, for a one year period after the date the date that shares of the Portfolio is first offered to the public. The Expense Limitation Agreement also provides a mechanism for reimbursing the Adviser for its expense cap subsidy. Under the Expense Limitation Agreement, the Adviser may be able to recoup all or a portion of the amounts waived or reimbursed until the end of three fiscal years after the fiscal period in which the amounts were waived or reimbursed to the extent that the reimbursements do not cause the expense ratios of the Portfolio’s share classes to exceed the expense caps. The Adviser’s ability to recoup offering expenses will terminate with the agreement.

 

Portfolio   Expense Cap Pursuant to
Expense Limitation
Undertaking		      Estimated
Gross
Expense
Ratio6 		    Fiscal
Year End
Long/Short Multi-Manager Fund  

Class A

Class C

Class R

Class K

Class I

Advisor

Class Z

    

 

 

 

 

 

 

 2.24

2.99

2.49

2.24

1.99

1.99

1.99

 % 

% 

% 

% 

% 

% 

% 

     

 

 

 

 

 

 

 2.62

3.39

3.08

2.77

2.44

2.37

2.34

 % 

% 

% 

% 

% 

% 

% 

   May 31

 

I. ADVISORY FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS

The advisory fees charged to investment companies which the Adviser manages and sponsors are normally higher than those charged to similar sized institutional accounts, including pension plans and sub-advised investment companies. The fee differential reflects, among other things, different services provided to such clients, and different liabilities assumed. Services to be provided by the Adviser to the Portfolio that are not provided to non-investment company

 

6   The Portfolio’s estimated gross expense ratios are based on an initial estimate of the Portfolio’s net assets at $250 million.

 

AB LONG/SHORT MULTI-MANAGER FUND  •     77   

 

 

clients and sub-advised investment companies include providing office space and personnel to serve as Fund Officers, who among other responsibilities, make the certifications required under the Sarbanes-Oxley Act of 2002, and coordinating with and monitoring the Portfolio’s third party service providers such as Fund counsel, auditors, custodians, transfer agents and pricing services. The accounting, administrative, legal and compliance requirements for the Portfolio will be more costly than those for institutional assets due to the greater complexities and time required for investment companies, although the Adviser will be reimbursed for providing some of these services. Also, retail mutual funds managed by the Adviser are widely held. Servicing the Portfolio’s investors will be more time consuming and labor intensive compared to institutional clients since the Adviser needs to communicate with a more extensive network of financial intermediaries and shareholders. The Adviser also believes that it incurs substantial entrepreneurial risk when offering a new mutual fund since establishing a new mutual fund requires a large upfront investment and it may take a long time for the fund to achieve profitability since the fund must be priced to scale from inception in order to be competitive and assets are acquired one account at a time. Managing the cash flow of an investment company may be more difficult than managing that of a stable pool of assets, such as an institutional account with little cash movement in either direction, particularly, if a fund is in net redemption and the Adviser is frequently forced to sell securities to raise cash for redemptions. However, managing a fund with positive cash flow may be easier at times than managing a stable pool of assets. Finally, in recent years, investment advisers have been sued by institutional clients and have suffered reputational damage both by the attendant publicity and outcomes other than complete victories. Accordingly, the legal and reputational risks associated with institutional accounts are greater than previously thought, although still not equal to those related to the mutual fund industry.

The Investment Advisory Agreements for the Portfolio includes provisions permitting the Adviser to retain Sub-Advisers for the Portfolio and specifying that the Adviser has an obligation to oversee the services provided by any Sub-Adviser that is retained.

Notwithstanding the Adviser’s view that managing an investment company is not comparable to managing other institutional accounts because the services provided are different, the Supreme Court has indicated consideration should be given to the advisory fees charged to institutional accounts with a similar investment style as the Portfolio.7 However, the Adviser has represented that

 

7   The Supreme Court stated that “courts may give such comparisons the weight that they merit in light of the similarities and differences between the services that the clients in question require, but the courts must be wary of inapt comparisons.” Among the significant differences the Supreme Court noted that may exist between services provided to mutual funds and institutional accounts are “higher marketing costs.” Jones v. Harris at 1428.

 

78   •  AB LONG/SHORT MULTI-MANAGER FUND

 

 

there is no category in the Form ADV for institutional products that have a substantially similar investment style as the Portfolio.8

The Adviser has represented that it does not manage any sub-advisory relationship that has a substantially similar investment style as either of the Portfolios.

 

II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.

Lipper, Inc. (“Lipper”), an analytical service that is not affiliated with the Adviser, compared the fees charged to the Portfolio with fees charged to other investment companies for similar services offered by other investment advisers.9 Lipper’s analysis included the comparison of the Portfolio’s contractual management fee, estimated at an initial asset level of $250 million, to the median of the Portfolio’s Lipper Expense Group (“EG”)10 and the Portfolio’s contractual management fee ranking.11

Lipper describes an EG as a representative sample of comparable funds. Lipper’s standard methodology for screening funds to be included in an EG entails the consideration of several fund criteria, including fund type, investment classification/objective, load type and similar 12b-1/non-12b-1 service fees, asset (size) comparability, expense components and attributes. An EG will typically consist of seven to twenty funds.

Lipper does not have a separate category for multi-manager long/short equity funds. Accordingly, the EG that Lipper created for the Portfolio includes long/short equity funds that are not multi-managed. To show the impact caused by this difference, the tables below also includes a contractual management fee and total expense ratio comparison between funds with multi-managers and funds with single-managers.

 

8   The Adviser has indicated that with respect to institutional accounts with assets greater than $300 million, it will negotiate a fee schedule. Discounts that are negotiated vary based upon each client relationship.

 

9   The Supreme Court cautioned against accepting mutual fund fee comparisons without careful scrutiny since “these comparisons are problematic because these fees, like those challenged, may not be the product of negotiations conducted at arm’s length.” Jones v. Harris at 1429.

 

10   Lipper does not consider average account size when constructing EGs. Funds with relatively small average account sizes tend to have higher transfer agent expense ratio than comparable sized funds that have relatively large average account sizes. There are limitations to Lipper expense category data because different funds categorize expenses differently.

 

11   The contractual management fee is calculated by Lipper using the Portfolio’s contractual management fee rate at a hypothetical asset level. The hypothetical asset level is based on the combined net assets of all classes of the Portfolio, rounded up to the next $25 million. Lipper’s total expense ratio information is based on the most recent annual report except as otherwise noted. A ranking of “1” would mean that Portfolio had the lowest effective fee rate in the Lipper peer group.

 

AB LONG/SHORT MULTI-MANAGER FUND  •     79   

 

 

 

Portfolio   Contractual
Management
Fee (%)12		    

Lipper

EG

Median (%)

    

Lipper

EG

Rank

  

Lipper

EG

Quintile

Long/Short Multi-Manager Fund (all funds)     1.900        1.591      10/15   4

only multi-manager funds

     1.900        1.925      4/8   3

only singe-manager funds13

     N/A        1.260      N/A   N/A

Lipper also compared the Portfolio’s projected total expense ratio to the medians of the Portfolio’s EG and Lipper Expense Universe (“EU”). The EU is as a broader group compared to the EG, consisting of all funds that have the same investment classification/objective and load type as the subject Portfolio.14

 

Portfolio  

Total

Expense

Ratio
(%)15

    

Lipper

EG

Median
(%)

    

Lipper

EG

Rank

  

Lipper

EG

Quintile

  

Lipper
EU

Median
(%)

    

Lipper
EU

Rank

    

Lipper

EU

Quintile

Long/Short Multi-Manager Fund (all funds)     2.240        1.996      11/15   4     1.890        19/27      4

only multi-manager funds

     2.240        2.595      4/8   3      

only singe-manager funds13

     N/A        1.742      N/A   N/A      

Based on this analysis, the Portfolio has a higher contractual management fee and total expense ratio than the respective overall EG medians; however, the Portfolio’s contractual management fee and total expense ratio are lower than the EG medians for multi-manager funds.

 

III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO THE MANAGEMENT FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.

The Adviser utilizes two profitability reporting systems, which operate independently but are aligned with each other, to estimate the Adviser’s profitability in connection with investment advisory services provided to the Portfolio. The Senior Officer has retained a consultant to provide independent advice

 

12   The contractual management fee does not reflect any expense reimbursements made by the Portfolio to the Adviser for certain clerical, legal, accounting, administrative, and other services. In addition, the contractual management fee does not reflect any advisory fee waivers for expense caps.

 

13   Since the Portfolio has multiple Sub-Advisers, the Portfolio is not compared to long/short equity funds that have only a single manager. Accordingly, “N/A” is listed under Contractual Management Fee, Lipper EG Rank and Lipper EG Quintile.

 

14   Except for asset (size) comparability, Lipper uses the same criteria for selecting an EG peer when selecting an EU peer. Unlike the EG, the EU allows for the same adviser to be represented by more than just one fund.

 

15   Projected total expense ratio information pertains to the Portfolio’s Class A shares.

 

80   •  AB LONG/SHORT MULTI-MANAGER FUND

 

 

regarding the alignment of the two profitability systems as well as the methodologies and allocations utilized by both profitability systems. See Section IV for additional discussion.

 

IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH SERVICES.

The Portfolio has not yet commenced operations. Therefore, there is no historic profitability data with respect to the Adviser’s investment services to the Portfolio.

In addition to the Adviser’s direct profits from managing the Portfolio, certain of the Adviser’s affiliates have business relationships with the Portfolio and may earn a profit from providing other services to the Portfolio. The courts have referred to this type of business opportunity as “fall-out benefits” to the Adviser and indicated that such benefits should be factored into the evaluation of the total relationship between the Portfolio and the Adviser. Neither case law nor common business practice precludes the Adviser’s affiliates from earning a reasonable profit on this type of relationship provided the affiliates’ charges and services are competitive and the relationship otherwise complies with the 40 Act restrictions. These affiliates provide transfer agent, distribution and brokerage related services to the Portfolio and receive transfer agent fees, Rule 12b-1 payments, front-end sales loads, contingent deferred sales charges (“CDSC”) and brokerage commissions. In addition, the Adviser benefits from soft dollar arrangements which offset expenses the Adviser would otherwise incur.

AllianceBernstein Investments, Inc. (“ABI”), an affiliate of the Adviser, is the Fund’s principal underwriter. ABI and the Adviser have disclosed in the Portfolio’s prospectus that they may make revenue sharing payments from their own resources, in addition to resources derived from sales loads and Rule 12b-1 fees, to firms that sell shares of the Portfolio. The total amount to be paid to a financial intermediary associated with the sale of shares 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 the average daily net assets attributable to that firm over the year. In 2013, ABI paid approximately 0.05% of the average monthly assets of the AllianceBernstein Mutual Funds or approximately $19.4 million for distribution services and educational support (revenue sharing payments).

Fees and reimbursements for out of pocket expenses to be charged by AllianceBernstein Investor Services, Inc. (“ABIS”), the affiliated transfer agent for the Portfolio, are based on the level of the network account and the class of shares held by the account. ABIS also receives a fee per shareholder sub-account for each account maintained by an intermediary on an omnibus basis.

The Portfolio’s Sub-Advisers may effect brokerage transactions in the future through the Adviser’s affiliate, Sanford C. Bernstein & Co., LLC (“SCB & Co.”), and its U.K. affiliate, Sanford C. Bernstein Limited (“SCB Ltd.”), collectively

 

AB LONG/SHORT MULTI-MANAGER FUND  •     81   

 

 

“SCB,” and pay commissions for such transactions. The Adviser represented that SCB’s profitability from any future business conducted with the Portfolio’s Sub-Advisers would be comparable to the profitability of SCB’s dealings with other similar third party clients. In the ordinary course of business, SCB receives and pays liquidity rebates from electronic communications networks (“ECNs”) derived from trading for its clients. These credits and charges are not being passed onto any SCB client. The Adviser also receives certain soft dollar benefits from brokers that execute agency trades for its clients. These soft dollar benefits reduce the Adviser’s cost of doing business and increase its profitability.

 

V. POSSIBLE ECONOMIES OF SCALE

The Adviser has indicated that economies of scale are being shared with shareholders through pricing to scale, breakpoints, fee reductions/waivers and enhancement to services.

In May 2012, an independent consultant, retained by the Senior Officer, provided the Board of Directors information on the Adviser’s firm-wide average costs from 2005 through 2011 and the potential economies of scale. The independent consultant noted that from 2005 through 2007 the Adviser experienced significant growth in assets under management (“AUM”). During this period, operating expenses increased, in part to keep up with growth, and in part reflecting market returns. However, from 2008 through the first quarter of 2009, AUM rapidly and significantly decreased due to declines in market value and client withdrawals. When AUM rapidly decreased, some operating expenses categories, including base compensation and office space, adjusted more slowly during this period, resulting in an increase in average costs. Since 2009, AUM have experienced less significant changes. The independent consultant noted that changes in operating expenses reflect changes in business composition and business practices in response to changes in financial markets. Finally, the independent consultant concluded that the increase in average cost and the decline in net operating margin across the Adviser since late 2008 are inconsistent with the view that there are currently reductions in average costs due to economies of scale that can be shared with the AllianceBernstein Mutual Funds managed by the Adviser through lower fees.

Previously in February 2008, the independent consultant provided the Board of Directors an update of the Deli16 study on advisory fees and various fund characteristics.17 The independent consultant first reiterated the results of his previous

 

16   The Deli study, originally published in 2002 based on 1997 data and updated for the February 2008 Presentation, may be of diminished value due to the age of the data used in the presentation and the changes experienced in the industry over the last four years.

 

17   As mentioned previously, the Supreme Court cautioned against accepting mutual fund fee comparisons without careful scrutiny since the fees may not be the product of negotiations conducted at arm’s length. See Jones v. Harris at 1429.

 

82   •  AB LONG/SHORT MULTI-MANAGER FUND

 

 

two dimensional comparison analysis (fund size and family size) with the Board of Directors.18 The independent consultant then discussed the results of the regression model that was utilized to study the effects of various factors on advisory fees. The regression model output indicated that the bulk of the variation in fees predicted were explained by various factors, but substantially by fund AUM, family AUM, index fund indicator and investment style. The independent consultant also compared the advisory fees of the AllianceBernstein Mutual Funds to similar funds managed by 19 other large asset managers, regardless of the fund size and each Adviser’s proportion of mutual fund assets to non-mutual fund assets.

 

VI. NATURE AND QUALITY OF THE ADVISER’S SERVICES, INCLUDING THE PERFORMANCE OF THE FUND

With assets under management of approximately $454 billion as of March 31, 2014, the Adviser has the investment experience to manage and provide non-investment services (described in Section I) to the Portfolio.

Since the Portfolio has not yet commenced operations, the Portfolio has no performance history.

CONCLUSION:

Based on the factors discussed above, the Senior Officer proposed the Directors ask the Adviser to explain its reason for charging the same advisory fee rate to both the Portfolio and Multi-Manager Alternative Strategies Fund even though the Portfolio’s investment strategy only involves Long/Short, and does not involve other primary strategies (Special Situations, Credit and Global Macro) utilized by Multi-Manager Alternative Strategies Fund. In addition, the Directors should ask the Adviser to address how it plans to resolve the conflict of interest resulting from investments made by the Portfolio in Select US Long/Short Portfolio and from the allocation of assets to investing directly in long and short positions of equity securities, instead of using a Sub-Adviser.19 This conclusion in respect of the Portfolio is based on an evaluation of all of these factors and no single factor was dispositive.

Dated: June 5, 2014

 

18   The two dimensional analysis showed patterns of lower advisory fees for funds with larger asset sizes and funds from larger family sizes compared to funds with smaller asset sizes and funds from smaller family sizes, which according to the independent consultant is indicative of a sharing of economies of scale and scope. However, in less liquid and active markets, such is not the case, as the empirical analysis showed potential for diseconomies of scale in those markets. The empirical analysis also showed diminishing economies of scale and scope as funds surpassed a certain high level of assets.

 

19   Subsequent to the issuance of the Senior Officer’s evaluation, the Adviser revised its proposal to remove the possibility of the Portfolio investing in Select US Long/Short Portfolio.

 

AB LONG/SHORT MULTI-MANAGER FUND  •     83   

THIS PAGE IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS

AB FAMILY OF FUNDS

 

US EQUITY

 

US Core

Core Opportunities Fund

Select US Equity Portfolio

US Growth

Concentrated Growth Fund

Discovery Growth Fund

Growth Fund

Large Cap Growth Fund

Small Cap Growth Portfolio

US Value

Discovery Value Fund

Equity Income Fund

Growth & Income Fund

Small Cap Value Portfolio

Value Fund

INTERNATIONAL/ GLOBAL EQUITY

 

International/Global Core

Global Core Equity Portfolio

Global Equity & Covered Call Strategy Fund

Global Thematic Growth Fund

International Portfolio

Tax-Managed International Portfolio

International/Global Growth

International Growth Fund

International/Global Value

Asia ex-Japan Equity Portfolio

International Value Fund

FIXED INCOME

 

Municipal

High Income Municipal Portfolio

Intermediate California Municipal Portfolio

Intermediate Diversified Municipal Portfolio

Intermediate New York Municipal Portfolio

Municipal Bond Inflation Strategy

FIXED INCOME (continued)

 

Tax-Aware Fixed Income Portfolio

National Portfolio

Arizona Portfolio

California Portfolio

Massachusetts Portfolio

Michigan Portfolio

Minnesota Portfolio

New Jersey Portfolio

New York Portfolio

Ohio Portfolio

Pennsylvania Portfolio

Virginia Portfolio

Taxable

Bond Inflation Strategy

Global Bond Fund

High Income Fund

High Yield Portfolio

Intermediate Bond Portfolio

Limited Duration High Income Portfolio

Short Duration Portfolio

ALTERNATIVES

 

All Market Real Return Portfolio

Credit Long/Short Portfolio

Global Real Estate Investment Fund

Long/Short Multi-Manager Fund

Multi-Manager Alternative Strategies Fund

Select US Long/Short Portfolio

Unconstrained Bond Fund

MULTI-ASSET

 

All Market Growth Portfolio

All Market Income Portfolio

Emerging Markets Multi-Asset Portfolio

Global Risk Allocation Fund

MULTI-ASSET (continued)

 

Target-Date

Multi-Manager Select Retirement Allocation Fund

Multi-Manager Select 2010 Fund

Multi-Manager Select 2015 Fund

Multi-Manager Select 2020 Fund

Multi-Manager Select 2025 Fund

Multi-Manager Select 2030 Fund

Multi-Manager Select 2035 Fund

Multi-Manager Select 2040 Fund

Multi-Manager Select 2045 Fund

Multi-Manager Select 2050 Fund

Multi-Manager Select 2055 Fund

Wealth Strategies

Balanced Wealth Strategy

Conservative Wealth Strategy

Wealth Appreciation Strategy

Tax-Managed Balanced Wealth Strategy

Tax-Managed Conservative Wealth Strategy

Tax-Managed Wealth Appreciation Strategy

CLOSED-END FUNDS

 

AB Multi-Manager Alternative Fund

Alliance California Municipal Income Fund

AllianceBernstein Global High Income Fund

AllianceBernstein Income Fund

AllianceBernstein National Municipal Income Fund

 

We also offer Exchange Reserves, which serves as the money market fund exchange vehicle for the AB mutual funds. An investment in Exchange Reserves is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.

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

 

84   •  AB LONG/SHORT MULTI-MANAGER FUND

AB Family of Funds

LOGO

AB LONG/SHORT MULTI-MANAGER FUND

1345 Avenue of the Americas

New York, NY 10105

800.221.5672

 

LSMM-0152-1115                 LOGO

NOV    11.30.15

LOGO

 

SEMI-ANNUAL REPORT

AB MULTI-MANAGER

ALTERNATIVE STRATEGIES FUND

 

Investment Products Offered

 

• Are Not FDIC Insured

• May Lose Value

• Are Not Bank Guaranteed

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

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

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

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

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

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

January 16, 2016

 

Semi-Annual Report

This report provides management’s discussion of fund performance for AB Multi-Manager Alternative Strategies Fund (the “Fund”) for the semi-annual reporting period ended November 30, 2015. Effective January 20, 2015, the Fund’s name changed from AllianceBernstein Multi-Manager Alternative Strategies Fund to AB Multi-Manager Alternative Strategies Fund.

Investment Objectives and Policies

The investment objective of the Fund is to seek long-term capital appreciation. The Fund seeks to achieve its investment objective primarily by allocating its assets among non-traditional and alternative investment strategies (the “Strategies”). In order to implement the Strategies, AllianceBernstein L.P. (the “Adviser”) will allocate the Fund’s assets among multiple investment sub-advisers (each a “Sub-Adviser”) that the Adviser believes have substantial experience managing one or more Strategies.

The Adviser allocates the Fund’s assets principally among the following types of Strategies: (i) long/short equity, (ii) special situations, (iii) credit and (iv) global macro. The Adviser generally allocates the Fund’s assets among a variety of Sub-Advisers, seeking to gain exposure across various Strategies, but may focus the Fund’s investments in particular Strategies in order to take advantage of perceived investment opportunities or based on its current market outlook.

 

•  

Long/Short Equity: A long/short equity strategy typically involves

   

buying and/or selling securities believed to be significantly under- or over-priced by the market in relation to their potential value. A Sub-Adviser employing a long/short equity strategy generally will seek to buy securities in the expectation that they will increase in value (called “going long”) and sell securities short in the expectation that they will decrease in value (called “going short”). Long/short equity Sub-Advisers may invest in one or more countries, including developed and emerging market countries, and may specialize in a specific sector, industry or market capitalization. Many long/short equity Sub-Advisers hedge portfolios through the use of short sales and/or the use of index options and futures and other derivative products. When the Fund sells securities short, it sells a stock that it does not own (but has borrowed) at its current market price in anticipation that the price of the stock will decline. To complete, or close out, the short sale transaction, the Fund buys the same stock in the market at a later date and returns it to the lender.

 

•  

Special Situations: Special situations strategies seek to take advantage of information inefficiencies resulting from a particular corporate or market event or situation. A Sub-Adviser employing a special situations strategy will take positions in companies that are or are expected to become the subject of takeovers, liquidations, bankruptcies, tender offers, buybacks, spin-offs, exchange offers, mergers, other types of

 

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     1   

   

corporate reorganizations, litigation, or substantial financial or operational stress, or to be affected by regulatory or legislative changes, in the hope of profiting on results from the specific event. The goal of a special situations investment strategy is to profit when the price of a security changes to reflect more accurately the likelihood and potential impact of the occurrence, or non-occurrence, of the anticipated event. The prices of securities of the companies involved in these events are typically influenced by the dynamics of the particular event or situation. For example, the result and timing of factors such as legal decisions and deal negotiations are a key element in the success of any special situations discipline. A Sub-Adviser employing a special situations strategy may take an active role in determining the outcome of an event. Often, special situations Sub-Advisers rely on fundamental research that extends beyond the evaluation of the issues affecting a single company to include an assessment of the legal and structural issues surrounding an extraordinary event or transaction. The Fund’s assets are expected to be allocated among Sub-Advisers that focus on a variety of special situations strategies, thereby effectively allocating capital between merger arbitrage, distressed securities, restructurings and other areas of focus for special situations strategies. Sub-Advisers employing a special situations approach may employ a broad range of investment strategies and techniques to attempt to take advantage of specific events (for example, by using a long/short

   

strategy driven by events), and may do so through almost any type of security or instrument, including investments in equities, fixed income securities, currencies, commodities and other financial instruments.

 

•  

Credit: A Sub-Adviser that employs credit strategies generally invests in a variety of fixed-income and other securities, including bonds (corporate and government), bank debt, asset-backed financial instruments, mortgage-backed securities and mezzanine and distressed securities. This strategy also includes opportunistic trading and investing in securities of distressed companies and high yield securities (also known as “junk bonds”). The Fund may be invested in various credit strategies that involve being long and short different financial instruments, and the credits involved will range from high grade to high yield and distressed debt.

 

•  

Global Macro: Global macro strategies aim to identify and exploit imbalances in global economies and asset classes. Though encompassing many approaches and styles, macro strategies are linked by the utilization of macroeconomic and technical market factors, rather than “bottom-up” individual security analysis, as the primary basis for management. A Sub-Adviser using a global macro strategy generally may invest in all major markets–equities, bonds, currencies and commodities–though not always at the same time, and will typically use leverage in its investment strategy in the form of short sales, swaps, options and other derivative

 

 

2   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

   

instruments. Global macro strategies may involve speculative trading in commodity futures contracts, options on such contracts or forward contracts. Some Sub-Advisers using a global macro approach will base their investments on their fundamental determinations of market conditions and market evolutions (the discretionary approach), while others will use quantitative or pre-defined rules to do so (the systematic approach).

The Adviser may determine to allocate the Fund’s assets to Sub-Advisers employing all or a subset of the Strategies described above at any one time, and may change those allocations from time to time. In the future, the Adviser may also determine to allocate the Fund’s assets to Sub-Advisers employing other strategies not described in this report, including, but not limited to, emerging markets, currency, high-frequency trading, quantitative and real estate related assets strategies.

The Adviser intends to hire and terminate Sub-Advisers in accordance with the terms of an exemptive order that the Fund and the Adviser have received from the Securities and Exchange Commission. This order permits the Adviser, subject to the supervision and approval by the Board of Directors of the Fund (the “Board”), to enter into sub-advisory agreements with Sub-Advisers, and to materially amend or terminate those agreements, in each case without seeking the approval of the Fund’s shareholders. The Sub-Advisers will not be affiliated with the Adviser. The initial

shareholder of the Fund approved the Fund’s operation in this manner and reliance by the Fund on this exemptive order.

The Adviser identifies potential Sub-Advisers through a variety of sources. The Sub-Adviser selection process is driven by both quantitative and qualitative analysis. For each prospective allocation to a new Sub-Adviser, the Adviser will first conduct an evaluation of the Sub-Adviser and its Strategy, team, and approach through analysis of, among other criteria, the prior investment returns of similar strategies (if any), portfolio exposures, current assets under management, and Strategy outlook. The Adviser may also (i) conduct background checks; (ii) analyze whether the Sub-Adviser has the personnel, research and technology resources to effectively implement its Strategy; and (iii) conduct additional due diligence as the Adviser deems appropriate.

The Adviser expects to allocate the Fund’s assets to the Sub-Advisers but may from time to time manage a portion of the Fund’s assets directly. The Adviser may cause the Fund to invest in securities, options, futures, options on futures, swap contracts, or other derivatives or financial instruments.

The Fund’s principal investments may include: equity securities, including common and preferred stocks, convertible securities, rights and warrants and depositary receipts; fixed-income and/or floating rate securities, including debt issued by corporations, debt issued by governments (including the

 

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     3   

US and foreign governments), their agencies, instrumentalities, sponsored entities, and political subdivisions, notes, debentures, debt participations, convertible bonds, non-investment grade securities (commonly known as “junk bonds”), and bank loans (including senior secured loans) and other direct indebtedness; mortgage-backed and other mortgage-related securities, asset-backed securities, municipal securities, to be announced securities, and custodial receipts; currencies; and restricted securities eligible for resale pursuant to Rule 144A under the Securities Act of 1933.

The Fund’s investments may be publicly traded or privately issued or negotiated. The Fund may invest without restriction as to issuer capitalization, country, currency, maturity or credit rating. The Fund’s investments may include securities of US and foreign issuers, including securities of issuers in emerging countries and securities denominated in a currency other than the US dollar. From time to time, the Fund may invest in shares of companies through initial public offerings.

The Fund expects to use derivatives, such as options, futures, forwards and swaps, to a significant extent. Derivatives may provide a more efficient and economical exposure to market segments than direct investments, and may also be a quicker and more efficient way to alter the Fund’s exposure. For example, Sub-Advisers utilizing a long/short strategy may use various types of derivatives to take both a long and short position

in securities or market segments. The Sub-Advisers or the Adviser may use derivatives to effectively leverage the Fund by creating aggregate exposure substantially in excess of the Fund’s net assets.

The Fund also may, from time to time, make investments in public investment vehicles, including other investment companies (including registered investment companies), exchange-traded funds (“ETFs”), European registered investment funds, real estate investment trusts (“REITs”), private investment funds, and partnership interests, including master limited partnerships.

The Fund may seek to gain exposure to physical commodities traded in the commodities markets through investments in a variety of derivative instruments, including investments in commodity index-linked notes. The Fund may seek to gain exposure to commodities and commodities-related instruments and derivatives primarily through investments in AllianceBernstein Multi-Manager Alternative Strategies Fund (Cayman) Ltd., a wholly-owned subsidiary of the Fund organized under the laws of the Cayman Islands (the “Subsidiary”). The Subsidiary will be advised by the Adviser and will have the same investment objective and substantially similar investment policies and restrictions as the Fund except that the Subsidiary, unlike the Fund, will be able to invest, without limitation, in commodities and commodities-related instruments. The Fund will be subject to the risks associated with the commodities, derivatives and other instruments in

 

 

4   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

which the Subsidiary invests, to the extent of its investment in the Subsidiary. The Fund will limit its investment in the Subsidiary to no more than 25% of its total assets. Any investment in the Subsidiary is expected to provide the Fund with commodity exposure within the limitations of federal tax requirements that apply to the Fund.

The Fund is considered to be “non-diversified,” which means that the Investment Company Act of 1940, as amended (the “1940 Act”), does not limit the percentage of its assets that it may invest in any one company (subject to certain limitations under the Internal Revenue Code of 1986, as amended).

Investment Results

The table on page 13 shows the Fund’s performance compared with its primary benchmark, the Bank of America (“BofA”) Merrill Lynch 3-Month US T-Bill Index, for the six-month and 12-month periods ended November 30, 2015. Also included in the table is the performance of the HFRX Global Hedge Fund Index.

For both periods, all share classes of the Fund generated negative absolute returns and underperformed the primary benchmark, but outperformed the HFRX Global Hedge Fund Index, before sales charges. As of November 30, 2015, the Fund was managed by 11 Sub-Advisers across the following three strategy allocations, in descending order of size: Long/Short Equity, Special Situations and Credit.

The Fund’s Long/Short Equity allocation contributed to performance in the six-month period. Three of the six Long/Short Equity Sub-Advisers made positive contributions to Fund performance. Not surprisingly, during a weak period for equities, the Fund’s short-only Sub-Advisers generated very strong performance. In particular, being short China and energy helped performance. On the negative side, during a period in which value equities experienced weakness, the Fund’s deep value-focused Sub-Advisers delivered negative returns.

The six-month period was a difficult one for Special Situations and Event Driven Sub-Advisers, as a number of high-profile mergers were derailed and several widely-owned, catalyst-driven names declined. Against this backdrop, all three of the Fund’s Sub-Advisers generated negative performance.

Within Credit, results for the two Sub-Advisers were negative, reflecting continued weakness in the high yield and distressed credit markets.

For the 12-month period, all six of the Fund’s Long/Short Equity Sub-Advisers made positive contributions to Fund performance. The strongest performers were the Fund’s short-only Sub-Adviser and one of its US large capitalization-focused Sub-Advisers.

Within Special Situations, two of three Sub-Advisers generated negative performance. The third Sub-Adviser, who had significantly reduced its market exposure, delivered a positive return.

 

 

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     5   

Within Credit, results were mixed for the Fund’s two Sub-Advisers, with one generating positive performance and the other negative.

The Fund utilized derivatives in the form of credit default swaps, total return swaps, purchased options and written options, for hedging and investment purposes. Forwards were used for hedging purposes. For both periods, forwards, credit default swaps, purchased options and written options had no material impact on absolute performance. Total return swaps had no material impact on performance for the six-month period, and added for the 12-month period.

Market Review and Investment Strategy

Macroeconomic and geopolitical concerns, particularly about the implications of potentially slower growth in China, weighed on investor sentiment in the 12-month

period ended November 30, 2015. More recently, negative company-specific headlines caused segments of the market to trade down sharply. This negatively impacted performance for some Long/Short Equity, and Special Situations and Event Driven Sub-Advisers, Sub-Advisers including those to which the Fund had exposure. During this period there was a prolonged selloff in lower rated and less liquid credit, which made the environment difficult for credit strategies, including those of Sub-Advisers.

While some of the Fund’s Sub-Advisers were negatively impacted by the challenging environment at different points during the 12-month period, the emphasis on diversification among strategies and Sub-Advisers were beneficial and the Fund out-performed the HFRX Global Hedge Fund Index over both periods.

 

 

6   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

DISCLOSURES AND RISKS

Benchmark Disclosure

The unmanaged BofA Merrill Lynch 3-Month US T-Bill Index and the HFRX Global Hedge Fund Index do not reflect fees and expenses associated with the active management of a mutual fund portfolio. The BofA ML US 3-Month T-Bill Index measures the performance of Treasury securities maturing in 90 days. The HFRX Global Hedge Fund Index is designed to be representative of the overall composition of the hedge fund universe. It is comprised of all eligible hedge fund strategies; including but not limited to convertible arbitrage, distressed securities, equity hedge, equity market neutral, event driven, macro, merger arbitrage, and relative value arbitrage. The strategies are asset weighted based on the distribution of assets in the hedge fund industry. An investor cannot invest directly in an index or average, and their results are not indicative of the performance for any specific investment, including the Fund.

A Word About Risk

Market Risk: The value of the Fund’s investments will fluctuate as the stock or bond market fluctuates. The value of its investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events that affect large portions of the market. Market risk includes the risk that a particular Fund, such as global macro, may underperform the market generally.

Allocation and Management Risk: The Adviser will invest the assets of the Fund primarily by allocating Fund assets to the Sub-Advisers. The success of the Fund depends, in part, upon the ability of the Sub-Advisers to develop and implement Strategies to achieve the Fund’s investment objective. There is no assurance that the Adviser’s allocation decisions will result in the desired effects. Subjective decisions made by the Adviser (e.g., with respect to allocation among Strategies) and/or the Sub- Advisers may cause the Fund to incur losses or to miss profit opportunities on which it might otherwise have capitalized. The success of the Fund’s investment program depends primarily on the trading and investing skills of the Sub-Advisers rather than on the trading and investing skills of the Adviser itself. To the extent that the Adviser is unable to select, manage, allocate appropriate levels of capital to, and invest with Sub-Advisers that, in the aggregate, are able to produce consistently positive returns for the Fund, the performance of the Fund may be impaired. Some Sub-Advisers have little experience managing registered investment companies which, unlike the private investment funds these Sub-Advisers have been managing, are subject to daily inflows and outflows of investor cash and are subject to certain legal and tax-related restrictions on their investments and operations. Subject to the overall supervision of the Fund’s investment program by the Adviser, each Sub-Adviser is responsible, with respect to the portion of the Fund’s assets it manages, for compliance with the Fund’s investment strategies and applicable law. Strategies implemented by the Sub-Advisers may fail to produce the intended results. The success of a particular Sub-Adviser is dependent on the expertise of its portfolio managers. Certain Sub-Advisers may have only one or a limited number of key individuals responsible for managing the Fund’s assets. The loss of one or more key individuals from a Sub-Adviser could have a materially adverse effect on the performance of the Fund.

Counterparty Risk: The Fund is expected to establish relationships with third parties to engage in derivative transactions and obtain prime and other brokerage services that permit the Fund to trade in any variety of markets or asset classes. If the Fund is unable to establish or maintain such relationships, such inability may limit the Fund’s transactions and trading activity, prevent it from trading at optimal rates and terms, and result in losses. Some of the markets in which the Fund may effect transactions are not “exchanged-based,” including “over-the-counter” or “interdealer” markets. The participants in these markets are typically not subject to the credit evaluation and

 

(Disclosures, Risks and Note about Historical Performance continued on next page)

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     7   

Disclosures and Risks

DISCLOSURES AND RISKS

(continued from previous page)

 

regulatory oversight to which members of “exchange-based” markets are subject. This exposes the Fund to the risk that a counterparty will not settle a transaction in accordance with its terms and conditions. Such “counterparty risk” is heightened for contracts with longer maturities where events may intervene to prevent settlement, or where the Fund has concentrated its transactions with a single or small group of counterparties. Furthermore, there is a risk that any of the Fund’s counterparties could become insolvent and/or the subject of insolvency proceedings. If one or more of the Fund’s counterparties were to become insolvent or the subject of insolvency proceedings, there exists the risk that the recovery of the Fund’s assets from the counterparty will be delayed or be of a value less than the value of the assets originally entrusted to the counterparty.

Hedging Transactions Risk: The Fund may invest in securities and utilize financial instruments to seek to hedge fluctuations in the values of the Fund’s positions. However, hedging transactions will typically limit the opportunity for gain if the value of such positions should increase, and may not work as intended and actually compound losses. It may not be possible to hedge against certain price fluctuations at a reasonable cost. The Fund generally is not required to enter into hedging transactions and may choose not to do so.

Short Sales Risk: The Fund may engage in short-selling, which involves the sale of a security that the Fund does not own in the hope of purchasing the same or equivalent security at a later date at a lower price. A short sale involves the risk of an increase in the market price of the security, and therefore the possibility of a theoretically unlimited loss. The Fund must borrow the security to initiate the short sale, and it may be difficult and costly to effect the purchase of the security in order to return it to the lender, particularly if the security is illiquid. The Fund may for a number of reasons be forced to unwind a short sale at a disadvantageous price.

Volatility Risk: The Fund will frequently be subject to substantial volatility, which could result from a number of causes. Furthermore, there is the risk that a disproportionate share of the Fund’s assets may be committed to one or more investment strategies or techniques, which would result in less diversification than would be suggested by the number of Sub-Advisers being employed. The allocation of Fund assets to Sub-Advisers in response to particular market conditions could increase volatility and potential for loss if such market conditions continue to worsen or react in a manner not anticipated by the Adviser.

Portfolio Turnover Risk: Certain Sub-Advisers may invest and trade securities on the basis of certain short-term market considerations. The resultant high portfolio turnover could potentially involve substantial brokerage commissions and fees.

Special Situations Investment Risk: Special situations investing requires a Sub-Adviser to make predictions about the likelihood that an event will occur and the impact such event will have on the value of a company’s securities. If the event fails to occur or it does not have the effect foreseen, losses can result.

Fixed-Income Securities Risk: The Fund may invest in debt or other fixed-income securities of US and non-US issuers. The value of fixed-income securities will change in response to fluctuations in interest rates and changes in market perception of the issuer’s creditworthiness or other factors. The Fund may invest to a substantial degree in debt securities rated below investment grade, otherwise known as high-yield securities or “junk bonds.” High-yield securities may rank junior to other outstanding securities and obligations of the issuer. Moreover, high-yield securities may not be protected by financial covenants or limitations on additional indebtedness. Companies that issue high-yield securities are often highly leveraged and may not have available to them more traditional methods of financing. High-yield securities face ongoing

 

(Disclosures, Risks and Note about Historical Performance continued on next page)

 

8   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Disclosures and Risks

DISCLOSURES AND RISKS

(continued from previous page)

 

uncertainties and exposure to adverse business, financial or economic conditions that could lead to the issuer’s inability to meet timely interest and principal payments.

Distressed Investments Risk: The Fund may invest in companies that are in poor financial condition, lack sufficient capital or that are involved in bankruptcy or reorganization proceedings. Securities and obligations of such distressed companies often trade at a discount to the expected enterprise value that could be achieved through a restructuring and an investor in such securities is exposed to risk that a restructuring will not occur, or will occur on unfavorable terms. Debt obligations of distressed companies are typically unrated, lower-rated or close to default. Securities of distressed companies are generally more likely to become worthless than securities of more financially stable companies.

Derivative Instruments Risk: The Fund may enter into options, futures, forwards, swaps and other derivative instrument contracts. Derivative instruments may be subject to various types of risks, including market risk, liquidity risk, the risk of nonperformance by the counterparty, including risks relating to the financial soundness and creditworthiness of the counterparty, legal risk and operations risk. The prices of derivative instruments can be highly volatile. Depending on the nature of the derivative, price movements may be influenced by interest rates, changing supply and demand relationships, trade, fiscal, monetary and exchange control programs and policies of governments, and national and international political and economic events and policies.

Small Capitalization and Recently Organized Companies Risk: Fund assets may be exposed, long and short, to securities of small capitalization companies and recently organized companies. Historically, such securities have been more volatile in price than those of larger capitalized, more established companies. These companies may have limited product lines, distribution channels and financial and managerial resources. Further, there is often less publicly available information concerning such companies than for larger, more established businesses. The equity securities of small capitalization companies may be traded in volumes that are lower than are typical of larger company securities.

Non-US Investments Risk: The Fund may invest in securities of non-US companies and foreign countries. Investing in the securities of such companies and countries involves political and economic considerations, such as: the potential difficulty of repatriating funds, general social, political and economic instability and adverse diplomatic developments; the possibility of imposition of withholding or other taxes on income or capital gains; the small size of the securities markets in such countries and the low volume of trading, resulting in potential lack of liquidity and price volatility; fluctuations in the rate of exchange between currencies and costs associated with currency conversion; and certain government policies that may restrict the Fund’s investment opportunities. The economies of non-US countries may differ favorably or unfavorably from the United States economy in such respects as growth of gross domestic product, rate of inflation, currency depreciation, asset reinvestment, resource self-sufficiency and balance of payments position. In addition, accounting and financial reporting standards that prevail in non-US countries generally are not equivalent to US standards and, consequently, less information may be available to investors in companies located in non-US countries than is available to investors in companies located in the United States.

Currency Risk: The Fund may invest a portion of its assets in instruments denominated in currencies other than the US dollar, the prices of which are determined with reference to currencies other than the US dollar. The Fund, however, generally values its securities and other assets in US dollars. To the extent unhedged, the value of the Fund’s assets will fluctuate with currency exchange rates as well as with the price

 

(Disclosures, Risks and Note about Historical Performance continued on next page)

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     9   

Disclosures and Risks

DISCLOSURES AND RISKS

(continued from previous page)

 

changes of the Fund’s investments. Thus, an increase in the value of the US dollar compared to the other currencies in which the Fund makes its investments will reduce the effect of increases and magnify the effect of decreases in the prices of the Fund’s securities in their local markets. The Fund may utilize financial instruments such as currency options and forward contracts to hedge currency fluctuations, but there can be no assurance that such hedging transactions (if implemented) will be effective.

Emerging Markets Risk: Investment in emerging market securities involves a greater degree of risk than investment in securities of issuers based in developed countries. Among other things, emerging market securities investments may carry the risks of less publicly available information, more volatile markets, less strict securities market regulation, less favorable tax provisions, and a greater likelihood of severe inflation, unstable currency, war and expropriation of personal property than investments in securities of issuers based in developed countries.

Undervalued Securities Risk: The Fund may make certain investments in securities that the Sub-Advisers believe to be undervalued. However, there are no assurances that the securities will in fact be undervalued. In addition, it may take a substantial period of time before the securities realize their anticipated value, and such securities may never appreciate to the level anticipated by the Sub-Advisers.

Quantitative Investment Risk: Certain Sub-Advisers may attempt to execute strategies for the Fund using proprietary quantitative models. Investments selected using these models may perform differently than expected as a result of the factors used in the models, the weight placed on each factor, changes from the factors’ historical trends, and technical issues in the construction and implementation of the models (including, for example, data problems and/or software issues). There is no guarantee that a Sub- Adviser’s use of quantitative models will result in effective investment decisions for the Fund. The success of a Sub-Adviser’s quantitative investment models is heavily dependent on the mathematical models used by the Sub-Adviser. Models that have been formulated on the basis of past market data may not be predictive of future price movements. Models also may have hidden biases or exposure to broad structural or sentiment shifts. Furthermore, the effectiveness of such models tends to deteriorate over time as more traders seek to exploit the same market inefficiencies through the use of similar models.

Commodities-Related Investments Risk: To the extent the fund invests in commodities or instruments whose performance is linked to the price of an underlying commodity or commodity index, the fund will be subject to the risks of investing in commodities, including regulatory, economic and political developments, weather events and natural disasters and market disruptions. Commodities and commodity-linked investments may be less liquid than other investments.

Subsidiary Risk: The Fund may invest in certain commodities and commodity-related investments through a wholly owned subsidiary organized in the Cayman Islands. The Fund will not invest more than 25% of its managed assets through the Subsidiary. It is not anticipated that the Subsidiary will be registered under the 1940 Act. As an investor in the Subsidiary, the Fund would not have all of the protections offered to investors by the 1940 Act. The Fund will be subject to the risks associated with the commodities, derivatives and other instruments in which the Subsidiary invests, to the extent of its investment in the Subsidiary.

Multi-Manager Risk: The multi-manager strategy employed by the Fund involves special risks, which include:

 

•  

Offsetting positions. Sub-Advisers may make investment decisions which conflict with each other; for example, at any particular time, one Sub-Adviser may be purchasing shares of an issuer whose shares are being sold by another Sub-Adviser.

 

(Disclosures, Risks and Note about Historical Performance continued on next page)

 

10   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Disclosures and Risks

DISCLOSURES AND RISKS

(continued from previous page)

 

  Consequently, the Fund could indirectly incur transaction costs without accomplishing any net investment result.

 

•  

Proprietary investment strategy risk. Sub-Advisers may use proprietary or licensed investment strategies that are based on considerations and factors that are not fully disclosed to the Board or the Adviser. Moreover, these proprietary or licensed investment strategies, which may include quantitative mathematical models or systems, may be changed or refined over time. A Sub-Adviser (or the licensor of the strategies used by the Sub-Adviser) may make certain changes to the strategies the Sub-Adviser has previously used, may not use such strategies at all (or the Sub-Adviser’s license may be revoked), and may use additional strategies, where such changes or discretionary decisions, and the reasons for such changes or decisions, are also not fully disclosed to the Board or the Adviser. These strategies may involve risks under some market conditions that are not anticipated by the Adviser or the Fund.

Non-Diversification Risk: The Fund is a “non-diversified” investment company, which means that the Fund may invest a larger portion of its assets in a smaller number of issuers than a diversified investment company. This increases the risks of investing in the Fund because the performance of each security in which the Fund invests has a greater impact on the Fund’s performance. To the extent that the Fund invests a relatively high percentage of its assets in securities of a limited number of companies, the Fund may also be more susceptible than a diversified investment company to any single economic, political or regulatory occurrence.

Leverage Risk: Leverage creates exposure to gains and losses in a greater amount than the dollar amount made in an investment by attempting to enhance return or value without increasing the investment amount. Leverage can magnify the effects of changes in the value of the Fund’s investments and make the Fund more volatile. The use of leverage may cause the Fund to liquidate portfolio positions when it may not be advantageous to do so.

Liquidity Risk: Liquidity risk exists when particular investments are difficult to purchase or sell, possibly preventing the Fund from selling out of these illiquid securities at an advantageous price. Illiquid securities may also be difficult to value. Derivatives and securities involving substantial market and credit risk tend to involve greater liquidity risk.

Mortgage-Related Securities Risk: In the case of investments in mortgage-related securities, a loss could be incurred if the collateral backing these securities is insufficient.

Real Estate Related Securities Risk: The Fund may invest in real estate related securities and may indirectly invest in real assets, such as real estate, natural resources and commodities, and infrastructure assets. Investing in real estate related securities includes, among others, the following risks: possible declines in the value of real estate; risks related to general and local economic conditions, including increases in the rate of inflation; possible lack of availability of mortgage funds; overbuilding; extended vacancies of properties; increases in competition, property taxes and operating expenses; changes in zoning laws; costs resulting from the clean-up of, and liability to third parties for damages resulting from, environmental problems; casualty or condemnation losses; uninsured damages from floods, earthquakes or other natural disasters; limitations on and variations in rents; and changes in interest rates. Investments in real assets involve a substantial degree of risk, including significant financial, operating and competitive risks. Investing in REITs involves certain unique risks in addition to those risks associated with investing in the real estate industry in general. REITs are dependent upon management skills, are not diversified, and are often subject to heavy cash flow dependency, default by borrowers and self-liquidation.

 

(Disclosures, Risks and Note about Historical Performance continued on next page)

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     11   

Disclosures and Risks

DISCLOSURES AND RISKS

(continued from previous page)

 

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

An Important Note About Historical Performance

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

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

 

12   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Disclosures and Risks

HISTORICAL PERFORMANCE

 

        
THE FUND VS. ITS BENCHMARKS
PERIODS ENDED NOVEMBER 30, 2015 (unaudited)		   NAV Returns      
  6 Months        12 Months       
AB Multi-Manager Alternative Strategies Fund         

Class A

     -3.10%           -1.19%     

 

Class C

     -3.51%           -1.98%     

 

Advisor Class*

     -3.09%           -0.99%     

 

Class R*

     -3.30%           -1.48%     

 

Class K*

     -3.20%           -1.28%     

 

Class I*

     -3.00%           -0.99%     

 

Class Z*

     -3.00%           -0.99%     

 

Primary Benchmark: BofA Merrill Lynch 3-Month US T-Bill Index     0.01%           0.02%     

 

HFRX Global Hedge Fund Index     -4.77%           -3.07%     

 

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

        

 

See Disclosures, Risks and Note about Historical Performance on pages 7-12.

(Historical Performance continued on next page)

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     13   

Historical Performance

HISTORICAL PERFORMANCE

(continued from previous page)

 

AVERAGE ANNUAL RETURNS AS OF NOVEMBER 30, 2015 (unaudited)  
     NAV Returns        SEC Returns
(reflects applicable
sales charges)		  
       
Class A Shares        

1 Year

      -1.19 %         -5.39 % 

Since Inception*

      0.00 %         -3.18 % 
       
Class C Shares        

1 Year

      -1.98 %         -2.96 % 

Since Inception*

      -0.75 %         -0.75 % 
       
Advisor Class Shares†        

1 Year

      -0.99 %         -0.99 % 

Since Inception*

      0.22 %         0.22 % 
       
Class R Shares†        

1 Year

      -1.48 %         -1.48 % 

Since Inception*

      -0.30 %         -0.30 % 
       
Class K Shares†        

1 Year

      -1.28 %         -1.28 % 

Since Inception*

      -0.07 %         -0.07 % 
       
Class I Shares†        

1 Year

      -0.99 %         -0.99 % 

Since Inception*

      0.22 %         0.22 % 
       
Class Z Shares†        

1 Year

      -0.99 %         -0.99 % 

Since Inception*

      0.22 %         0.22 % 

The Fund’s current prospectus fee table shows the Fund’s total annual operating expense ratios as 4.44%, 5.37%, 3.76%, 3.78%, 3.49%, 3.26% and 3.25% for Class A, Class C, Advisor Class, Class R, Class K, Class I and Class Z shares, respectively, gross of any fee waivers or expense reimbursements. Contractual fee waivers and/or expense reimbursements limit the Fund’s annual operating expense ratios exclusive of interest expense, dividend expense, borrowing costs and brokerage expense on securities sold short to 2.24%, 2.99%, 1.99%, 2.49%, 2.24%, 1.99% and 1.99% for Class A, Class C, Advisor Class, Class R, Class K, Class I and Class Z shares, respectively. These waivers/reimbursements may not be terminated before September 30, 2016 and may be extended by the Adviser for additional one-year terms. Absent reimbursements or waivers, performance would have been lower. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.

 

*   Inception date: 7/31/2014.

 

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

See Disclosures, Risks and Note about Historical Performance on pages 7-12.

(Historical Performance continued on next page)

 

14   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Historical Performance

HISTORICAL PERFORMANCE

(continued from previous page)

 

SEC AVERAGE ANNUAL RETURNS

AS OF THE MOST RECENT CALENDAR QUARTER-END

DECEMBER 31, 2015 (unaudited)

  
    

SEC Returns

(reflects applicable

sales charges)

  
  
Class A Shares   

1 Year

      -6.14 % 

Since Inception*

      -3.60 % 
  
Class C Shares   

1 Year

      -3.63 % 

Since Inception*

      -1.33 % 
  
Advisor Class Shares†   

1 Year

      -1.67 % 

Since Inception*

      -0.34 % 
  
Class R Shares†   

1 Year

      -2.26 % 

Since Inception*

      -0.91 % 
  
Class K Shares†   

1 Year

      -1.97 % 

Since Inception*

      -0.63 % 
  
Class I Shares†   

1 Year

      -1.77 % 

Since Inception*

      -0.41 % 
  
Class Z Shares†   

1 Year

      -1.77 % 

Since Inception*

      -0.41 % 

 

*   Inception date: 7/31/2014.

 

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

See Disclosures, Risks and Note about Historical Performance on pages 7-12.

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     15   

Historical Performance

EXPENSE EXAMPLE

(unaudited)

 

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

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

Actual Expenses

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

Hypothetical Example for Comparison Purposes

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

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

 

     Beginning
Account Value
June 1, 2015		      Ending
Account Value
November 30, 2015		      Expenses Paid
During Period*		      Annualized
Expense Ratio*		  
Class A            

Actual

    $ 1,000       $ 969.00       $ 14.57         2.96 % 

Hypothetical**

    $ 1,000       $ 1,010.20       $ 14.88         2.96 % 
Class C            

Actual

    $ 1,000       $ 964.90       $ 18.18         3.70 % 

Hypothetical**

    $ 1,000       $ 1,006.50       $ 18.56         3.70 % 
Advisor Class            

Actual

    $ 1,000       $ 969.10       $ 13.19         2.68 % 

Hypothetical**

    $ 1,000       $ 1,011.60       $ 13.48         2.68 % 
Class R            

Actual

    $ 1,000       $ 967.00       $ 16.03         3.26 % 

Hypothetical**

    $ 1,000       $ 1,008.65       $ 16.37         3.26 % 
Class K            

Actual

    $ 1,000       $ 968.00       $ 14.91         3.03 % 

Hypothetical**

    $ 1,000       $ 1,009.85       $ 15.22         3.03 % 
Class I            

Actual

    $ 1,000       $ 970.00       $ 13.69         2.78 % 

Hypothetical**

    $ 1,000       $ 1,011.10       $ 13.98         2.78 % 
Class Z            

Actual

    $ 1,000       $ 970.00       $ 13.69         2.78 % 

Hypothetical**

    $     1,000       $     1,011.10       $     13.98         2.78 % 

 

*   Expenses are equal to the classes’ annualized expense ratios multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period).

 

**   Assumes 5% annual return before expenses.

 

16   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Expense Example

PORTFOLIO SUMMARY

November 30, 2015 (unaudited)

 

PORTFOLIO STATISTICS

Net Assets ($mil): $378.5

 

LOGO

SUB-ADVISER ALLOCATION*

 

%     Sub Adviser   Category
  11.1%     

Chilton Investment Company LLC

  

Long / Short Equity

  10.1%     

First Pacific Advisors LLC

  

Special Situations

  9.6%     

Sirios Capital Management LP

  

Long / Short Equity

  9.2%     

River Canyon Fund Management LLC

  

Special Situations

  9.0%     

Halcyon Liquid Strategies IC Mgt LP

  

Special Situations

  8.9%     

Passport Capital, LLC

  

Long / Short Equity

  8.9%     

Lyrical Asset Management LP

  

Long / Short Equity

  8.8%     

Impala Asset Management LLC

  

Long / Short Equity

  8.8%     

CQS US LLC

  

Credit

  7.7%     

Kynikos Associates LP

  

Long / Short Equity

  6.3%     

MPAM Credit Trading Partners LP

  

Credit

  1.6%     

Liquidity Sleeve Cash†

  

Cash

SECURITY TYPE BREAKDOWN*

 

 

     Long        Short  

Bank Loans

      0.1 %         — % 

Collateralized Mortgage Obligations

      0.1           —   

Common Stocks

      55.5           -11.1   

Convertible Bonds

      0.7           —   

Corporate Bonds

      11.7           -0.4   

Depository Receipts

      0.7           -0.5   

Government Issues

      1.5           -1.2   

Municipals

      1.2           —   

Mutual Funds

      —           -12.0   

Equity Linked Note

      0.2           —   

Options Purchased – Puts

      0.1           —   

Preferred Stocks

      0.3           —   

Real Estate Investment Trust Units

      1.1           -0.1   

 

*   Holdings are expressed as a percentage of total net assets and may vary over time. The Fund also enters into derivative transactions, which may be used for hedging or investment purposes (see “Portfolio of Investments” section of the report for additional details).

 

†    Cash maintained on portfolio level for investors’ transactions.

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     17   

Portfolio Summary

CONSOLIDATED PORTFOLIO OF INVESTMENTS

November 30, 2015 (unaudited)

 

Company           
    
Shares		      U.S. $ Value  

 

  

COMMON STOCKS – 55.5%

       

Consumer Discretionary – 14.7%

       

Auto Components – 0.7%

       

Goodyear Tire & Rubber Co. (The)

       29,527       $ 1,029,902   

Johnson Controls, Inc.(a)

       27,680         1,273,280   

Tenneco, Inc.(b)

       6,487         349,519   
      

 

 

  
         2,652,701   
      

 

 

  

Automobiles – 0.5%

       

Daimler AG (REG)

       4,238         378,300   

General Motors Co.

       844         30,553   

Peugeot SA(b)

       80,910         1,443,303   
      

 

 

  
         1,852,156   
      

 

 

  

Diversified Consumer Services – 0.1%

       

Service Corp. International/US

       9,293         258,810   

Sotheby’s(c)

       3,230         91,441   
      

 

 

  
         350,251   
      

 

 

  

Hotels, Restaurants & Leisure – 3.8%

       

Buffalo Wild Wings, Inc.(a)(b)

       10,713         1,716,651   

Caesars Acquisition Co. – Class A(b)

       3,712         29,325   

Caesars Entertainment Corp.(b)(c)

       11,707         99,158   

Carnival Corp.

       38,910         1,966,123   

Chipotle Mexican Grill, Inc. – Class A(b)

       732         424,231   

ClubCorp Holdings, Inc.

       4,911         88,152   

Domino’s Pizza, Inc.

       12,998         1,396,895   

Genting Malaysia Bhd

       133,500         137,922   

Hilton Worldwide Holdings, Inc.

       5,418         125,806   

Las Vegas Sands Corp.

       4,280         188,577   

McDonald’s Corp.(a)

       11,323         1,292,634   

MGM Resorts International(b)

       42,281         961,470   

OPAP SA

       454         3,065   

Pinnacle Entertainment, Inc.(b)

       2,999         98,337   

Sonic Corp.(a)

       60,906         1,769,928   

Starbucks Corp.

       40,752         2,501,765   

Starwood Hotels & Resorts Worldwide, Inc.

       19,480         1,399,443   
      

 

 

  
         14,199,482   
      

 

 

  

Household Durables – 0.7%

       

CalAtlantic Group, Inc.(b)

       22,175         933,568   

DR Horton, Inc.

       5,479         177,026   

Garmin Ltd.

       846         32,021   

Jarden Corp.(b)

       13,510         630,647   

Mohawk Industries, Inc.(b)

       3,464         660,654   

PulteGroup, Inc.

       18,591         362,153   
      

 

 

  
         2,796,069   
      

 

 

  

Internet & Catalog Retail – 1.3%

       

Amazon.com, Inc.(b)

       2,356         1,566,269   

HomeAway, Inc.(b)

       28,102         993,687   

Liberty Interactive Corp. QVC Group – Class A(b)

       46,592         1,233,756   

 

18   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Consolidated Portfolio of Investments

 

Company           
    
Shares		      U.S. $ Value  

 

  

Wayfair, Inc. – Class A(b)(c)

       31,980       $ 1,212,362   
      

 

 

  
         5,006,074   
      

 

 

  

Media – 3.4%

       

Cablevision Systems Corp. – Class A

       41,092         1,253,306   

Clear Channel Outdoor Holdings, Inc. – Class A(b)

       458         2,404   

Comcast Corp. – Class A

       24,188         1,472,082   

DISH Network Corp. – Class A(b)

       25,344         1,589,322   

Interpublic Group of Cos., Inc. (The)

       18,700         430,100   

JCDecaux SA

       25,905         960,470   

Liberty Global PLC – Class A(b)

       13,541         574,274   

Liberty Global PLC – Series C(a)(b)

       21,904         898,064   

Liberty Global PLC LiLAC – Class A(b)

       2,049         76,940   

Naspers Ltd. – Class N

       7,985         1,188,847   

Time Warner, Inc.

       30,142         2,109,337   

Walt Disney Co. (The)(a)

       14,891         1,689,682   

WPP PLC

       23,020         532,008   
      

 

 

  
         12,776,836   
      

 

 

  

Multiline Retail – 0.4%

       

Dollar Tree, Inc.(a)(b)

       18,548         1,399,632   
      

 

 

  

Specialty Retail – 2.9%

       

Advance Auto Parts, Inc.(a)

       3,396         552,631   

AutoNation, Inc.(b)

       18,275         1,168,138   

AutoZone, Inc.(a)(b)

       2,885         2,261,176   

Home Depot, Inc. (The)(a)

       26,718         3,577,006   

Industria de Diseno Textil SA

       16,307         585,688   

Lowe’s Cos., Inc.

       8,090         619,694   

MarineMax, Inc.(b)

       12,012         218,018   

Monro Muffler Brake, Inc.

       7,360         544,935   

O’Reilly Automotive, Inc.(b)

       3,898         1,028,565   

Office Depot, Inc.(b)

       45,945         302,778   

Vitamin Shoppe, Inc.(b)

       5,124         156,282   
      

 

 

  
         11,014,911   
      

 

 

  

Textiles, Apparel & Luxury Goods – 0.9%

       

Luxottica Group SpA

       5,391         360,163   

Moncler SpA

       25,592         389,491   

NIKE, Inc. – Class B(a)

       19,610         2,594,011   

Skechers U.S.A., Inc. – Class A(b)

       6,287         189,867   
      

 

 

  
         3,533,532   
      

 

 

  
         55,581,644   
      

 

 

  

Information Technology – 9.1%

       

Communications Equipment – 0.5%

       

ARRIS Group, Inc.(b)

       15,726         480,744   

Cisco Systems, Inc.

       28,960         789,160   

QUALCOMM, Inc.

       5,420         264,442   

Radware Ltd.(b)

       7,940         130,533   

Ruckus Wireless, Inc.(b)

       16,198         185,467   
      

 

 

  
         1,850,346   
      

 

 

  

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     19   

Consolidated Portfolio of Investments

 

Company           
    
Shares		      U.S. $ Value  

 

  

Electronic Equipment, Instruments &
Components – 1.0%

       

CDW Corp./DE

       2,204       $ 95,147   

Corning, Inc.

       66,030         1,236,742   

TE Connectivity Ltd.(a)

       33,921         2,275,760   
      

 

 

  
         3,607,649   
      

 

 

  

Internet Software & Services – 1.0%

       

Facebook, Inc. – Class A(a)(b)

       15,475         1,613,114   

Rackspace Hosting, Inc.(b)

       2,759         78,962   

Tencent Holdings Ltd.

       57,790         1,151,401   

Yahoo!, Inc.(b)

       30,290         1,024,105   
      

 

 

  
         3,867,582   
      

 

 

  

IT Services – 1.3%

       

Amdocs Ltd.

       18,612         1,052,881   

Computer Sciences Corp.(a)

       8,291         259,757   

CSRA, Inc.

       6,615         208,439   

Euronet Worldwide, Inc.(b)

       2,379         184,896   

MasterCard, Inc. – Class A

       10,845         1,061,942   

Visa, Inc. – Class A(a)

       13,457         1,063,238   

Western Union Co. (The) – Class W

       57,241         1,079,565   
      

 

 

  
         4,910,718   
      

 

 

  

Semiconductors & Semiconductor
Equipment – 2.5%

       

Altera Corp.

       19,728         1,041,638   

Analog Devices, Inc.

       7,350         452,980   

Atmel Corp.

       88,949         769,409   

Avago Technologies Ltd.

       18,336         2,391,931   

Broadcom Corp. – Class A

       28,254         1,543,516   

KLA-Tencor Corp.

       16,595         1,103,070   

NXP Semiconductors NV(b)

       2,172         202,995   

OmniVision Technologies, Inc.(b)

       11,743         342,896   

PMC-Sierra, Inc.(b)

       143,585         1,698,611   
      

 

 

  
         9,547,046   
      

 

 

  

Software – 1.9%

       

CDK Global, Inc.

       2,711         128,528   

Citrix Systems, Inc.(a)(b)

       7,665         587,676   

CommVault Systems, Inc.(b)

       4,948         202,769   

Intuit, Inc.

       2,463         246,793   

Microsoft Corp.(a)

       45,181         2,455,587   

Oracle Corp.

       40,840         1,591,535   

PTC, Inc.(b)

       10,177         366,779   

salesforce.com, Inc.(b)

       1,592         126,866   

Symantec Corp.(a)

       71,842         1,406,666   

Take-Two Interactive Software, Inc.(b)

       5,564         196,799   
      

 

 

  
         7,309,998   
      

 

 

  

Technology Hardware, Storage &
Peripherals – 0.9%

       

EMC Corp./MA

       36,289         919,563   

 

20   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Consolidated Portfolio of Investments

 

Company           
    
Shares		      U.S. $ Value  

 

  

Lexmark International, Inc. – Class A

       6,640       $ 228,018   

NCR Corp.(b)

       17,756         481,365   

Western Digital Corp.

       26,922         1,680,202   
      

 

 

  
         3,309,148   
      

 

 

  
         34,402,487   
      

 

 

  

Industrials – 6.8%

       

Aerospace & Defense – 2.2%

       

Airbus Group SE

       6,473         467,269   

Esterline Technologies Corp.(b)

       5,510         523,891   

Honeywell International, Inc.

       4,893         508,627   

Meggitt PLC

       81,550         475,581   

Northrop Grumman Corp.

       970         180,769   

Precision Castparts Corp.(a)

       8,866         2,052,834   

Raytheon Co.(a)

       14,167         1,757,133   

TransDigm Group, Inc.(a)(b)

       6,607         1,550,200   

United Technologies Corp.

       10,390         997,959   
      

 

 

  
         8,514,263   
      

 

 

  

Air Freight & Logistics – 0.8%

       

FedEx Corp.

       18,299         2,901,123   
      

 

 

  

Airlines – 0.4%

       

Delta Air Lines, Inc.

       21,225         986,113   

Wizz Air Holdings PLC(b)(d)

       13,948         370,577   
      

 

 

  
         1,356,690   
      

 

 

  

Construction & Engineering – 0.2%

       

AECOM(b)

       10,837         344,942   

Fluor Corp.

       6,336         307,929   
      

 

 

  
         652,871   
      

 

 

  

Electrical Equipment – 0.4%

       

Eaton Corp. PLC

       19,291         1,121,965   

SolarCity Corp.(b)(c)

       12,279         353,144   
      

 

 

  
         1,475,109   
      

 

 

  

Industrial Conglomerates – 0.8%

       

Danaher Corp.

       11,370         1,095,954   

General Electric Co.(a)

       56,110         1,679,934   

Jardine Matheson Holdings Ltd.

       2,400         119,746   

Jardine Strategic Holdings Ltd.

       4,540         122,316   
      

 

 

  
         3,017,950   
      

 

 

  

Machinery – 0.0%

       

Joy Global, Inc.

       5,120         78,592   

Kennametal, Inc.

       3,531         103,282   
      

 

 

  
         181,874   
      

 

 

  

Road & Rail – 1.1%

       

Avis Budget Group, Inc.(a)(b)

       18,179         679,713   

CSX Corp.

       4,440         126,229   

Hertz Global Holdings, Inc.(b)

       46,376         735,524   

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     21   

Consolidated Portfolio of Investments

 

Company           
    
Shares		      U.S. $ Value  

 

  

Norfolk Southern Corp.

       5,663       $ 538,325   

Old Dominion Freight Line, Inc.(a)(b)

       8,082         514,904   

Saia, Inc.(b)

       4,575         112,133   

Swift Transportation Co.(b)(c)

       14,643         233,849   

Union Pacific Corp.(a)

       15,653         1,314,069   
      

 

 

  
         4,254,746   
      

 

 

  

Trading Companies & Distributors – 0.8%

       

AerCap Holdings NV(b)

       22,704         1,031,670   

Avolon Holdings Ltd.(b)

       55,770         1,707,677   

MRC Global, Inc.(b)

       10,877         160,871   
      

 

 

  
         2,900,218   
      

 

 

  

Transportation Services – 0.1%

       

Europcar Groupe SA(b)(d)

       33,051         414,717   
      

 

 

  
         25,669,561   
      

 

 

  

Health Care – 6.6%

       

Biotechnology – 0.5%

       

Celgene Corp.(b)

       3,006         329,007   

Gilead Sciences, Inc.(a)

       8,063         854,355   

Incyte Corp.(b)

       2,812         321,243   

Vertex Pharmaceuticals, Inc.(b)

       1,127         145,789   
      

 

 

  
         1,650,394   
      

 

 

  

Health Care Equipment & Supplies – 1.0%

       

Becton Dickinson and Co.(a)

       12,687         1,906,222   

IDEXX Laboratories, Inc.(a)(b)

       21,911         1,551,737   

Medtronic PLC

       4,132         311,305   

TearLab Corp.(b)(c)

       26,155         38,971   
      

 

 

  
         3,808,235   
      

 

 

  

Health Care Providers & Services – 2.6%

       

Aetna, Inc.

       16,701         1,716,028   

Anthem, Inc.(a)

       11,667         1,521,143   

Brookdale Senior Living, Inc.(b)

       13,542         304,424   

HCA Holdings, Inc.(a)(b)

       5,567         378,890   

Health Net, Inc./CA(b)

       40,380         2,554,439   

Humana, Inc.

       10,975         1,851,044   

UnitedHealth Group, Inc.

       7,151         805,989   

Universal Health Services, Inc. – Class B(a)

       5,847         710,527   
      

 

 

  
         9,842,484   
      

 

 

  

Life Sciences Tools & Services – 0.4%

       

Thermo Fisher Scientific, Inc.

       11,253         1,557,415   
      

 

 

  

Pharmaceuticals – 2.1%

       

Allergan PLC(a)(b)

       14,547         4,566,158   

Bristol-Myers Squibb Co.(a)

       15,326         1,026,995   

Ipsen SA

       11,316         726,266   

Johnson & Johnson

       5,224         528,878   

Pfizer, Inc.(a)

       15,373         503,773   

 

22   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Consolidated Portfolio of Investments

 

Company           
    
Shares		      U.S. $ Value  

 

  

ZS Pharma, Inc.(b)

       7,745       $ 696,740   
      

 

 

  
         8,048,810   
      

 

 

  
         24,907,338   
      

 

 

  

Financials – 5.6%

       

Banks – 1.5%

       

Bank of America Corp.

       132,490         2,309,301   

Bank of the Ozarks, Inc.

       13,826         750,475   

CIT Group, Inc.

       9,660         414,994   

Citigroup, Inc.

       19,250         1,041,233   

JPMorgan Chase & Co.

       3,315         221,044   

Sberbank of Russia PJSC (Preference Shares)

       41,900         47,974   

Signature Bank/New York NY(b)

       4,608         728,755   

Western Alliance Bancorp(b)

       6,736         261,289   
      

 

 

  
         5,775,065   
      

 

 

  

Capital Markets – 0.8%

       

Ameriprise Financial, Inc.

       10,841         1,224,491   

Legg Mason, Inc.

       2,500         110,950   

LPL Financial Holdings, Inc.(c)

       9,670         444,626   

OM Asset Management PLC

       9,809         159,004   

SEI Investments Co.

       21,346         1,161,009   
      

 

 

  
         3,100,080   
      

 

 

  

Consumer Finance – 0.2%

       

Ally Financial, Inc.(b)

       20,147         402,134   

American Express Co.

       1,200         85,968   

Navient Corp.

       10,124         120,577   

Santander Consumer USA Holdings, Inc.(b)

       7,313         129,001   
      

 

 

  
         737,680   
      

 

 

  

Diversified Financial Services – 0.8%

       

Groupe Bruxelles Lambert SA

       5,210         428,152   

Intercontinental Exchange, Inc.(a)

       1,765         458,618   

Leucadia National Corp.

       26,590         470,111   

Moody’s Corp.

       16,010         1,650,951   
      

 

 

  
         3,007,832   
      

 

 

  

Insurance – 2.0%

       

Aflac, Inc.

       21,866         1,426,538   

Alleghany Corp.(b)

       607         309,181   

Ambac Financial Group, Inc.(b)

       3,768         63,604   

American International Group, Inc.

       15,860         1,008,379   

AmTrust Financial Services, Inc.(c)

       8,045         502,893   

Aon PLC

       13,190         1,249,621   

Assurant, Inc.

       7,637         653,116   

Chubb Corp. (The)

       10,440         1,362,733   

Willis Group Holdings PLC

       19,018         874,067   
      

 

 

  
         7,450,132   
      

 

 

  

Real Estate Management & Development – 0.3%

       

Realogy Holdings Corp.(b)

       21,702         896,510   
      

 

 

  
         20,967,299   
      

 

 

  

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     23   

Consolidated Portfolio of Investments

 

Company           
    
Shares		      U.S. $ Value  

 

  

Materials – 5.3%

       

Chemicals – 3.7%

       

Airgas, Inc.

       12,309       $ 1,701,104   

Albemarle Corp.

       1         54   

Celanese Corp. – Series A

       16,545         1,170,559   

CF Industries Holdings, Inc.(a)

       36,204         1,670,453   

Cytec Industries, Inc.

       32,470         2,431,029   

LyondellBasell Industries NV – Class A

       8,597         823,764   

PPG Industries, Inc.

       3,731         394,516   

Sherwin-Williams Co. (The)(a)

       10,967         3,027,659   

WR Grace & Co.(a)(b)

       28,454         2,794,752   
      

 

 

  
         14,013,890   
      

 

 

  

Construction Materials – 0.8%

       

Buzzi Unicem SpA(c)

       40,389         724,935   

Eagle Materials, Inc.

       7,419         512,505   

Martin Marietta Materials, Inc.

       12,257         1,929,252   
      

 

 

  
         3,166,692   
      

 

 

  

Containers & Packaging – 0.3%

       

Berry Plastics Group, Inc.(b)

       9,898         359,891   

Owens-Illinois, Inc.(b)

       35,071         676,520   
      

 

 

  
         1,036,411   
      

 

 

  

Metals & Mining – 0.4%

       

Alcoa, Inc.

       82,290         770,235   

Barrick Gold Corp.

       18,519         135,930   

Freeport-McMoRan, Inc.

       7,480         61,186   

Impala Platinum Holdings Ltd.(b)

       56,327         123,346   

Newmont Mining Corp.

       17,313         318,732   
      

 

 

  
         1,409,429   
      

 

 

  

Paper & Forest Products – 0.1%

       

Canfor Corp.(b)

       35,749         557,603   
      

 

 

  
         20,184,025   
      

 

 

  

Consumer Staples – 4.6%

       

Beverages – 1.3%

       

Brown-Forman Corp. – Class B(a)

       9,095         932,601   

Carlsberg A/S – Class B

       4,183         354,724   

Coca-Cola Co. (The)

       19,889         847,669   

Constellation Brands, Inc. – Class A

       10,772         1,510,881   

Davide Campari-Milano SpA

       45,883         402,800   

Heineken NV

       3,881         344,094   

Monster Beverage Corp.(b)

       2,771         428,424   

PepsiCo, Inc.

       3,530         353,565   
      

 

 

  
         5,174,758   
      

 

 

  

Consumer Products – 0.8%

       

Alphabet, Inc. – Class A(a)(b)

       3,445         2,628,018   

Alphabet, Inc. – Class C(b)

       413         306,694   
      

 

 

  
         2,934,712   
      

 

 

  

 

24   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Consolidated Portfolio of Investments

 

Company           
    
Shares		      U.S. $ Value  

 

  

Food & Staples Retailing – 1.0%

  

Costco Wholesale Corp.(a)

       14,501       $ 2,340,751   

CVS Health Corp.

       10,232         962,729   

Walgreens Boots Alliance, Inc.

       2,790         234,444   

Whole Foods Market, Inc.

       11,343         330,648   
      

 

 

  
         3,868,572   
      

 

 

  

Food Products – 1.4%

       

Chocoladefabriken Lindt & Spruengli AG (REG)

       28         2,022,293   

JM Smucker Co. (The)

       10,941         1,325,940   

Kraft Heinz Co. (The)

       14,078         1,037,408   

Mondelez International, Inc. – Class A

       18,247         796,664   

Orkla ASA

       19,580         158,814   
      

 

 

  
         5,341,119   
      

 

 

  

Household Products – 0.1%

       

Henkel AG & Co. KGaA

       2,490         238,605   
      

 

 

  
         17,557,766   
      

 

 

  

Energy – 1.7%

       

Energy Equipment & Services – 0.3%

       

Baker Hughes, Inc.

       4,502         243,423   

Halliburton Co.

       6,040         240,694   

National Oilwell Varco, Inc.

       16,242         606,477   
      

 

 

  
         1,090,594   
      

 

 

  

Oil, Gas & Consumable Fuels – 1.4%

       

Canadian Oil Sands Ltd.(c)

       67,294         431,343   

EOG Resources, Inc.

       12,072         1,007,167   

Marathon Petroleum Corp.

       12,414         725,102   

Occidental Petroleum Corp.

       19,109         1,444,449   

Phillips 66

       4,232         387,355   

Suncor Energy, Inc. (New York)(a)

       32,426         894,957   

Surgutneftegas OAO (Preference Shares)

       79,000         50,552   

Williams Cos., Inc. (The)

       12,814         468,480   
      

 

 

  
         5,409,405   
      

 

 

  
         6,499,999   
      

 

 

  

Utilities – 0.7%

       

Electric Utilities – 0.3%

       

NextEra Energy, Inc.

       9,998         998,400   
      

 

 

  

Independent Power and Renewable Electricity Producers – 0.0%

       

Vivint Solar, Inc.(b)

       20,455         165,481   
      

 

 

  

Multi-Utilities – 0.4%

       

Sempra Energy(a)

       13,445         1,334,148   
      

 

 

  
         2,498,029   
      

 

 

  

Telecommunication Services – 0.4%

       

Diversified Telecommunication Services – 0.2%

       

Cellnex Telecom SAU(b)(d)

       15,688         284,411   

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     25   

Consolidated Portfolio of Investments

 

Company           
    
Shares		      U.S. $ Value  

 

  

Sunrise Communications Group AG(b)(d)

       7,294       $ 432,467   
      

 

 

  
         716,878   
      

 

 

  

Wireless Telecommunication Services – 0.2%

       

T-Mobile US, Inc.(b)

       25,618         909,439   
      

 

 

  
         1,626,317   
      

 

 

  

Total Common Stocks
(cost $200,310,898)

          209,894,465   
      

 

 

  
        Principal
Amount
(000)		         

CORPORATE BONDS – 11.7%

       

Corporate – High Yield – 11.6%

       

Aerospace & Defense – 0.3%

       

Bombardier, Inc.
5.75%, 3/15/22(d)

   U.S.$     100         75,250   

7.50%, 3/15/25(d)

       100         74,500   

7.75%, 3/15/20(d)

       101         89,322   

DynCorp International, Inc.
10.375%, 7/01/17

       1,100         869,000   
      

 

 

  
         1,108,072   
      

 

 

  

Automobiles – 0.1%

       

Navistar International Corp.
8.25%, 11/01/21(c)

       300         213,750   
      

 

 

  

Banks – 0.8%

       

Bank of Ireland
10.00%, 2/12/20

   EUR     635         842,040   

Barclays PLC
8.00%, 12/15/20(e)

       370         427,866   

Lloyds Banking Group PLC
7.875%, 6/27/29(d)(e)

   GBP     200         322,597   

Novo Banco SA
4.00%, 1/21/19(d)

   EUR     1,400         1,349,003   
      

 

 

  
         2,941,506   
      

 

 

  

Capital Markets – 0.2%

       

Lehman Brothers Holdings, Inc.
1.00%, 12/30/16(b)

   U.S.$     1,995         149,625   

11.25%, 5/08/18(b)

   GBP     4,150         531,276   
      

 

 

  
         680,901   
      

 

 

  

Chemicals – 0.4%

       

Hexion, Inc.
8.875%, 2/01/18

   U.S.$     330         216,975   

10.00%, 4/15/20(c)

       276         221,490   

Perstorp Holding AB
8.75%, 5/15/17(d)

       400         402,000   

9.00%, 5/15/17(d)

   EUR     200         214,733   

 

26   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Consolidated Portfolio of Investments

 

        Principal
Amount
(000)		      U.S. $ Value  

 

  

PSPC Escrow II Corp.
10.375%, 5/01/21(d)

   U.S.$     300       $ 306,000   
      

 

 

  
         1,361,198   
      

 

 

  

Consumer Cyclical Services – 0.0%

       

APX Group, Inc.
6.375%, 12/01/19

       85         81,175   
      

 

 

  

Consumer Product – 0.2%

       

Kronos Acquisition Holdings, Inc.
9.00%, 8/15/23(d)

       630         590,625   
      

 

 

  

Financial Other – 0.0%

       

Walter Investment Management Corp.
7.875%, 12/15/21

       100         79,000   
      

 

 

  

Food & Beverage – 0.3%

       

Kraft Heinz Foods Co.
4.875%, 2/15/25(d)

       810         863,181   

Post Holdings, Inc.
7.75%, 3/15/24(d)

       440         456,500   
      

 

 

  
         1,319,681   
      

 

 

  

Health Care – 0.7%

       

ConvaTec Finance International SA
8.25% (8.25% Cash or 9.00% PIK),
1/15/19(d)(f)

       675         659,394   

inVentiv Health, Inc.
10.00%, 8/15/18

       949         915,785   

10.00% (10.00% Cash or 12.00% PIK),

8/15/18(d)(f)

       1,269         1,205,142   
      

 

 

  
         2,780,321   
      

 

 

  

Health Care Providers & Services – 0.1%

       

LifePoint Health, Inc.
5.875%, 12/01/23(g)

       425         427,656   
      

 

 

  

Home Construction – 0.0%

       

Shea Homes LP/Shea Homes Funding Corp.
5.875%, 4/01/23(d)

       180         185,850   
      

 

 

  

Hotels Restaurants & Leisure – 1.6%

       

Caesars Entertainment Operating Co., Inc.
8.50%, 2/15/20(h)

       20         15,900   

9.00%, 2/15/20(h)

       890         700,875   

10.00%, 12/15/18(h)

       1,000         324,914   

11.25%, 6/01/17(h)

       2,444         1,881,880   

Caesars Entertainment Resort Properties LLC/Caesars Entertainment Resort Prope
8.00%, 10/01/20

       650         630,500   

11.00%, 10/01/21

       280         256,900   

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     27   

Consolidated Portfolio of Investments

 

        Principal
Amount
(000)		      U.S. $ Value  

 

  

CPUK Finance Ltd.
7.00%, 8/28/20(d)

   GBP     510       $ 791,469   

LTF Merger Sub, Inc.
8.50%, 6/15/23(d)

   U.S.$     250         241,250   

Punch Taverns Finance PLC
7.274%, 10/15/26(d)

   GBP     205         336,538   

7.32%, 10/15/25(d)

       327         537,735   

Scientific Games International, Inc.
7.00%, 1/01/22(d)

   U.S.$     250         241,250   
      

 

 

  
         5,959,211   
      

 

 

  

Independent – 0.3%

       

California Resources Corp.
5.00%, 1/15/20(c)

       18         11,475   

5.50%, 9/15/21(c)

       76         45,600   

6.00%, 11/15/24(c)

       18         10,800   

CrownRock LP / CrownRock Finance, Inc.
7.125%, 4/15/21(d)

       570         579,975   

7.75%, 2/15/23(d)

       100         101,750   

Talisman Energy, Inc.
5.50%, 5/15/42

       395         315,234   
      

 

 

  
         1,064,834   
      

 

 

  

Insurance – 0.4%

       

Ambac Assurance Corp.
5.10%, 6/07/20(d)

       1,386         1,441,607   
      

 

 

  

Media – 1.5%

       

Cequel Communications Holdings I LLC/Cequel Capital Corp.
5.125%, 12/15/21(d)

       70         64,663   

iHeartCommunications, Inc.
9.00%, 3/01/21-9/15/22

       1,350         922,728   

10.625%, 3/15/23

       242         169,400   

11.25%, 3/01/21

       730         509,175   

Intelsat Jackson Holdings SA
6.625%, 12/15/22

       1,000         605,000   

Intelsat Luxembourg SA
6.75%, 6/01/18(c)

       775         507,625   

7.75%, 6/01/21

       575         224,250   

Neptune Finco Corp.
10.875%, 10/15/25(d)

       750         789,375   

Postmedia Network, Inc.
12.50%, 7/15/18

       727         690,650   

Radio One, Inc.
7.375%, 4/22/15(d)

       400         370,000   

7.375%, 4/15/22(d)

       750         693,750   
      

 

 

  
         5,546,616   
      

 

 

  

 

28   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Consolidated Portfolio of Investments

 

        Principal
Amount
(000)		      U.S. $ Value  

 

  

Metals & Mining – 0.9%

       

Alpha Natural Resources, Inc.
6.25%, 6/01/21(h)

   U.S.$     1,100       $ 22,000   

American Gilsonite Co.
11.50%, 9/01/17(d)

       1,440         1,015,200   

CONSOL Energy, Inc.
5.875%, 4/15/22

       200         131,000   

8.00%, 4/01/23(c)(d)

       100         70,500   

Consolidated Minerals Ltd.
8.00%, 5/15/20(d)

       1,000         645,000   

First Quantum Minerals Ltd.
7.25%, 5/15/22(d)

       1,075         663,812   

HudBay Minerals, Inc.
9.50%, 10/01/20

       540         425,250   

Thompson Creek Metals Co., Inc.
7.375%, 6/01/18

       515         123,600   

12.50%, 5/01/19

       50         12,375   

Westmoreland Coal Co.
8.75%, 1/01/22(d)

       277         182,128   

Wise Metals Group LLC / Wise Alloys Finance Corp.
8.75%, 12/15/18(d)

       400         316,000   
      

 

 

  
         3,606,865   
      

 

 

  

Midstream – 0.4%

       

DCP Midstream LLC
9.75%, 3/15/19(d)

       424         452,401   

NGPL PipeCo LLC
7.119%, 12/15/17(d)

       200         176,500   

9.625%, 6/01/19(d)

       1,149         999,630   
      

 

 

  
         1,628,531   
      

 

 

  

Pharmaceuticals – 0.1%

       

Concordia Healthcare Corp.
9.50%, 10/21/22(d)

       220         213,950   

Valeant Pharmaceuticals International, Inc.
7.50%, 7/15/21(d)

       150         141,762   
      

 

 

  
         355,712   
      

 

 

  

Real Estate Investment Trusts
(REITS) – 0.3%

       

Annington Finance No 5 PLC
13.00%, 1/15/23(d)(f)

   GBP     600         1,061,800   
      

 

 

  

Retailers – 0.4%

       

Boardriders SA
8.875%, 12/15/17(d)

   EUR     480         481,787   

Claire’s Stores, Inc.
9.00%, 3/15/19(d)

   U.S.$     180         135,900   

Guitar Center, Inc.
6.50%, 4/15/19(d)

       560         509,600   

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     29   

Consolidated Portfolio of Investments

 

        Principal
Amount
(000)		      U.S. $ Value  

 

  

L Brands, Inc.
6.875%, 11/01/35(d)

   U.S.$     250       $ 256,250   
      

 

 

  
         1,383,537   
      

 

 

  

Supermarkets – 0.3%

       

New Albertsons, Inc.
6.625%, 6/01/28

       45         38,700   

7.15%, 7/23/27(i)

       30         24,825   

7.45%, 8/01/29

       420         395,850   

8.00%, 5/01/31

       860         834,200   
      

 

 

  
         1,293,575   
      

 

 

  

Technology – 0.7%

       

Aegis Merger Sub, Inc.
10.25%, 2/15/23(d)

       1,095         1,089,525   

Equinix, Inc.
5.875%, 1/15/26(g)

       50         50,750   

Interface Master Holdings, Inc.
12.50% (12.50% Cash or 14.50% PIK),
8/01/18(d)(f)

       657         637,290   

Riverbed Technology, Inc.
8.875%, 3/01/23(d)

       45         42,806   

Syniverse Holdings, Inc.
9.125%, 1/15/19

       281         174,220   

TES Finance PLC
6.75%, 7/15/20(d)

   GBP     500         719,163   
      

 

 

  
         2,713,754   
      

 

 

  

Transportation Services – 0.3%

       

Navios Maritime Acquisition Corp./Navios Acquisition Finance US, Inc.
8.125%, 11/15/21(d)

   U.S.$     1,375         1,285,625   
      

 

 

  

Wireless Telecommunication
Services – 1.2%

       

Altice Luxembourg SA
7.625%, 2/15/25(d)

       2,055         1,788,364   

Numericable-SFR SAS
6.00%, 5/15/22(d)

       565         557,937   

6.25%, 5/15/24(d)

       1,305         1,285,425   

Sprint Capital Corp.
6.90%, 5/01/19

       400         356,000   

Sprint Communications, Inc.
8.375%, 8/15/17

       580         578,550   
      

 

 

  
         4,566,276   
      

 

 

  

Wirelines – 0.1%

       

EarthLink Holdings Corp.
8.875%, 5/15/19

       313         320,825   
      

 

 

  
         43,998,503   
      

 

 

  

 

30   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Consolidated Portfolio of Investments

 

        Principal
Amount
(000)		      U.S. $ Value  

 

  

Corporate – Investment Grade – 0.1%

       

Hotels Restaurants & Leisure – 0.1%

       

Yum! Brands, Inc.
6.875%, 11/15/37

   U.S.$     210       $ 189,201   
      

 

 

  

Metals & Mining – 0.0%

       

Glencore Finance Canada Ltd.
4.25%, 10/25/22(d)

       100         79,750   

6.00%, 11/15/41(d)

       100         73,000   
      

 

 

  
         152,750   
      

 

 

  
         341,951   
      

 

 

  

Total Corporate Bonds
(cost $49,375,903)

          44,340,454   
      

 

 

  
      

GOVERNMENT ISSUES – 1.5%

  

Government – 1.5%

  

U.S. Treasury Bill
Zero Coupon, 12/10/15(a)

       1,000         999,988   

U.S. Treasury Notes
1.375%, 3/31/20

       290         287,474   

2.00%, 1/31/16(a)

       2,000         2,005,468   

2.125%, 2/29/16(a)

       2,000         2,009,062   

2.25%, 11/15/25

       290         290,827   
      

 

 

  

Total Government Issues
(cost $5,597,288)

          5,592,819   
      

 

 

  
      

MUNICIPALS – 1.2%

       

Municipal – 1.2%

       

Local Authorities – 1.2%

       

Bethel Local School District
Series B
4.00%, 11/01/51

       95         95,694   

California Statewide Communities Development Authority
3.00%, 8/15/29

       20         19,668   

3.25%, 8/15/32

       45         43,919   

City of Birmingham AL
3.50%, 3/01/35

       105         104,559   

City of Industry CA
5.125%, 1/01/51

       65         65,171   

City of Pasadena CA
3.50%, 2/01/32

       45         45,492   

City of Pompano Beach
3.50%, 9/01/35

       65         58,205   

Commonwealth of Puerto Rico
5.00%, 7/01/33-7/01/35(i)

       205         128,125   

5.125%, 7/01/31-7/01/37(i)

       120         75,393   

5.25%, 7/01/34(i)

       5         3,175   

5.75%, 7/01/41(i)

       10         6,375   

Series 2012A
5.00%, 7/01/41(i)

       20         12,500   

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     31   

Consolidated Portfolio of Investments

 

        Principal
Amount
(000)		      U.S. $ Value  

 

  

Concord University
4.00%, 6/01/35

   U.S.$     30       $ 30,463   

County of Mecklenburg
3.00%, 4/01/32

       25         25,141   

Cumberland County Municipal Authority
4.00%, 1/01/33

       255         249,734   

Halifax Hospital Medical Center
4.00%, 6/01/38

       5         5,000   

Hartford County Metropolitan District
3.00%, 3/01/31

       45         44,999   

Illinois Finance Authority
4.125%, 5/01/45

       185         185,496   

Indiana Finance Authority
4.00%, 3/01/37

       100         101,620   

Liberty Center Local School District
4.125%, 11/01/51

       115         116,594   

Michigan Strategic Fund
4.00%, 10/15/47

       40         40,553   

Missouri Development Finance Board
4.00%, 3/01/40-3/01/45

       370         365,161   

New Jersey Turnpike Authority
3.375%, 1/01/31

       85         84,056   

Northwood Local School District
4.00%, 7/15/51

       105         106,338   

Ohio University
5.59%, 12/01/14

       530         570,057   

Pennsylvania Housing Finance Agency
4.75%, 10/01/50

       55         55,992   

Public Finance Authority
5.00%, 7/01/50

       95         96,223   

Puerto Rico Highways & Transportation Authority
5.55%, 7/01/18

       30         25,954   

Puerto Rico Public Buildings Authority
5.65%, 7/01/28(i)

       515         310,288   

5.70%, 7/01/28(i)

       550         331,375   

Puerto Rico Sales Tax Financing Corp
5.25%, 8/01/40(i)

       150         92,640   

Puerto Rico Sales Tax Financing Corp.
6.00%, 8/01/38(i)

       25         14,188   

6.05%, 8/01/36-8/01/39(i)

       760         431,299   

6.13%, 8/01/38(i)

       5         2,838   

Robinson Township Municipal Authority
3.60%, 5/15/37

       195         193,555   

Town of Shalimar FL
4.375%, 10/01/35

       10         9,967   

4.625%, 10/01/45

       45         45,050   

University of Nebraska
3.60%, 5/15/39

       155         151,866   

 

32   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Consolidated Portfolio of Investments

 

Company       Principal
Amount
(000)		      U.S. $ Value  

 

  

Virginia Polytechnic Institute & State University
3.00%, 6/01/29

   U.S.$     30       $ 29,802   
      

 

 

  

Total Municipals
(cost $4,444,698)

          4,374,525   
      

 

 

  
        Shares         

REAL ESTATE INVESTMENT TRUST UNITS – 1.1%

       

Financials – 1.1%

       

Real Estate Investment Trusts
(REITs) – 1.1%

       

BioMed Realty Trust, Inc.

       72,797         1,708,546   

Campus Crest Communities, Inc.

       186,975         1,252,732   

Campus Crest Communities, Inc.(e)

       7,275         192,787   

NorthStar Realty Europe Corp.(b)

       8,050         92,012   

NorthStar Realty Finance Corp.

       24,151         435,684   

Public Storage

       1,536         368,732   
      

 

 

  

Total Real Estate Investment Trust Units
(cost $4,612,945)

          4,050,493   
      

 

 

  
      

DEPOSITORY RECEIPTS – 0.7%

       

Information Technology – 0.3%

       

Internet Software & Services – 0.3%

       

Youku Tudou, Inc. (ADR)(b)

       38,171         1,025,655   
      

 

 

  

Consumer Staples – 0.2%

       

Beverages – 0.1%

       

Anheuser-Busch InBev SA/NV (Sponsored ADR)

       2,090         268,481   
      

 

 

  

Food & Staples Retailing – 0.0%

       

Lenta Ltd. (GDR)(b)(d)

       16,290         123,641   
      

 

 

  

Food Products – 0.1%

       

Unilever NV

       8,900         390,472   
      

 

 

  
         782,594   
      

 

 

  

Health Care – 0.1%

       

Pharmaceuticals – 0.1%

       

GlaxoSmithKline PLC (Sponsored ADR)

       8,455         342,512   
      

 

 

  

Energy – 0.1%

       

Oil, Gas & Consumable Fuels – 0.1%

       

Gazprom PAO (Sponsored ADR)

       25,300         104,249   

LUKOIL PJSC (Sponsored ADR)

       2,800         107,184   

Rosneft OAO (GDR)

       11,800         47,436   
      

 

 

  
         258,869   
      

 

 

  

Financials – 0.0%

       

Banks – 0.0%

       

ICICI Bank Ltd. (Sponsored ADR)

       8,325         69,181   

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     33   

Consolidated Portfolio of Investments

 

Company           
    
Shares		      U.S. $ Value  

 

  

Sberbank of Russia PJSC (Sponsored ADR)

       9,800       $ 65,758   
      

 

 

  
         134,939   
      

 

 

  

Telecommunication Services – 0.0%

       

Telecommunication Services – 0.0%

       

China Mobile Ltd. (Sponsored ADR)

       2,780         159,767   
      

 

 

  

Materials – 0.0%

       

Metals & Mining – 0.0%

       

MMC Norilsk Nickel PJSC (ADR)

       8,710         117,149   
      

 

 

  

Total Depository Receipts
(cost $2,947,501)

          2,821,485   
      

 

 

  
        Principal
Amount
(000)		         

CONVERTIBLE BONDS – 0.7%

       

Convertible – 0.7%

       

CalAtlantic Group, Inc.
0.25%, 6/01/19(j)

   U.S.$     750         689,062   

Empire State Realty OP LP
2.625%, 8/15/19(d)(j)

       400         423,250   

Navistar International Corp.
4.50%, 10/15/18(j)

       45         32,850   

4.75%, 4/15/19(j)

       66         47,891   

SolarCity Corp.
1.625%, 11/01/19(a)(j)

       1,545         1,039,012   

SunEdison, Inc.
0.25%, 1/15/20(d)(j)

       90         27,338   

2.00%, 10/01/18(j)

       85         35,913   

2.375%, 4/15/22(a)(d)(j)

       325         100,141   

2.625%, 6/01/23(c)(d)(j)

       275         78,375   

3.375%, 6/01/25(a)(d)(j)

       360         103,050   

Walter Investment Management Corp.
4.50%, 11/01/19(j)

       66         45,004   
      

 

 

  

Total Convertible Bonds
(cost $3,502,670)

          2,621,886   
      

 

 

  
        Shares         

PREFERRED STOCKS – 0.3%

       

Health Care – 0.3%

       

Pharmaceuticals – 0.3%

       

Allergan PLC
5.50%(j)

       900         942,588   
  

 

 

  

Information Technology – 0.0%

       

Semiconductors & Semiconductor Equipment – 0.0%

       

SunEdison, Inc.
6.75%(j)

       379         89,270   
  

 

 

  

 

34   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Consolidated Portfolio of Investments

 

Company           
    
Shares		      U.S. $ Value  

 

  

Financials – 0.0%

       

Thrifts & Mortgage Finance – 0.0%

       

Federal Home Loan Mortgage Corp.
5.57%

       689       $ 2,157   

Federal Home Loan Mortgage Corp.
5.90%

       1,178         3,805   

Federal Home Loan Mortgage Corp.
Series Z
8.375%(c)

       1,775         7,703   

Federal National Mortgage Association
4.50%

       1,339         4,740   

Federal National Mortgage Association
Series S
8.25%

       2,175         9,461   
      

 

 

  
         27,866   
      

 

 

  

Total Preferred Stocks
(cost $1,319,946)

          1,059,724   
      

 

 

  
      

EQUITY LINKED NOTES – 0.2%

       

Financials – 0.2%

       

Banks – 0.2%

       

National Commercial Bank, HSBC Bank PLC,
expiring 11/20/17(b)
(cost $990,255)

       56,253         801,858   
      

 

 

  
        Contracts         

OPTIONS PURCHASED – PUTS – 0.1%

       

Alibaba Group Holding Ltd.
Expiration: Dec 2015,
Exercise Price: $ 77.50(b)(k)

       27         1,652   

Alibaba Group Holding Ltd.
Expiration: Jan 2016,
Exercise Price: $ 80.00(b)(k)

       25         6,678   

athenahealth, Inc.
Expiration: Dec 2015,
Exercise Price: $ 160.00(b)(k)

       11         4,448   

athenahealth, Inc.
Expiration: Jan 2016,
Exercise Price: $ 160.00(b)(k)

       6         4,218   

BofI Holding, Inc.
Expiration: Dec 2015,
Exercise Price: $ 20.00(b)(k)

       74         11,988   

Cablevision Systems Corp.
Expiration: Dec 2015,
Exercise Price: $ 25.00(b)(k)

       40         252   

Carrizo Oil & Gas, Inc.
Expiration: Dec 2015,
Exercise Price: $ 35.00(b)(k)

       64         2,880   

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     35   

Consolidated Portfolio of Investments

 

Company           
    
Contracts		      U.S. $ Value  

 

  

Cheniere Energy, Inc.
Expiration: Dec 2015,
Exercise Price: $ 47.50(b)(k)

       60       $ 12,612   

Cheniere Energy, Inc.
Expiration: Dec 2015,
Exercise Price: $ 50.00(b)(k)

       24         8,467   

Cheniere Energy, Inc.
Expiration: Jan 2016,
Exercise Price: $ 47.00(b)(k)

       34         10,703   

Continental Resources, Inc./OK
Expiration: Dec 2015,
Exercise Price: $ 32.00(b)(k)

       139         6,603   

Credit Acceptance Corp.
Expiration: Dec 2015,
Exercise Price: $ 160.00(b)(k)

       20         2,388   

Credit Acceptance Corp.
Expiration: Jan 2016,
Exercise Price: $ 200.00(b)(k)

       2         3,147   

DeVry, Inc.
Expiration: Dec 2015,
Exercise Price: $ 22.50(b)(k)

       74         2,412   

Five Below, Inc.
Expiration: Dec 2015,
Exercise Price: $ 28.00(b)(k)

       71         11,701   

Franklin Resources, Inc.
Expiration: Dec 2015,
Exercise Price: $ 40.00(b)(k)

       68         1,476   

GlenCore PLC
Expiration: Dec 2015,
Exercise Price: GBP 0.90(b)(l)

       129,007         8,160   

Gogo, Inc.
Expiration: Dec 2015,
Exercise Price: $ 15.00(b)(k)

       46         800   

Gogo, Inc.
Expiration: Dec 2015,
Exercise Price: $ 16.00(b)(k)

       99         3,297   

Gogo, Inc.
Expiration: Dec 2015,
Exercise Price: $ 18.00(b)(k)

       33         3,386   

GrubHub, Inc.
Expiration: Dec 2015,
Exercise Price: $ 22.50(b)(k)

       66         1,115   

Hewlett-Packard Co.
Expiration: Jan 2016,
Exercise Price: $ 13.00(b)(k)

       110         9,097   

Horizon Pharma PLC
Expiration: Dec 2015,
Exercise Price: $ 18.00(b)(k)

       32         1,526   

 

36   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Consolidated Portfolio of Investments

 

Company           
    
Contracts		      U.S. $ Value  

 

  

Horizon Pharma PLC
Expiration: Dec 2015,
Exercise Price: $ 21.00(b)(k)

       46       $ 6,012   

Keurig Green Mountain, Inc.
Expiration: Dec 2015,
Exercise Price: $ 50.00(b)(k)

       37         4,843   

Keurig Green Mountain, Inc.
Expiration: Jan 2016,
Exercise Price: $ 50.00(b)(k)

       39         11,318   

Keurig Green Mountain, Inc.
Expiration: Jan 2016,
Exercise Price: $ 52.50(b)(k)

       24         9,610   

Lenovo Group Ltd.
Expiration: Jan 2016,
Exercise Price: HKD 8.50(b)(l)

       117,300         9,595   

Mallinckrodt PLC
Expiration: Dec 2015,
Exercise Price: $ 55.00(b)(k)

       15         836   

Mallinckrodt PLC
Expiration: Dec 2015,
Exercise Price: $ 65.00(b)(k)

       18         4,559   

Mobileye NV
Expiration: Jan 2016,
Exercise Price: $ 44.00(b)(k)

       41         12,616   

Oasis Petroleum, Inc.
Expiration: Dec 2015,
Exercise Price: $ 11.00(b)(k)

       149         9,268   

Outerwall, Inc.
Expiration: Dec 2015,
Exercise Price: $ 65.00(b)(k)

       14         5,540   

Range Resources Corp.
Expiration: Dec 2015,
Exercise Price: $ 30.00(b)(k)

       23         5,702   

Range Resources Corp.
Expiration: Jan 2016,
Exercise Price: $ 27.50(b)(k)

       66         14,487   

Restoration Hardware Holdings, Inc.
Expiration: Jan 2016,
Exercise Price: $ 90.00(b)(k)

       20         10,889   

Royal Dutch Shell PLC
Expiration: Dec 2015,
Exercise Price: $ 50.00(b)(k)

       56         7,487   

SolarCity Corp.
Expiration: Jan 2016,
Exercise Price: $ 24.00(b)(k)

       66         8,851   

SolarCity Corp.
Expiration: Jan 2016,
Exercise Price: $ 26.00(b)(k)

       87         16,887   

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     37   

Consolidated Portfolio of Investments

 

Company           
    
Contracts		      U.S. $ Value  

 

  

SolarCity Corp.
Expiration: Jan 2016,
Exercise Price: $ 28.00(b)(k)

       34       $ 9,316   

SolarCity Corp.
Expiration: Jan 2016,
Exercise Price: $ 30.00(b)(k)

       26         9,803   

Sotheby’s
Expiration: Dec 2015,
Exercise Price: $ 29.00(b)(k)

       56         7,034   

Southwestern Energy Co.
Expiration: Dec 2015,
Exercise Price: $ 10.00(b)(k)

       99         13,088   

Tesla Motors, Inc.
Expiration: Dec 2015,
Exercise Price: $ 210.00(b)(k)

       13         2,301   

Tesla Motors, Inc.
Expiration: Dec 2015,
Exercise Price: $ 230.00(b)(k)

       9         6,806   

Tesla Motors, Inc.
Expiration: Jan 2016,
Exercise Price: $ 225.00(b)(k)

       8         8,475   

Valeant Pharmaceuticals International, Inc.
Expiration: Dec 2015,
Exercise Price: $ 80.00(b)(k)

       21         4,465   

Valeant Pharmaceuticals International, Inc.
Expiration: Dec 2015,
Exercise Price: $ 85.00(b)(k)

       17         6,178   

Valeant Pharmaceuticals International, Inc.
Expiration: Dec 2015,
Exercise Price: $ 90.00(b)(k)

       21         12,163   

Vipshop Holdings Ltd.
Expiration: Dec 2015,
Exercise Price: $ 13.00(b)(k)

       132         1,214   

Whiting Petroleum Corp.
Expiration: Dec 2015,
Exercise Price: $ 16.00(b)(k)

       68         6,848   

Wynn Resorts Ltd.
Expiration: Dec 2015,
Exercise Price: $ 60.00(b)(k)

       24         4,102   

Wynn Resorts Ltd.
Expiration: Dec 2015,
Exercise Price: $ 65.00(b)(k)

       35         14,591   

Zillow Group, Inc.
Expiration: Dec 2015,
Exercise Price: $ 22.50(b)(k)

       39         1,065   

Zillow Group, Inc.
Expiration: Dec 2015,
Exercise Price: $ 24.00(b)(k)

       27         1,871   

 

38   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Consolidated Portfolio of Investments

 

Company           
    
Contracts		      U.S. $ Value  

 

  

Zillow Group, Inc.
Expiration: Dec 2015,
Exercise Price: $ 25.00(b)(k)

       150       $ 17,429   
      

 

 

  

Total Options Purchased – Puts
(premiums paid $662,610)

          384,255   
      

 

 

  
    Principal
Amount
(000)		         

COLLATERALIZED MORTGAGE OBLIGATIONS – 0.1%

       

Securitized – 0.1%

       

Thrifts & Mortgage Finance – 0.1%

       

Sunset Mortgage Loan Co. LLC
Series 2014-NPL1, Class A
3.228%, 8/16/44(d)

   U.S.$     227         227,039   

Series 2015-NPL1, Class A
4.459%, 9/16/45(d)

       105         104,853   
      

 

 

  

Total Collateralized Mortgage Obligations
(cost $332,618)

          331,892   
      

 

 

  
      

BANK LOANS – 0.1%

       

Consumer Discretionary – 0.1%

       

Retailers – 0.1%

       

Toys R Us Delaware, Inc.
1.00%, 4/24/20
(cost $294,570)

       329         250,636   
      

 

 

  
    Shares         

WARRANTS – 0.0%

       

Financials – 0.0%

       

Banks – 0.0%

       

JPMorgan Chase & Co.,
expiring 10/28/18(b)
(cost $92,333)

       5,490         135,329   
      

 

 

  
      

COMMON STOCK UNITS – 0.0%

       

Financials – 0.0%

       

Real Estate Management & Development – 0.0%

       

Rescap Liquidating Trust
(cost $156,270)

       15,081         132,713   
      

 

 

  
        Contracts         

OPTIONS PURCHASED – CALLS – 0.0%

       

Altera Corp.
Expiration: Mar 2016,
Exercise Price: $ 50.00(b)(k)

       23         8,625   

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     39   

Consolidated Portfolio of Investments

 

Company           
    
Contracts		     U.S. $ Value  

 

  

HCA Holdings, Inc.
Expiration: Dec 2015,
Exercise Price: $ 90.00(b)(k)

       88      $ 660   

HCA Holdings, Inc.
Expiration: Dec 2015,
Exercise Price: $ 95.00(b)(k)

       101        2,272   

ZS Pharma, Inc.
Expiration: Dec 2015,
Exercise Price: $ 90.00(b)(k)

       68        2,380   
     

 

 

  

Total Options Purchased – Calls
(premiums paid $47,801)

         13,937   
     

 

 

  
        Shares        

SHORT-TERM INVESTMENTS – 20.0%

      

Investment Companies – 20.0%

      

AB Fixed Income Shares, Inc. – Government STIF Portfolio, 0.16%(m)(n)

       72,342,387        72,342,387   

State Street Institutional U.S. Government Money Market Fund – Premier Class, 0.00%(n)

       3,322,615        3,322,615   
     

 

 

  

Total Short-Term Investments
(cost $75,665,002)

         75,665,002   
     

 

 

  

Total Investments Before Security Lending Collateral for Securities Loaned – 93.2%
(cost $350,353,308)

         352,471,473   
     

 

 

  
     

INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED – 1.2%

      

Investment Companies – 1.2%

      

AB Exchange Reserves – Class I, 0.15%
(cost $4,413,167)

       4,413,167        4,413,167   
     

 

 

  

Total Investments Before Securities Sold Short – 94.4%
(cost $354,766,475)

         356,884,640   
     

 

 

  
     

SECURITIES SOLD SHORT – (25.3)%

      

MUTUAL FUNDS – (12.0)%

      

Index – (12.0)%

      

Index – (12.0)%

      

Consumer Discretionary Select Sector SPDR Fund

       (20,797 )      (1,679,982 ) 

Consumer Staples Select Sector SPDR Fund

       (7,194 )      (355,527 ) 

Energy Select Sector SPDR Fund

       (10,172 )      (691,899 ) 

Financial Select Sector SPDR Fund

       (74,104 )      (1,819,994 ) 

Health Care Select Sector SPDR Fund

       (21,723 )      (1,544,722 ) 

Industrial Select Sector SPDR Fund

       (51,588 )      (2,823,928 ) 

 

40   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Consolidated Portfolio of Investments

 

Company           
    
Shares		     U.S. $ Value  

 

  

iShares MSCI Brazil Capped ETF

       (23,656 )    $ (532,733 ) 

iShares MSCI Emerging Markets ETF

       (29,043 )      (987,172 ) 

Materials Select Sector SPDR Fund

       (18,522 )      (847,012 ) 

SPDR S&P 500 ETF Trust

       (146,656 )      (30,605,641 ) 

SPDR S&P Biotech ETF

       (4,163 )      (300,943 ) 

SPDR S&P Regional Banking ETF

       (13,599 )      (620,794 ) 

Technology Select Sector SPDR Fund

       (43,068 )      (1,893,269 ) 

Utilities Select Sector SPDR Fund

       (14,204 )      (608,215 ) 
     

 

 

  

Total Mutual Funds
(proceeds $43,544,921)

         (45,311,831 ) 
 

 

 

  
     

COMMON STOCKS – (11.1)%

      

Consumer Discretionary – (2.7)%

      

Auto Components – (0.1)%

      

Autoliv, Inc.

       (3,228 )      (406,179 ) 
     

 

 

  

Automobiles – (0.3)%

      

General Motors Co.

       (15,270 )      (552,774 ) 

Tesla Motors, Inc.(b)

       (2,366 )      (544,795 ) 
     

 

 

  
        (1,097,569 ) 
     

 

 

  

Distributors – 0.0%

      

LKQ Corp.(b)

       (4,032 )      (118,904 ) 
     

 

 

  

Diversified Consumer Services – (0.1)%

      

DeVry Education Group, Inc.

       (5,824 )      (138,320 ) 

Grand Canyon Education, Inc.(b)

       (2,699 )      (106,934 ) 

LifeLock, Inc.(b)

       (9,532 )      (137,642 ) 

Sotheby’s

       (2,267 )      (64,179 ) 
     

 

 

  
        (447,075 ) 
     

 

 

  

Hotels, Restaurants & Leisure – (0.3)%

      

Diamond Resorts International, Inc.(b)

       (8,142 )      (228,872 ) 

Domino’s Pizza, Inc.

       (90 )      (9,672 ) 

Hyatt Hotels Corp. – Class A(b)

       (2,461 )      (121,303 ) 

Interval Leisure Group, Inc.

       (4,121 )      (64,370 ) 

Marriott International, Inc./MD – Class A

       (8,851 )      (627,624 ) 

Restaurant Brands International, Inc.

       (3,717 )      (136,005 ) 

Starbucks Corp.

       (500 )      (30,695 ) 

Texas Roadhouse, Inc.

       (414 )      (14,490 ) 
     

 

 

  
        (1,233,031 ) 
     

 

 

  

Household Durables – 0.0%

      

GoPro, Inc. – Class A(b)

       (4,245 )      (86,598 ) 
     

 

 

  

Internet & Catalog Retail – (0.3)%

      

Expedia, Inc.

       (5,804 )      (714,530 ) 

Netflix, Inc.(b)

       (776 )      (95,704 ) 

Zalando SE(b)(d)

       (2,647 )      (89,660 ) 
     

 

 

  
        (899,894 ) 
     

 

 

  

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     41   

Consolidated Portfolio of Investments

 

Company           
    
Shares		     U.S. $ Value  

 

  

Leisure Products – (0.1)%

      

BRP, Inc./CA(b)

       (6,194 )    $ (101,343 ) 

Polaris Industries, Inc.

       (2,290 )      (241,435 ) 
     

 

 

  
        (342,778 ) 
     

 

 

  

Media – (0.1)%

      

Altice NV – Class A(b)

       (9,931 )      (152,142 ) 

Live Nation Entertainment, Inc.(b)

       (3,479 )      (88,332 ) 

World Wrestling Entertainment, Inc. – Class A

       (12,738 )      (216,419 ) 
     

 

 

  
        (456,893 ) 
     

 

 

  

Multiline Retail – (0.7)%

      

Canadian Tire Corp. Ltd. – Class A

       (16,513 )      (1,547,124 ) 

Dollar General Corp.

       (8,114 )      (530,737 ) 

Target Corp.

       (6,548 )      (474,730 ) 
     

 

 

  
        (2,552,591 ) 
     

 

 

  

Specialty Retail – (0.3)%

      

CarMax, Inc.(b)

       (3,189 )      (182,730 ) 

Five Below, Inc.(b)

       (4,175 )      (116,942 ) 

Guess?, Inc.

       (4,802 )      (94,551 ) 

Hennes & Mauritz AB – Class B

       (4,737 )      (175,417 ) 

L Brands, Inc.

       (286 )      (27,287 ) 

Restoration Hardware Holdings, Inc.(b)

       (1,764 )      (158,531 ) 

RONA, Inc.

       (8,968 )      (89,515 ) 

Ross Stores, Inc.

       (381 )      (19,816 ) 

Staples, Inc.

       (9,975 )      (120,398 ) 

TJX Cos., Inc.

       (525 )      (37,065 ) 
     

 

 

  
        (1,022,252 ) 
     

 

 

  

Textiles, Apparel & Luxury Goods – (0.4)%

      

adidas AG

       (2,854 )      (275,656 ) 

lululemon Athletica, Inc.(b)

       (5,037 )      (240,869 ) 

Luxottica Group SpA

       (3,121 )      (208,509 ) 

Pandora A/S

       (1,461 )      (172,920 ) 

Steven Madden Ltd.(b)

       (3,425 )      (109,258 ) 

Swatch Group AG (The)

       (1,705 )      (597,830 ) 
     

 

 

  
        (1,605,042 ) 
     

 

 

  
        (10,268,806 ) 
     

 

 

  

Information Technology – (2.1)%

      

Internet Software & Services – (0.6)%

      

CoStar Group, Inc.(b)

       (805 )      (168,438 ) 

Gogo, Inc.(b)

       (2,500 )      (44,875 ) 

GrubHub, Inc.(b)

       (9,257 )      (237,349 ) 

Tencent Holdings Ltd.

       (61,100 )      (1,217,349 ) 

Yahoo Japan Corp.

       (33,458 )      (137,881 ) 

Yelp, Inc.(b)

       (4,335 )      (130,614 ) 

Zillow Group, Inc. – Class C(b)

       (12,167 )      (299,917 ) 
     

 

 

  
        (2,236,423 ) 
     

 

 

  

 

42   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Consolidated Portfolio of Investments

 

Company           
    
Shares		     U.S. $ Value  

 

  

IT Services – (0.3)%

      

Alliance Data Systems Corp.(b)

       (519 )    $ (148,875 ) 

International Business Machines Corp.

       (4,176 )      (582,218 ) 

Western Union Co. (The)

       (9,365 )      (176,624 ) 

Wirecard AG

       (4,739 )      (231,958 ) 
     

 

 

  
        (1,139,675 ) 
     

 

 

  

Semiconductors & Semiconductor Equipment – (0.8)%

      

Applied Materials, Inc.

       (4,688 )      (87,994 ) 

Avago Technologies Ltd.

       (5,442 )      (709,909 ) 

Dialog Semiconductor PLC(b)

       (7,176 )      (267,283 ) 

Intel Corp.

       (4,624 )      (160,776 ) 

Lam Research Corp.

       (8,300 )      (649,060 ) 

Micron Technology, Inc.(b)

       (30,518 )      (486,152 ) 

Microsemi Corp.(b)

       (11,070 )      (398,631 ) 

Qorvo, Inc.(b)

       (2,495 )      (144,885 ) 

SunEdison, Inc.(b)

       (24,174 )      (77,115 ) 
     

 

 

  
        (2,981,805 ) 
     

 

 

  

Software – (0.3)%

      

Mobileye NV(b)

       (11,426 )      (498,174 ) 

Oracle Corp.

       (4,653 )      (181,327 ) 

Red Hat, Inc.(b)

       (4,259 )      (346,725 ) 

salesforce.com, Inc.(b)

       (1,920 )      (153,005 ) 

SAP SE

       (1,333 )      (105,266 ) 
     

 

 

  
        (1,284,497 ) 
     

 

 

  

Technology Hardware, Storage & Peripherals – (0.1)%

      

HP, Inc.

       (13,703 )      (171,836 ) 

Logitech International SA

       (11,127 )      (167,019 ) 
     

 

 

  
        (338,855 ) 
     

 

 

  
        (7,981,255 ) 
     

 

 

  

Industrials – (1.7)%

      

Aerospace & Defense – (0.2)%

      

Boeing Co. (The)

       (4,700 )      (683,615 ) 
     

 

 

  

Air Freight & Logistics – 0.0%

      

United Parcel Service, Inc. – Class B

       (955 )      (98,375 ) 
     

 

 

  

Airlines – (0.3)%

      

American Airlines Group, Inc.

       (3,754 )      (154,890 ) 

Deutsche Lufthansa AG(b)

       (40,878 )      (585,099 ) 

Hawaiian Holdings, Inc.(b)

       (3,319 )      (120,148 ) 

Japan Airlines Co., Ltd.

       (9,772 )      (333,904 ) 
     

 

 

  
        (1,194,041 ) 
     

 

 

  

Commercial Services & Supplies – 0.0%

      

Pitney Bowes, Inc.

       (800 )      (17,280 ) 
     

 

 

  

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     43   

Consolidated Portfolio of Investments

 

Company           
    
Shares		     U.S. $ Value  

 

  

Construction & Engineering – 0.0%

      

Fluor Corp.

       (1,563 )    $ (75,962 ) 
     

 

 

  

Electrical Equipment – (0.1)%

      

Sensata Technologies Holding NV(b)

       (2,364 )      (108,295 ) 

SolarCity Corp.(b)

       (11,633 )      (334,565 ) 
     

 

 

  
        (442,860 ) 
     

 

 

  

Machinery – (0.7)%

      

Caterpillar, Inc.

       (18,553 )      (1,347,876 ) 

Cummins, Inc.

       (7,424 )      (745,147 ) 

Deere & Co.

       (1,011 )      (80,445 ) 

MAN SE

       (1,195 )      (118,483 ) 

PACCAR, Inc.

       (4,574 )      (237,665 ) 

WABCO Holdings, Inc.(b)

       (1,528 )      (164,229 ) 
     

 

 

  
        (2,693,845 ) 
     

 

 

  

Marine – (0.1)%

  

AP Moeller – Maersk A/S – Class B

       (146 )      (222,232 ) 
     

 

 

  

Trading Companies & Distributors – (0.3)%

      

Fastenal Co.

       (12,990 )      (527,134 ) 

Noble Group Ltd.

       (790,400 )      (237,606 ) 

United Rentals, Inc.(b)

       (1,816 )      (142,865 ) 

WW Grainger, Inc.

       (200 )      (40,108 ) 
     

 

 

  
        (947,713 ) 
     

 

 

  
        (6,375,923 ) 
     

 

 

  

Energy – (1.3)%

      

Energy Equipment & Services – (0.1)%

      

National Oilwell Varco, Inc.

       (12,547 )      (468,505 ) 
     

 

 

  

Oil, Gas & Consumable Fuels – (1.2)%

      

Apache Corp.

       (2,994 )      (147,245 ) 

Cabot Oil & Gas Corp.

       (6,196 )      (116,671 ) 

Canadian Natural Resources Ltd.

       (6,309 )      (152,678 ) 

Carrizo Oil & Gas, Inc.(b)

       (4,363 )      (176,178 ) 

Cheniere Energy, Inc.(b)

       (4,616 )      (219,491 ) 

Chevron Corp.

       (7,156 )      (653,485 ) 

Concho Resources, Inc.(b)

       (1,543 )      (168,866 ) 

Continental Resources, Inc./OK(b)

       (7,511 )      (272,649 ) 

Devon Energy Corp.

       (3,243 )      (149,210 ) 

EOG Resources, Inc.

       (2,283 )      (190,471 ) 

EQT Corp.

       (1,683 )      (96,301 ) 

Exxon Mobil Corp.

       (2,236 )      (182,592 ) 

Hess Corp.

       (1,957 )      (115,463 ) 

Oasis Petroleum, Inc.(b)

       (21,177 )      (243,324 ) 

ONEOK, Inc.

       (5,600 )      (165,088 ) 

Pioneer Natural Resources Co.

       (1,244 )      (180,069 ) 

Polski Koncern Naftowy Orlen SA

       (18,378 )      (308,688 ) 

 

44   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Consolidated Portfolio of Investments

 

Company           
    
Shares		     U.S. $ Value  

 

  

Range Resources Corp.

       (6,000 )    $ (171,480 ) 

Southwestern Energy Co.(b)

       (16,485 )      (148,530 ) 

Suncor Energy, Inc.

       (16,824 )      (464,866 ) 

Ultra Petroleum Corp.(b)

       (27,104 )      (108,687 ) 

Whiting Petroleum Corp.(b)

       (11,271 )      (186,084 ) 
     

 

 

  
        (4,618,116 ) 
     

 

 

  
        (5,086,621 ) 
     

 

 

  

Health Care – (1.2)%

      

Health Care Equipment & Supplies – (0.3)%

      

Intuitive Surgical, Inc.(b)

       (1,374 )      (714,507 ) 

Varian Medical Systems, Inc.(b)

       (4,406 )      (355,917 ) 

Zeltiq Aesthetics, Inc.(b)

       (6,201 )      (188,387 ) 
     

 

 

  
        (1,258,811 ) 
     

 

 

  

Health Care Providers & Services – (0.7)%

      

Aetna, Inc.

       (9,191 )      (944,375 ) 

Centene Corp.(b)

       (25,113 )      (1,450,276 ) 

Express Scripts Holding Co.(b)

       (919 )      (78,556 ) 
     

 

 

  
        (2,473,207 ) 
     

 

 

  

Health Care Technology – 0.0%

  

athenahealth, Inc.(b)

       (591 )      (99,140 ) 
     

 

 

  

Pharmaceuticals – (0.2)%

      

Endo Health Solutions, Inc.(b)

       (3,026 )      (186,039 ) 

Horizon Pharma PLC(b)

       (5,927 )      (127,608 ) 

Mallinckrodt PLC(b)

       (1,991 )      (135,209 ) 

Valeant Pharmaceuticals International, Inc.(b)

       (1,764 )      (158,689 ) 
     

 

 

  
        (607,545 ) 
     

 

 

  
        (4,438,703 ) 
     

 

 

  

Financials – (0.7)%

      

Banks – (0.1)%

      

Canadian Imperial Bank of Commerce/Canada

       (7,131 )      (535,473 ) 
     

 

 

  

Capital Markets – (0.2)%

      

Affiliated Managers Group, Inc.(b)

       (1,186 )      (210,195 ) 

Franklin Resources, Inc.

       (4,894 )      (205,157 ) 

Goldman Sachs Group, Inc. (The)

       (1,871 )      (355,527 ) 
     

 

 

  
        (770,879 ) 
     

 

 

  

Consumer Finance – (0.1)%

      

Credit Acceptance Corp.(b)

       (853 )      (170,958 ) 

Santander Consumer USA Holdings, Inc.(b)

       (6,619 )      (116,759 ) 
     

 

 

  
        (287,717 ) 
     

 

 

  

Insurance – (0.3)%

      

ACE Ltd.

       (6,284 )      (721,717 ) 

CNP Assurances

       (21,651 )      (301,365 ) 
     

 

 

  
        (1,023,082 ) 
     

 

 

  

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     45   

Consolidated Portfolio of Investments

 

Company           
    
Shares		     U.S. $ Value  

 

  

Thrifts & Mortgage Finance – 0.0%

      

BofI Holding, Inc.(b)

       (7,192 )    $ (144,056 ) 
     

 

 

  
        (2,761,207 ) 
     

 

 

  

Materials – (0.7)%

      

Chemicals – (0.5)%

      

LyondellBasell Industries NV – Class A

       (7,800 )      (747,396 ) 

Mosaic Co. (The)

       (14,956 )      (473,208 ) 

Potash Corp. of Saskatchewan, Inc.

       (15,820 )      (319,880 ) 

Wacker Chemie AG

       (2,205 )      (197,838 ) 
     

 

 

  
        (1,738,322 ) 
     

 

 

  

Metals & Mining – (0.2)%

      

First Quantum Minerals Ltd.

       (51,563 )      (187,649 ) 

GlenCore PLC(b)

       (365,522 )      (532,197 ) 

Grupo Mexico SAB de CV – Series B

       (46,437 )      (101,371 ) 

ThyssenKrupp AG

       (4,490 )      (95,377 ) 
     

 

 

  
        (916,594 ) 
     

 

 

  
        (2,654,916 ) 
     

 

 

  

Consumer Staples – (0.6)%

      

Beverages – (0.1)%

      

Coca-Cola Co. (The)

       (3,762 )      (160,336 ) 

Monster Beverage Corp.(b)

       (1,114 )      (172,236 ) 
     

 

 

  
        (332,572 ) 
     

 

 

  

Food & Staples Retailing – (0.2)%

      

Kroger Co. (The)

       (799 )      (30,090 ) 

United Natural Foods, Inc.(b)

       (2,335 )      (102,530 ) 

Wal-Mart Stores, Inc.

       (4,832 )      (284,315 ) 

Whole Foods Market, Inc.

       (3,269 )      (95,292 ) 

Woolworths Ltd.

       (19,577 )      (333,993 ) 
     

 

 

  
        (846,220 ) 
     

 

 

  

Food Products – (0.2)%

      

Archer-Daniels-Midland Co.

       (3,194 )      (116,549 ) 

Bunge Ltd.

       (1,989 )      (132,487 ) 

Chocoladefabriken Lindt & Spruengli AG

       (15 )      (90,470 ) 

Hormel Foods Corp.

       (564 )      (42,255 ) 

JM Smucker Co. (The)

       (1,740 )      (210,871 ) 

Keurig Green Mountain, Inc.

       (2,329 )      (122,040 ) 
     

 

 

  
        (714,672 ) 
     

 

 

  

Household Products – 0.1%

      

Kimberly-Clark Corp.

       (1,607 )      (191,474 ) 
     

 

 

  
        (2,084,938 ) 
     

 

 

  

Telecommunication Services – (0.1)%

      

Diversified Telecommunication Services – (0.1)%

      

AT&T, Inc.

       (5,592 )      (188,283 ) 
     

 

 

  

Total Common Stocks
(proceeds $45,094,891)

         (41,840,652 ) 
     

 

 

  

 

46   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Consolidated Portfolio of Investments

 

Company         Principal
Amount
(000)		     U.S. $ Value  

 

  

GOVERNMENT ISSUES – (1.2)%

      

Government – (1.2)%

      

U.S. Treasury Bonds
2.875%, 8/15/45

     U.S.$        (2,245 )    $ (2,190,016 ) 

U.S. Treasury Notes
1.625%, 8/31/19-6/30/20

       (1,420 )      (1,426,388 ) 

2.00%, 2/15/25

       (755 )      (741,404 ) 
     

 

 

  

Total Government Issues
(proceeds $4,319,722)

         (4,357,808 ) 
     

 

 

  
          Shares        

DEPOSITORY RECEIPTS – (0.5)%

      

Consumer Discretionary – (0.3)%

      

Internet & Catalog Retail – (0.3)%

      

Alibaba Group Holding Ltd. (Sponsored ADR)(b)

       (12,303 )      (1,034,436 ) 

Vipshop Holdings Ltd. (ADR)(b)

       (5,532 )      (91,444 ) 
     

 

 

  
        (1,125,880 ) 
     

 

 

  

Energy – (0.1)%

      

Oil, Gas & Consumable Fuels – (0.1)%

      

Royal Dutch Shell PLC (Sponsored ADR) – Class A

       (8,949 )      (445,302 ) 
     

 

 

  

Financials – (0.1)%

      

Banks – (0.1)%

      

Banco Bradesco SA (ADR)

       (42,888 )      (229,880 ) 

Siam Commercial Bank PCL (The) (NVDR)

       (56,000 )      (205,609 ) 
     

 

 

  
        (435,489 ) 
     

 

 

  

Total Depository Receipts
(proceeds $2,026,458)

         (2,006,671 ) 
     

 

 

  
          Principal
Amount
(000)		        

CORPORATE BONDS – (0.4)%

      

Corporate – Investment Grade – (0.2)%

      

Chemicals – (0.1)%

      

LyondellBasell Industries NV
5.75%, 4/15/24

   U.S.$          (400 )      (449,350 ) 
     

 

 

  

Oil Field Services – (0.1)%

      

Ensco PLC
4.50%, 10/01/24

       (240 )      (187,461 ) 

5.20%, 3/15/25

       (240 )      (197,741 ) 
     

 

 

  
        (385,202 ) 
     

 

 

  
        (834,552 ) 
     

 

 

  

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     47   

Consolidated Portfolio of Investments

 

Company         Principal
Amount
(000)		     U.S. $ Value  

 

  

Corporate – High Yield – (0.2)%

      

Chemicals – (0.1)%

      

Huntsman International LLC
4.875%, 11/15/20

   U.S.$          (212 )    $ (199,280 ) 
     

 

 

  

Electric – 0.0%

      

AES Corp./VA
7.375%, 7/01/21

       (30 )      (30,900 ) 

8.00%, 6/01/20

       (20 )      (22,150 ) 
     

 

 

  
        (53,050 ) 
     

 

 

  

Technology – (0.1)%

      

EMC Corp./MA
3.375%, 6/01/23

       (400 )      (342,513 ) 
     

 

 

  
        (594,843 ) 
     

 

 

  

Total Corporate Bonds
(proceeds $1,527,876)

         (1,429,395 ) 
     

 

 

  
          Shares        

REAL ESTATE INVESTMENT TRUST UNITS – (0.1)%

      

Financials – (0.1)%

      

Real Estate Investment Trusts (REITs) – (0.1)%

      

Care Capital Properties, Inc.

       (25 )      (791 ) 

Host Hotels & Resorts, Inc.

       (7,290 )      (121,014 ) 

Iron Mountain, Inc.

       (10,996 )      (305,469 ) 

Pennsylvania Real Estate Investment Trust

       (1,200 )      (25,872 ) 

Ventas, Inc.

       (100 )      (5,333 ) 
     

 

 

  

Total Real Estate Investment Trust Units
(proceeds $495,416)

         (458,479 ) 
     

 

 

  

Total Securities Sold Short
(proceeds $97,009,284)

         (95,404,836 ) 
     

 

 

  

Total Investments, Net of Securities Sold Short – 69.1%
(cost $257,757,191)

         261,479,804   

Other assets less liabilities – 30.9%

         117,019,020   
     

 

 

  

Net Assets – 100.0%

       $ 378,498,824   
     

 

 

  

FORWARD CURRENCY EXCHANGE CONTRACTS (see Note D)

 

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

Credit Suisse International

      EUR         767         USD         815         12/28/15       $     3,626   

Credit Suisse International

      GBP         402         USD         608         12/29/15         2,574   

 

48   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Consolidated Portfolio of Investments

 

 

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

Credit Suisse Securities (USA) LLC

      EUR         2,031         USD        2,285        12/18/15      $ 138,461   

Credit Suisse Securities (USA) LLC

      GBP         703         USD        1,077        12/18/15        17,774   

Credit Suisse Securities (USA) LLC

      GBP         6         USD        9        12/18/15        (19 ) 

Credit Suisse Securities (USA) LLC

      USD         1,950         EUR        1,746        12/18/15            (104,921 ) 

Credit Suisse Securities (USA) LLC

      USD         1,655         GBP        1,082        12/18/15        (25,081 ) 

Credit Suisse Securities (USA) LLC

      CAD         7         USD        5        1/22/16        15   

Credit Suisse Securities (USA) LLC

      USD         3         CAD        4        1/22/16        4   

Credit Suisse Securities (USA) LLC

      USD         36         CAD        48        1/22/16        (115 ) 

Morgan Stanley Co., Inc.

      CHF         446         USD        458        12/18/15        24,386   

Morgan Stanley Co., Inc.

      EUR         2,039         USD        2,269        12/18/15        113,551   

Morgan Stanley Co., Inc.

      USD         663         EUR        588        12/18/15        (41,036 ) 

Morgan Stanley Co., Inc.

      CAD         208         USD        156        12/22/15        556   

Morgan Stanley Co., Inc.

      EUR         5,120         USD        5,666        12/22/15        253,621   

Morgan Stanley Co., Inc.

      EUR         59         USD        62        12/22/15        (39 ) 

Morgan Stanley Co., Inc.

      GBP         233         USD        359        12/22/15        8,232   

Morgan Stanley Co., Inc.

      GBP         166         USD        250        12/22/15        (308 ) 

Morgan Stanley Co., Inc.

      USD         78         CAD        104        12/22/15        18   

Morgan Stanley Co., Inc.

      USD         1,276         CAD        1,680        12/22/15        (17,759 ) 

Morgan Stanley Co., Inc.

      USD         1,887         EUR        1,741        12/22/15        (45,920 ) 

Morgan Stanley Co., Inc.

      USD         226         GBP        149        12/22/15        (1,910 ) 

Morgan Stanley Co., Inc.

      USD         238         JPY        29,303        12/22/15        291   

Morgan Stanley Co., Inc.

      USD         113         JPY        13,791        12/22/15        (594 ) 

Morgan Stanley Co., Inc.

      USD         184         SEK        1,549        12/22/15        (6,359 ) 

Morgan Stanley Co., Inc.

      USD         96         ZAR        1,351        12/22/15        (2,564 ) 

Morgan Stanley Co., Inc.

      ZAR         3,110         USD        229        12/22/15        14,569   

State Street Bank & Trust Co.

      EUR         350         USD        387        12/02/15        17,658   

State Street Bank & Trust Co.

      CHF         1,991         USD        2,056        12/16/15        119,615   

State Street Bank & Trust Co.

      EUR         995         USD        1,130        12/16/15        77,772   

State Street Bank & Trust Co.

      GBP         83         USD        129        12/16/15        2,983   

State Street Bank & Trust Co.

      USD         59         EUR        52        12/16/15        (4,171 ) 

State Street Bank & Trust Co.

      USD         128         GBP        84        12/16/15        (2,580 ) 

State Street Bank & Trust Co.

      EUR         200         USD        214        12/21/15        2,176   

State Street Bank & Trust Co.

      GBP         700         USD        1,068        12/23/15        13,677   

State Street Bank & Trust Co.

      EUR         2,700         USD        2,869        1/08/16        12,702   

State Street Bank & Trust Co.

      GBP         1,800         USD        2,714        1/08/16        2,434   
              

 

 

  
  $     573,319   
              

 

 

  

CENTRALLY CLEARED CREDIT DEFAULT SWAPS (see Note D)

 

Clearing Broker/(Exchange)
& Referenced Obligation		   Fixed
Rate
(Pay)
Receive		     Implied
Credit
Spread at
November 30,
2015		     Notional
Amount
(000)		     Market
Value		     Unrealized
Appreciation/
(Depreciation)		  

Buy Contracts

  

Morgan Stanley Co., Inc./(CME):

          

CDX-NAIG Series 25,
5 Year, 12/20/20*

     1.00 %      0.84 %    $     2,860      $     (27,263 )    $     (5,708 ) 

 

*   Termination Date

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     49   

Consolidated Portfolio of Investments

 

 

CREDIT DEFAULT SWAPS (see Note D)

 

Swap Counterparty
& Referenced
Obligation		   Fixed
Rate
(Pay)
Receive		     Implied
Credit
Spread at
November 30,
2015		     Notional
Amount
(000)		     Market
Value		     Upfront
Premiums
Paid
(Received)		     Unrealized
Appreciation/
(Depreciation)		  

Buy Contracts

            

Bank of America, NA:

            

Rallye SA,
7.625%, 11/04/16, 3/20/20*

     5.00 %      7.20 %    EUR 500      $ 35,864      $ (58,494 )    $ 94,358   

Credit Suisse International:

            

ArcelorMittal,
6.125%, 6/01/18, 12/20/20*

     1.00        6.59        500            119,683        108,939        10,744   

Credit Suisse Securities (USA) LLC:

            

Rallye SA,
7.625%, 11/04/16, 3/20/20*

     5.00        7.20        300        21,431        (34,632 )      56,063   

Sherwin-Williams Co., (The),
7.375%, 2/01/27, 3/20/20*

     1.00        0.20      $ 2,000        (71,286 )      (66,153 )      (5,133 ) 

Goldman Sachs International:

            

Anglo American Capital PLC,
4.450%, 9/27/20, 9/20/20*

     1.00        6.73      EUR 400        93,325        47,670        45,655   

Clariant AG,
3.125%, 6/09/17, 12/20/20*

     1.00        0.75        400        (6,108 )      (2,321 )      (3,787 ) 

United Rentals North America, Inc.,
6.125%, 6/15/23, 12/20/20*

     5.00        2.67      $ 1,300        (152,836 )          (132,818 )      (20,018 ) 

Morgan Stanley Co., Inc.:

            

ArcelorMittal,
6.125%, 6/01/18, 9/20/20*

     1.00        6.45      EUR  1,000        225,397        96,246            129,151   

Beazer Homes USA, Inc.,
9.125%, 5/15/19, 12/20/20*

     5.00        6.68      $ 400        24,211        24,316        (105 ) 

Beazer Homes USA, Inc.,
9.125%, 5/15/19, 12/20/20*

     5.00        6.69        150        9,092        9,119        (27 ) 

Cardinal Health, Inc.,
1.90%, 6/15/17, 3/20/20*

     1.00        0.13        2,000        (77,636 )      (65,289 )      (12,347 ) 

Care UK Health & Social Care PLC,
8.079%, 1/15/20, 12/20/20*

     5.00        7.04      EUR 500        39,229        48,548        (9,319 ) 

 

50   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Consolidated Portfolio of Investments

 

 

Swap Counterparty
& Referenced
Obligation		   Fixed
Rate
(Pay)
Receive		     Implied
Credit
Spread at
November 30,
2015		     Notional
Amount
(000)		     Market
Value		     Upfront
Premiums
Paid
(Received)		     Unrealized
Appreciation/
(Depreciation)		  

Dean Foods Co.,
6.500%, 3/15/23, 12/20/20*

     5.00 %      1.94 %    $ 700      $ (108,133 )    $ (94,201 )    $ (13,932 ) 

Devon Energy Corp.,
7.950%, 4/15/32, 12/20/20*

     1.00        2.09        400        19,691        13,527        6,164   

MDC Holdings, Inc.,
5.625%, 2/01/20, 12/20/20*

     1.00        2.28            1,400        81,022        64,297        16,725   

Newmont Mining Corp.,
5.875%, 4/01/35, 12/20/20*

     1.00        2.82        1,250        102,076        44,634        57,442   

Staples, Inc.,
2.750%, 1/12/18, 12/20/20*

     1.00        1.90        1,400        56,940        52,653        4,287   

Staples, Inc.,
2.750%, 1/12/18, 12/20/20*

     1.00        1.90        1,200        48,806        56,890        (8,084 ) 

Sale Contracts

            

Citibank, NA:

            

Yum! Brands, Inc.,
6.250%, 3/15/18, 12/20/21*

     1.00        2.60        25        (2,114 )      (3,483 )      1,369   

Yum! Brands, Inc.,
6.250%, 3/15/18, 12/20/21*

     1.00        2.60        25        (2,114 )      (3,362 )      1,248   

Yum! Brands, Inc.,
6.250%, 3/15/18, 12/20/21*

     1.00        2.60        15        (1,268 )      (1,631 )      363   

Goldman Sachs International:

            

K Hovnanian Enterprises, Inc.,
8.625%, 1/15/17, 12/20/19*

     5.00        19.99        195        (73,586 )      (5,520 )      (68,066 ) 

K Hovnanian Enterprises, Inc.,
8.625%, 1/15/17, 12/20/20*

     5.00        19.55            1,000        (410,436 )          (327,869 )      (82,567 ) 

K Hovnanian Enterprises, Inc.,
8.625%, 1/15/17, 6/23/20*

     5.00        19.70        1,129        (444,956 )      (93,896 )          (351,060 ) 

Toys R Us, Inc.,
7.375%, 10/15/18, 12/20/17*

     5.00        20.42        736            (177,822 )      (103,374 )      (74,448 ) 

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     51   

Consolidated Portfolio of Investments

 

 

Swap Counterparty
& Referenced
Obligation		   Fixed
Rate
(Pay)
Receive		     Implied
Credit
Spread at
November 30,
2015		     Notional
Amount
(000)		     Market
Value		     Upfront
Premiums
Paid
(Received)		     Unrealized
Appreciation/
(Depreciation)		  

Morgan Stanley Capital Services LLC:

            

Yum! Brands, Inc.,
6.250%, 3/15/18, 12/20/21*

     1.00 %      2.60 %    $ 25      $ (2,114 )    $ (2,605 )    $ 491   

Morgan Stanley Co., Inc.:

            

iHeartCommunications, Inc.,
6.875%, 6/15/18, 12/21/15*

     5.00        31.07            1,339        (7,343 )      (195 )      (7,148 ) 

SUPERVALU, Inc.,
6.750%, 6/01/21, 6/22/20*

     5.00        4.77        415        7,745        35,234        (27,489 ) 
       

 

 

    

 

 

    

 

 

  
      $     (653,240 )    $     (393,770 )    $     (259,470 ) 
       

 

 

    

 

 

    

 

 

  

 

*   Termination Date

TOTAL RETURN SWAPS (see Note D)

 

Counterparty &
Referenced
Obligation		   # of Shares
or Units		     Rate Paid/
Received		    Notional
Amount
(000)		     Maturity
Date		     Unrealized
Appreciation/
(Depreciation)		  

Receive Total Return on Reference Obligation

  

Credit Suisse International:

           

Apollo Global Management LLC

     26,792      BBA 1 Month
LIBOR Plus 0.75%		    USD 196        5/14/16      $     (150,371 ) 

Comcast Corp. – Class A

     18,035      BBA 1 Month
LIBOR Plus 0.30%		      1,067        11/23/16        30,719   

Ryanair Holdings PLC

     11,871      EURIBOR 1 Month
Plus 0.30%		    EUR 137        5/31/16        32,771   

Goldman Sachs & Co.:

           

BG Group PLC

     141,596      BBA 1 Month
LIBOR Plus 0.30%		    USD 2,162        1/1/50        33,428   

Fortress Investment Group LLC

     24,808      BBA 1 Month
LIBOR Plus 0.70%		      597        5/14/16        (60,884 ) 

Och-Ziff Capital Management

     10,843      BBA 1 Month
LIBOR Plus 0.65%		      140        5/16/16        (73,130 ) 

Morgan Stanley Co., Inc.:

           

Alaska Air Group, Inc.

     11,538      FedFundEffective
Plus 0.35%		      853        7/24/17        69,343   

Brunswick Corp.

     9,408      FedFundEffective
Plus 0.35%		      471        7/24/17        25,590   

 

52   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Consolidated Portfolio of Investments

 

 

Counterparty &
Referenced
Obligation		   # of Shares
or Units		     Rate Paid/
Received		    Notional
Amount
(000)		     Maturity
Date		     Unrealized
Appreciation/
(Depreciation)		  

Constellation Brands, Inc.

     9,454      FedFundEffective
Plus 0.50%		    USD 1,215        7/24/17      $     113,732   

Costco Wholesale Corp.

     7,593      FedFundEffective
Plus 0.35%		      1,155        7/24/17        70,326   

Kroger Co. (The)

     42,164      FedFundEffective
Plus 0.35%		      1,575        7/24/17        16,133   

Louisiana-Pacific Corp.

     26,425      FedFundEffective
Plus 0.50%		      443        7/24/17        42,808   

Marriott International, Inc.

     7,816      BBA 1 Month
LIBOR Plus 0.50%		      555        5/22/17        2,747   

NVR, Inc.

     986      BBA 1 Month
LIBOR Plus 0.50%		      1,354        5/22/17        304,763   

Rexam PLC

     171,917      BBA 1 Month
LIBOR Plus 0.35%		    GBP  946        1/1/50        75,248   

Ryanair Holdings PLC

     36,436      EURIBOR 1 Month
Plus 0.50%		    EUR  462        4/10/17        73,275   

SABMiller PLC

     20,592      BBA 1 Month
LIBOR Plus 0.35%		    GBP  827        1/1/50        2,881   

Telecity Group PLC

     104,520      BBA 1 Month
LIBOR Plus 0.35%		      1,258        1/1/50        27,701   

United Continental Holdings, Inc.

     15,824      FedFundEffective
Plus 0.50%		    USD  914        7/24/17        (32,546 ) 

Wizz Air Holdings PLC

     4,227      BBA 1 Month
LIBOR Plus 0.50%		    GBP  78        1/16/17        (5,067 ) 

Wizz Air Holdings PLC

     7,447      BBA 1 Month
LIBOR Plus 0.50%		      125        3/3/17        9,795   

Wyndham Worldwide Corp.

     7,596      BBA 1 Month
LIBOR Plus 0.50%		    USD  659        5/22/17        (78,847 ) 

Xchanging PLC

     133,825      BBA 1 Month
LIBOR Plus 0.35%		    GBP  242        1/1/50        (25 ) 

Pay Total Return on Reference Obligation

  

  

Goldman Sachs & Co.:

           

iBoxx $ Liquid High Yield Index

     386      BBA 3 month
LIBOR Minus 0.31%		    USD  86        12/20/15        1,867   

Royal Dutch Shell PLC

     63,065      BBA 1 Month
LIBOR Minus 0.40%		      1,573        1/1/50        (14,913 ) 

Morgan Stanley Capital Services LLC:

           

Repsol SA

     329,013      FedFundEffective
Minus 0.50%		      329        9/20/17        (234 ) 

Repsol SA

     25,660      FedFundEffective
Minus 0.50%		      329        9/20/17        (5,499 ) 

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     53   

Consolidated Portfolio of Investments

 

 

Counterparty &
Referenced
Obligation		   # of Shares
or Units		     Rate Paid/
Received		    Notional
Amount
(000)		     Maturity
Date		     Unrealized
Appreciation/
(Depreciation)		  

Morgan Stanley Co., Inc.:

           

Agile Property Holdings Ltd.

     86,300      HK Overnight Index
Swap Ref Rate
Minus 1.50%		    HKD  449        8/1/16      $ 11,621   

Agile Property Holdings Ltd.

     10,800      HK Overnight Index
Swap Ref Rate
Minus 2.00%		      53        8/1/16        989   

Agile Property Holdings Ltd.

     3,500      HK Overnight Index
Swap Ref Rate
Minus 0.40%		      17        8/1/16        315   

Air China Ltd.

     415,148      HONIX
Minus 0.50%		      2,714        7/24/17        16,128   

Airbus Group SE

     5,752      EONIA
Minus 0.40%		    EUR  323        8/21/17            (74,136 ) 

Antofagasta PLC

     4,000      SONIA Overnight
Deposit Rate
Minus 0.30%		    GBP  32        8/1/16        18,267   

Antofagasta PLC

     14,590      SONIA Overnight
Deposit Rate
Minus 0.30%		      93        8/1/16        28,168   

ASOS PLC

     2,599      SONIA Overnight
Deposit Rate
Minus 0.30%		      71        8/1/16        (24,518 ) 

Asustek Computer, Inc.

     31,730      FedFundEffective
Minus 0.51%		    USD  306        8/1/16        43,361   

Ball Corp.

     7,857      BBA 1 Month
LIBOR Minus 0.30%		      521        1/1/50        (25,692 ) 

Banco do Brasil SA

     38,974      FedFundEffective
Minus 1.80%		      185        8/1/16        21,954   

Bank of East Asia

     27,925     

HKAB 1 Month

HIBOR Fixing
Minus 0.40%

    HKD  866        8/1/16        12,025   

Bank of East Asia

     2,700      HK Overnight Index
Swap Ref Rate
Minus 0.50%		      79        8/1/16        555   

Bank of East Asia

     2,200      HK Overnight Index
Swap Ref Rate
Minus 0.40%		      64        8/1/16        452   

Bank of East Asia

     1,000      HK Overnight Index
Swap Ref Rate
Minus 0.40%		      29        8/1/16        214   

BYD Co., Ltd.

     30,120      HK Overnight Index
Swap Ref Rate
Minus 1.74%		      1,378        8/1/16        15,262   

Canon, Inc.

     9,390      MUTSCALM
Minus 0.40%		    JPY 35,685        8/1/16        6,126   

China Cinda Asset Management Co., Ltd.

     191,500      HK Overnight Index
Swap Ref Rate
Minus 0.40%-1.25%		    HKD  874        8/1/16        41,903   

 

54   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Consolidated Portfolio of Investments

 

 

Counterparty &
Referenced
Obligation		   # of Shares
or Units		     Rate Paid/
Received		    Notional
Amount
(000)		     Maturity
Date		     Unrealized
Appreciation/
(Depreciation)		  

China CITIC Bank Corp., Ltd.

     212,100      HK Overnight Index
Swap Ref Rate
Minus 0.40%		    HKD 1,050        8/1/16      $ 1,649   

China CITIC Bank Corp., Ltd.

     25,000      HK Overnight Index
Swap Ref Rate
Minus 0.40%		      178        8/1/16        7,244   

China CITIC Bank Corp., Ltd.

     19,000      HK Overnight Index
Swap Ref Rate
Minus 0.40%		      114        8/1/16        2,668   

China CITIC Bank Corp., Ltd.

     16,000      HK Overnight Index
Swap Ref Rate
Minus 0.40%		      82        8/1/16        510   

China Communications Construction Co., Ltd.

     127,600      HK Overnight Index
Swap Ref Rate
Minus 0.45%		       1,456        8/1/16            40,680   

China Cosco Holdings

     29,900      HK Overnight Index
Swap Ref Rate
Minus 7.25%		      149        8/1/16        176   

China Merchants Bank Co., Ltd.

     78,800      HK Overnight Index
Swap Ref Rate
Minus 0.40%		      1,702        8/1/16        34,398   

China Everbright Bank Co.

     398,800      HK Overnight Index
Swap Ref Rate
Minus 0.40%		      1,692        8/1/16        38,219   

China Merchants Bank Co., Ltd.

     47,200      HK Overnight Index
Swap Ref Rate
Minus 0.40%		      864        8/1/16        497   

China Minsheng Banking Corp., Ltd.

     66,000      HK Overnight Index
Swap Ref Rate
Minus 0.40%		      679        8/1/16        24,005   

China Minsheng Banking Corp., Ltd.

     75,800      HK Overnight Index
Swap Ref Rate
Minus 0.40%		      610        8/1/16        5,716   

China Minsheng Banking Corp., Ltd.

     12,000      HK Overnight Index
Swap Ref Rate
Minus 0.40%		      113        8/1/16        3,059   

China Pacific Insurance (Group) Co., Ltd.

     20,600      HK Overnight Index
Swap Ref Rate
Minus 0.40%		      707        8/1/16        6,328   

China Pacific Insurance (Group) Co., Ltd.

     1,400      HK Overnight Index
Swap Ref Rate
Minus 0.40%		      42        8/1/16        (377 ) 

China Shipping Container

     284,500      HK Overnight Index
Swap Ref Rate
Minus 1.50%		      839        8/1/16        (5,950 ) 

China Southern Airlines Co., Ltd.

     236,777      HONIX
Minus 0.50%		      1,390        7/10/17        6,110   

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     55   

Consolidated Portfolio of Investments

 

 

Counterparty &
Referenced
Obligation		   # of Shares
or Units		     Rate Paid/
Received		    Notional
Amount
(000)		     Maturity
Date		     Unrealized
Appreciation/
(Depreciation)		  

CITIC Securities Co., Ltd.

     65,000      HK Overnight Index
Swap Ref Rate
Minus 0.40%		    HKD 1,328        8/1/16      $ 22,113   

Country Garden Holdings Co., Ltd.

     104,400      HK Overnight Index
Swap Ref Rate
Minus 0.40%		      404        8/1/16        12,958   

Country Garden Holdings Co., Ltd.

     104,000     

HK Overnight Index

Swap Ref Rate
Minus 0.40%

      400        8/1/16        12,475   

Equinix, Inc.

     3,512      BBA 1 Month
LIBOR Minus 0.30%		    USD 1,037        1/1/50        (3,898 ) 

Evergrande Real Estate Group Ltd.

     1,600      HK Overnight Index
Swap Ref Rate
Minus 8.51%		    HKD  5        8/1/16        (585 ) 

Evergrande Real Estate Group Ltd.

     39,000      HK Overnight Index
Swap Ref Rate
Minus 8.51%		      140        8/1/16            (12,776 ) 

Evergrande Real Estate Group Ltd.

     186,100      HK Overnight Index
Swap Ref Rate
Minus 8.51%		       1,182        8/1/16        5,512   

Fast Retailing Co., Ltd.

     420      MUTSCALM
Minus 0.40%		    JPY 22,303        8/1/16        11,161   

FirstRand Bank Ltd.

     54,953      South Africa Benchmark Overnight Rate
Minus 0.95%		    ZAR  2,869        8/1/16        19,839   

Fosun International Ltd.

     116,800      HK Overnight Index
Swap Ref
Minus 1.73%		    HKD  1,687        8/1/16        8,670   

Glencore PLC

     20,000      SONIA Overnight
Deposit Rate
Minus 0.30%		    GBP  72        8/1/16        79,045   

Glencore PLC

     17,824     

SONIA Overnight
Deposit Rate

Minus 0.30%

      66        8/1/16        73,027   

Glencore PLC

     6,500     

SONIA Overnight

Deposit Rate
Minus 0.30%

      21        8/1/16            21,704   

Glencore PLC

     1,060      SONIA Overnight
Deposit Rate
Minus 0.30%		      3        8/1/16        3,484   

Glencore PLC

     600      SONIA Overnight
Deposit Rate
Minus 0.30%		      2        8/1/16        1,753   

Glencore PLC

     476      SONIA Overnight
Deposit Rate
Minus 0.30%		      1        8/1/16        1,021   

Hyundai Heavy Industries Co., Ltd.

     1,208      FedFundEffective
Minus 0.40%		    USD  110        8/1/16        15,480   

 

56   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Consolidated Portfolio of Investments

 

 

Counterparty &
Referenced
Obligation		   # of Shares
or Units		     Rate Paid/
Received		    Notional
Amount
(000)		     Maturity
Date		     Unrealized
Appreciation/
(Depreciation)		  

Hyundai Heavy Industries Co., Ltd.

     300      FedFundEffective
Minus 0.40%		    USD 43        8/1/16      $ 19,586   

iBoxx $ Liquid High Yield Index

     7,605      BBA 3 Month
LIBOR Minus 0.35%		      1,749        12/20/15        37,969   

ICAP PLC

     7,572      SONIA Overnight
Deposit Rate
Minus 0.30%		    GBP  45        8/1/16        10,431   

ICAP PLC

     1,420      SONIA Overnight
Deposit Rate
Minus 0.30%		      8        8/1/16        762   

ICAP PLC

     11,200      SONIA Overnight
Deposit Rate
Minus 0.30%		      39        8/1/16            (27,401 ) 

Imerys SA

     1,873      EONIA
Minus 0.35%		    EUR  126        8/1/16        6,661   

INPEX Corp.

     26,150      MUTSCALM
Minus 0.40%		    JPY 34,633        8/1/16        20,207   

J Sainsbury PLC

     50,818      SONIA Overnight
Deposit Rate
Minus 0.30%		    GBP  116        8/1/16            (22,919 ) 

JFE Holdings, Inc.

     10,990      MUTSCALM
Minus 0.40%		    JPY  19,300        8/1/16        (18,164 ) 

Just Eat PLC

     19,188      SONIA Overnight
Deposit Rate
Minus 0.30%		    GBP  80        8/1/16        (6,486 ) 

Kering

     1,087      EONIA
Minus 0.35%		    EUR  174        8/1/16        (3,717 ) 

Kroton Educational SA

     36,789      FedFundEffective
Minus 1.00%		    USD  94        8/1/16        7,210   

Lenovo Group Ltd.

     51,670      HK Overnight Index
Swap Ref Rate
Minus 0.40%		    HKD  602        8/1/16        22,664   

Lenovo Group Ltd.

     8,300      HK Overnight Index
Swap Ref Rate
Minus 0.40%		       100        8/1/16        4,059   

Lenovo Group Ltd.

     8,100      HK Overnight Index
Swap Ref Rate
Minus 0.50%		      97        8/1/16        3,908   

Lenovo Group Ltd.

     161,000      HK Overnight Index
Swap Ref Rate
Minus 0.40%		      1,247        8/1/16        (10,150 ) 

Li & Fung Ltd.

     180,100      HK Overnight Index
Swap Ref Rate
Minus 0.40%		      1,167        8/1/16        25,920   

Li & Fung Ltd.

     52,000      HK Overnight Index
Swap Ref Rate
Minus 0.40%		      544        8/1/16        34,236   

Malayan Banking Bhd

     44,943      FedFundEffective
Minus 4.00%		    USD  86        8/1/16        (3,493 ) 

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     57   

Consolidated Portfolio of Investments

 

 

Counterparty &
Referenced
Obligation		   # of Shares
or Units		     Rate Paid/
Received		    Notional
Amount
(000)		     Maturity
Date		     Unrealized
Appreciation/
(Depreciation)		  

MITSUI & Co., Ltd.

     8,550      MUTSCALM
Minus 0.40%		    JPY 14,058        8/1/16      $ 6,653   

MITSUI & Co., Ltd.

     3,200      MUTSCALM
Minus 0.40%		      5,283        8/1/16        2,837   

MITSUI & Co., Ltd.

     1,300      MUTSCALM
Minus 0.40%		      2,245        8/1/16        1,957   

Mitsui O.S.K Lines Ltd.

     94,100      MUTSCALM
Minus 0.40%		      28,239        8/1/16        (15,986 ) 

MTN Group Ltd.

     12,556      South Africa Benchmark
Overnight Rate
Minus 0.95%		    ZAR  2,558        8/1/16        51,325   

MTN Group Ltd.

     4,300      South Africa Benchmark
Overnight Rate
Minus 0.95%		      955        8/1/16        23,041   

MTN Group Ltd.

     1,400      South Africa Benchmark
Overnight Rate
Minus 0.95%		      342        8/1/16        9,649   

MTN Group Ltd.

     840      South Africa Benchmark
Overnight Rate
Minus 0.95%		      179        8/1/16        3,982   

Nintendo Co., Ltd.

     758      MUTSCALM
Minus 0.40%		    JPY  14,547        8/1/16        1,631   

Ocado Group PLC

     22,394      SONIA Overnight
Deposit Rate
Minus 0.30%		    GBP  84        8/1/16        1,698   

Ocado Group PLC

     3,130      SONIA Overnight
Deposit Rate
Minus 0.75%		      12        8/1/16        1,304   

Ocado Group PLC

     800     

SONIA Overnight
Deposit Rate

Minus 0.30%

      3        8/1/16        736   

Ocado Group PLC

     700      SONIA Overnight
Deposit Rate
Minus 6.25%		      3        8/1/16        444   

Ocado Group PLC

     200      SONIA Overnight
Deposit Rate
Minus 0.30%		       1        8/1/16        133   

Old Mutual PLC

     60,680      SONIA Overnight
Deposit Rate
Minus 0.30%		      117        8/1/16            (14,817 ) 

Ping An Insurance (Group) Co. of China Ltd.

     17,000      HK Overnight Index
Swap Ref Rate
Minus 0.40%		    HKD  683        8/1/16        (5,232 ) 

Sasol Ltd.

     4,949      South Africa Benchmark
Overnight Rate
Minus 0.95%		    ZAR 2,033        8/1/16        2,979   

 

58   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Consolidated Portfolio of Investments

 

 

Counterparty &
Referenced
Obligation		   # of Shares
or Units		     Rate Paid/
Received		    Notional
Amount
(000)		     Maturity
Date		     Unrealized
Appreciation/
(Depreciation)		  

Shoprite Holdings Ltd.

     15,200      South Africa Benchmark
Overnight Rate
Minus 0.95%		    ZAR 2,047        8/1/16      $ (7,539 ) 

Standard Bank Group Ltd.

     14,443      South Africa Benchmark
Overnight Rate
Minus 0.95%		      2,129        8/1/16        17,745   

Standard Bank Group Ltd.

     4,900      South Africa Benchmark
Overnight Rate
Minus 0.95%		      723        8/1/16        6,066   

Standard Bank Group Ltd.

     950      South Africa Benchmark
Overnight Rate
minus 0.95%		      155        8/1/16        2,209   

Standard Chartered PLC

     24,301      SONIA Overnight
Deposit Rate
Minus 0.30%		    GBP  175        8/1/16        60,526   

Steinhoff International Holdings Ltd.

     19,977      South Africa Benchmark
Overnight Rate
Minus 0.95%		    ZAR  1,639        8/1/16        (3,556 ) 

Woodside Petroleum Ltd.

     11,854      RBA Daily Cash Rate Target Minus 0.40%    AUD  413        8/1/16            41,105   

Woodside Petroleum Ltd.

     2,800      RBA Daily Cash Rate Target Minus 0.40%      118        8/1/16        24,340   

Woodside Petroleum Ltd.

     425      RBA Daily Cash Rate Target Minus 0.40%      17        8/1/16        3,266   

Woodside Petroleum Ltd.

     200      RBA Daily Cash Rate Target Minus 0.40%      9        8/1/16        1,992   

Woolworth Holdings Ltd.

     15,809      South Africa Benchmark
Overnight Rate
Minus 0.95%		    ZAR  1,644        8/1/16        2,231   

Zhuzhou CSR Times Electric Co., LTd.

     32,600      HK Overnight Index
Swap Ref Rate
Minus 0.40%		    HKD  1,819        8/1/16        19,240   

Zoomlion Heavy Industry Science & Technology Co., Ltd.

     94,700      HK Overnight Index
Swap Ref Rate
Minus 3.21%		      561        8/1/16        35,667   

Zoomlion Heavy Industry Science & Technology Co., Ltd.

     79,000      HK Overnight Index
Swap Ref Rate
Minus 3.21%		      383        8/1/16        18,849   
          

 

 

  
           $     1,436,278   
          

 

 

  

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     59   

Consolidated Portfolio of Investments

 

 

 

(a)   Position, or a portion thereof, has been segregated to collateralize OTC derivatives outstanding.

 

(b)   Non-income producing security.

 

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

 

(d)   Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At November 30, 2015, the aggregate market value of these securities amounted to $30,464,763 or 7.8% of net assets.

 

(e)   Securities are perpetual and, thus, do not have a predetermined maturity date. The date shown, if applicable, reflects the next call date.

 

(f)   Pay-In-Kind Payments (PIK). The issuer may pay cash interest and/or interest in additional debt securities. Rates shown are the rates in effect at November 30, 2015.

 

(g)   When-Issued or delayed delivery security.

 

(h)   Security is in default and is non-income producing.

 

(i)   Illiquid security.

 

(j)   Convertible security.

 

(k)   One contract relates to 100 shares.

 

(l)   One contract relates to 1 share.

 

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

 

(n)   Investment in affiliated money market mutual fund. The rate shown represents the 7-day yield as of period end.

Currency Abbreviations:

AUD – Australian Dollar

CAD – Canadian Dollar

CHF – Swiss Franc

EUR – Euro

GBP – Great British Pound

HKD – Hong Kong Dollar

JPY – Japanese Yen

SEK – Swedish Krona

USD – United States Dollar

ZAR – South African Rand

Glossary:

ADR – American Depositary Receipt

BBA – British Bankers Association

CME – Chicago Mercantile Exchange

EONIA – Euro OverNight Index Average

ETF – Exchange Traded Fund

EURIBOR – Euro Interbank Offered Rate

FedFundEffective – Federal Funds Effective Rate

GDR – Global Depositary Receipt

HIBOR – Hong Kong Interbank Offer Rate

HKAB – Hong Kong Association of Banks

HONIX – Hong Kong Overnight Index Rate

LIBOR – London Interbank Offered Rates

MSCI – Morgan Stanley Capital International

MUTSCALM – Bank of Japan Estimated Unsecured Overnight Call Rate

NVDR – Non Voting Depositary Receipt

PJSC – Public Joint Stock Company

 

60   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Consolidated Portfolio of Investments

 

 

RBA – Reserve Bank of Australia

REG – Registered Shares

REIT – Real Estate Investment Trust

SONIA – Sterling Overnight Index Average

SPDR – Standard & Poor’s Depository Receipt

See notes to consolidated financial statements.

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     61   

Consolidated Portfolio of Investments

CONSOLIDATED STATEMENT OF ASSETS & LIABILITIES

November 30, 2015 (unaudited)

 

Assets   

Investments in securities, at value

   

Unaffiliated issuers (cost $278,010,921)

    $ 280,129,086 (a) 

Affiliated issuers (cost $76,755,554—including investment of cash collateral for securities loaned of $4,413,167)

      76,755,554   

Cash

      6,008,961   

Cash collateral due from broker

      7,624,379   

Foreign currencies, at value (cost $5,022,394)

      4,802,183 (b) 

Deposit at broker for securities sold short

      97,557,147   

Receivable for investment securities sold and foreign currency transactions

      8,907,760   

Unrealized appreciation on total return swaps

      2,145,186   

Interest and dividends receivable

      1,514,788   

Unrealized appreciation on forward currency exchange contracts

      826,695   

Upfront premium paid on credit default swaps

      602,073   

Unrealized appreciation on credit default swaps

      424,060   

Receivable for variation margin on exchange-traded derivatives

      347,871   

Receivable for capital stock sold

      347,071   

Receivable for terminated total return swaps

      115,723   

Receivable for terminated credit default swaps

      7,116   
  

 

 

  

Total assets

      488,115,653   
  

 

 

  
Liabilities   

Payable for securities sold short, at value (proceeds received $97,009,284)

      95,404,836   

Payable for investment securities purchased and foreign currency transactions

      6,055,607   

Payable for collateral received on securities loaned

      4,410,493   

Upfront premium received on credit default swaps

      995,843   

Unrealized depreciation on total return swaps

      708,908   

Unrealized depreciation on credit default swaps

      683,530   

Advisory fee payable

      443,212   

Unrealized depreciation on forward currency exchange contracts

      253,376   

Payable for terminated total return swaps

      159,040   

Dividend expense payable

      100,058   

Payable for capital stock redeemed

      75,218   

Interest expense payable

      46,911   

Transfer Agent fee payable

      23,313   

Collateral due to Securities Lending Agent

      2,674   

Distribution fee payable

      886   

Accrued expenses

      252,924   
  

 

 

  

Total liabilities

      109,616,829   
  

 

 

  

Net Assets

    $ 378,498,824   
  

 

 

  
Composition of Net Assets   

Capital stock, at par

    $ 3,775   

Additional paid-in capital

      377,376,169   

Accumulated net investment loss

      (1,152,341 ) 

Accumulated net realized loss on investment
and foreign currency transactions

      (2,967,044 ) 

Net unrealized appreciation on investments
and foreign currency denominated assets and liabilities

      5,238,265   
  

 

 

  
   $     378,498,824   
  

 

 

  

See notes to consolidated financial statements.

 

62   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Consolidated Statement of Assets & Liabilities

 

Net Asset Value Per Share—10 billion shares of capital stock authorized, $.0001 par value

 

Class   Net Assets        Shares
Outstanding		        Net Asset
Value		  

 

  
A   $ 2,366,902           236,693         $   10.00 * 

 

  
C   $ 549,607           55,503         $ 9.90   

 

  
Advisor   $ 11,513,682           1,147,547         $ 10.03   

 

  
R   $ 9,963           1,000         $ 9.96   

 

  
K   $ 76,743           7,679         $ 9.99   

 

  
I   $ 10,029           1,000         $ 10.03   

 

  
Z   $   363,971,898           36,301,744         $ 10.03   

 

  

 

(a)   Includes securities on loan with a value of $4,190,309 (see Note E).

 

(b)   Includes $3,247,524 on deposit with the broker for securities sold short.

 

*   The maximum offering price per share for Class A shares was $10.44 which reflects a sales charge of 4.25%.

See notes to consolidated financial statements.

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     63   

Consolidated Statement of Assets & Liabilities

CONSOLIDATED STATEMENT OF OPERATIONS

Six Months Ended November 30, 2015 (unaudited)

 

Investment Income    

Interest

   $ 2,479,208     

Dividends

    

Unaffiliated issuers (net of foreign taxes withheld of $15,347)

         1,613,832     

Affiliated issuers

     37,290     

Securities lending income

     66,865     

Other income

     52,062      $ 4,249,257   
 

 

 

    
Expenses    

Advisory fee (see Note B)

     3,650,981     

Distribution fee—Class A

     2,008     

Distribution fee—Class C

     1,579     

Distribution fee—Class R

     25     

Distribution fee—Class K

     96     

Transfer agency—Class A

     762     

Transfer agency—Class C

     154     

Transfer agency—Advisor Class

     2,946     

Transfer agency—Class R

     3     

Transfer agency—Class K

     21     

Transfer agency—Class I

     1     

Transfer agency—Class Z

     43,481     

Custodian

     647,532     

Audit and tax

     75,167     

Amortization of offering expenses

     70,566     

Printing

     39,710     

Registration fees

     38,175     

Legal

     11,864     

Directors’ fees

     9,584     

Miscellaneous

     19,857     
 

 

 

    

Total operating expenses (see Note B)

     4,614,512     

Interest expense

     285,210     

Dividend expense on securities sold short

     1,026,038     

Broker fee on securities sold short

     203,994     
 

 

 

    

Total expenses

     6,129,754     

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

     (786,882 )   
 

 

 

    

Net expenses

       5,342,872   
   

 

 

  

Net investment loss

       (1,093,615 ) 
   

 

 

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

Net realized gain (loss) on:

    

Investment transactions

       (7,217,665 ) 

Securities sold short

       4,886,430   

Options written

       13,159   

Swaps

       879,829   

Foreign currency transactions

       (5,462 ) 

Net change in unrealized appreciation/depreciation of:

    

Investments

       (14,374,100 ) 

Securities sold short

       2,887,029   

Options written

       (5,983 ) 

Swaps

       1,308,004   

Foreign currency denominated assets and liabilities

       534,168   
   

 

 

  

Net loss on investment and foreign currency transactions

       (11,094,591 ) 
   

 

 

  

Net Decrease in Net Assets from Operations

     $     (12,188,206 ) 
   

 

 

  

See notes to consolidated financial statements.

 

64   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Consolidated Statement of Operations

CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS

 

 

     Six Months Ended
November 30, 2015
(unaudited)		     July 31,  2014(a)
to
May 31, 2015		  
Increase (Decrease) in Net Assets from Operations     

Net investment loss

    $ (1,093,615 )    $ (2,204,555 ) 

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

      (1,443,709 )      368,654   

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

      (9,650,882 )      14,889,147   
  

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      (12,188,206 )      13,053,246   
Capital Stock Transactions     

Net increase (decrease)

      (6,362,844 )      383,996,628   
  

 

 

    

 

 

  

Total increase (decrease)

      (18,551,050 )      397,049,874   
Net Assets     

Beginning of period

      397,049,874        – 0  – 
  

 

 

    

 

 

  

End of period (including accumulated net investment loss of ($1,152,341) and ($58,726), respectively)

    $     378,498,824      $     397,049,874   
  

 

 

    

 

 

  

 

 

(a)   Commencement of operations.

See notes to consolidated financial statements.

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     65   

Consolidated Statement of Changes in Net Assets

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2015 (unaudited)

 

NOTE A

Significant Accounting Policies

AB Cap Fund, Inc. (the “Company”), which is a Maryland corporation, is registered under the Investment Company Act of 1940 as an open-end management investment company. Prior to January 20, 2015, the Company was known as AllianceBernstein Cap Fund, Inc. The Company operates as a series company currently comprised of 28 portfolios: AB Small Cap Growth Portfolio, AB Market Neutral Strategy—U.S., AB Emerging Markets Multi-Asset Portfolio, AB Select US Equity Portfolio, AB All Market Growth Portfolio, AB Select US Long/Short Portfolio, AB Concentrated Growth Fund, AB Multi-Manager Alternative Strategies Fund, AB Long/Short Multi-Manager Fund, AB Global Core Equity Portfolio, AB Emerging Markets Growth 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 Small Cap Value Portfolio, AB All Market Income Portfolio, AB All Market Alternative Return Portfolio, AB Concentrated International Growth Fund, AB International Strategic Core Portfolio and AB Emerging Markets Core Portfolio (the “Portfolios”). The AB Small Cap Growth Portfolio, AB Market Neutral Strategy—U.S., AB Emerging Markets Multi-Asset Portfolio, AB Select US Equity Portfolio and AB Select US Long/Short Portfolio are each diversified Portfolios. Each of the other Portfolios is non-diversified. AB Concentrated Growth Fund commenced operations on February 28, 2014. AB Multi-Manager Alternative Strategies Fund commenced operations on July 31, 2014. AB Long/Short Multi-Manager Fund commenced operations on September 30, 2014. AB Global Core Equity Portfolio commenced operations on November 12, 2014. AB Emerging Markets Growth Portfolio commenced operations on November 13, 2014. AB Small Cap Value Portfolio commenced operations on December 3, 2014. AB Multi-Manager Select Retirement Allocation Fund and AB Multi-Manager Select 2010-2055 Funds commenced operations on December 15, 2014. AB All Market Income Portfolio commenced operations on December 18, 2014. AB All Market Alternative Return Portfolio commenced operations on March 9, 2015. AB Concentrated International Growth Fund commenced operations on April 15, 2015. AB International Strategic Core Portfolio commenced operations on July 29, 2015. AB Emerging Markets Core Portfolio commenced operations on September 9, 2015. Each Portfolio is considered to be a separate entity for financial reporting and tax purposes. This report relates only to the AB Multi-Manager Alternative Strategies Fund (the “Fund”). Prior to January 20, 2015, the Fund was known as AllianceBernstein Multi-Manager Alternative Strategies Fund. As part of the Fund’s investment strategy, the Fund seeks to gain exposure to commodities and commodities-related instruments and derivatives primarily through investments in AllianceBernstein Multi-Manager Alternative Strategies Fund (Cayman) Ltd., a wholly-owned subsidiary of

 

66   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Notes to Consolidated Financial Statements

 

 

the Fund organized under the laws of the Cayman Islands (the “Subsidiary”). The Subsidiary commenced operations on October 6, 2014. The Fund is the sole shareholder of the Subsidiary and it is intended that the Fund will remain the sole shareholder and will continue to control the Subsidiary. Under the Articles of Association of the Subsidiary, shares issued by the Subsidiary confer upon a shareholder the right to receive notice of, to attend and to vote at general meetings of the Subsidiary and shall confer upon the shareholder rights in a winding-up or repayment of capital and the right to participate in the profits or assets of the Subsidiary. As of November 30, 2015, net assets of the Fund were $378,498,824, of which $5,189,109, or 1%, represented the Fund’s ownership of all issued shares and voting rights of the Subsidiary. This report presents the consolidated financial statements of AB Multi-Manager Alternative Strategies Fund and the Subsidiary. All intercompany transactions and balances have been eliminated in consolidation. The Fund has authorized the issuance of Class A, Class B, Class C, Advisor Class, Class R, Class K, Class I, Class Z, Class 1 and Class 2 shares. Class B, Class 1 and Class 2 shares are currently not being offered. As of November 30, 2015, AllianceBernstein L.P. (the “Adviser”), was the sole shareholder of Class R and Class I shares. Class A shares are sold with a front-end sales charge of up to 4.25% for purchases not exceeding $1,000,000. Class C shares are subject to a contingent deferred sales charge of 1% on redemptions made within the first year after purchase. Advisor Class, Class R, Class K, Class I, and Class Z shares are sold without an initial or contingent deferred sales charge. All seven classes of shares have identical voting, dividend, liquidation and other rights, except that the classes bear different distribution and transfer agency expenses. Each class has exclusive voting rights with respect to its distribution plan. The Fund seeks to achieve its investment objective primarily by allocating its assets among non-traditional and alternative investment strategies (the “Strategies”). In order to implement the Strategies, the Adviser will allocate the Fund’s assets among multiple investment sub-advisers (each a “Sub-Adviser”) that the Adviser believes have substantial experience managing one or more Strategies. The Adviser may also manage a portion of the Fund’s assets directly. The Sub-Advisers are not affiliated with the Adviser. The Adviser currently allocates assets to the following Sub-Advisers: Chilton Investment Company, LLC, Impala Asset Management LLC, Kynikos Associates LP, Lyrical Asset Management LP, Passport Capital, LLC, Sirios Capital Management, L.P., River Canyon Fund Management LLC, First Pacific Advisors, LLC, Halcyon Liquid Strategies IC Management LP, CQS (US), LLC and MPAM Credit Trading Partners L.P. The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the consolidated financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The Fund is an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the Fund.

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     67   

Notes to Consolidated Financial Statements

 

 

1. Security Valuation

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

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

Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors

 

68   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Notes to Consolidated Financial Statements

 

 

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

2. Fair Value Measurements

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

 

  •  

Level 1—quoted prices in active markets for identical investments

  •  

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

  •  

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

The fair value of debt instruments, such as bonds, and over-the-counter derivatives is generally based on market price quotations, recently executed market transactions (where observable) or industry recognized modeling techniques and are generally classified as Level 2. Pricing vendor inputs to Level 2 valuations may include quoted prices for similar investments in active markets, interest rate curves, coupon rates, currency rates, yield curves, option adjusted spreads, default rates, credit spreads and other unique security features in order to estimate the relevant cash flows which are then discounted to calculate fair values. If these inputs are unobservable and significant to the fair value, these investments will be classified as Level 3. In addition, non-agency rated investments are classified as Level 3.

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     69   

Notes to Consolidated Financial Statements

 

 

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

Options are valued using market-based inputs to models, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency, where such inputs and models are available. Alternatively the values may be obtained through unobservable management determined inputs and/or management’s proprietary models. Where models are used, the selection of a particular model to value an option depends upon the contractual terms of, and specific risks inherent in, the option as well as the availability of pricing information in the market. Valuation models require a variety of inputs, including contractual terms, market prices, measures of volatility and correlations of such inputs. Exchange traded options generally will be classified as Level 2. For options that do not trade on exchange but trade in liquid markets, inputs can generally be verified and model selection does not involve significant management judgment. Options are classified within Level 2 on the fair value hierarchy when all of the significant inputs can be corroborated to market evidence. Otherwise such instruments are classified as Level 3.

Valuations of mortgage-backed or other asset-backed securities, by pricing vendors, are based on both proprietary and industry recognized models and discounted cash flow techniques. Significant inputs to the valuation of these instruments are value of the collateral, the rates and timing of delinquencies, the rates and timing of prepayments, and default and loss expectations, which are driven in part by housing prices for residential mortgages. Significant inputs are determined based on relative value analyses, which incorporate comparisons to instruments with similar collateral and risk profiles, including relevant indices. Mortgage and asset-backed securities for which management has collected current observable data through pricing services are generally categorized within Level 2. Those investments for which current observable data has not been provided are classified as Level 3.

Other fixed income investments, including non-U.S. government and corporate debt, are generally valued using quoted market prices, if available, which are typically impacted by current interest rates, maturity dates and any perceived credit risk of the issuer. Additionally, in the absence of quoted market prices, these inputs are used by pricing vendors to derive a valuation based upon

 

70   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Notes to Consolidated Financial Statements

 

 

industry or proprietary models which incorporate issuer specific data with relevant yield/spread comparisons with more widely quoted bonds with similar key characteristics. Those investments for which there are observable inputs are classified as Level 2. Where the inputs are not observable, the investments are classified as Level 3.

The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of November 30, 2015:

 

Investments in Securities:

    Level 1     Level 2     Level 3     Total  

Assets:

         

Common Stocks:

         

Consumer Discretionary

    $ 49,602,387      $ 5,979,257      $ – 0  –    $ 55,581,644   

Information Technology

      33,251,086        1,151,401        – 0  –      34,402,487   

Industrials

      23,699,355        1,970,206        – 0  –      25,669,561   

Health Care

      24,181,072        726,266        – 0  –      24,907,338   

Financials

      20,491,173        476,126        – 0  –      20,967,299   

Materials

      19,335,744        848,281        – 0  –      20,184,025   

Consumer Staples

      14,036,436        3,521,330        – 0  –      17,557,766   

Energy

      6,449,447        50,552        – 0  –      6,499,999   

Utilities

      2,498,029        – 0  –      – 0  –      2,498,029   

Telecommunication Services

      909,439        716,878        – 0  –      1,626,317   

Corporate Bonds

      – 0  –        40,747,713          3,592,741        44,340,454   

Government Issues

      – 0  –      5,592,819        – 0  –      5,592,819   

Municipals

      – 0  –      4,066,586        307,939        4,374,525   

R.E. Investment Trust Units

      4,050,493        – 0  –      – 0  –      4,050,493   

Depository Receipts

      2,650,408        171,077        – 0  –      2,821,485   

Convertible Bonds

      – 0  –      769,803        1,852,083        2,621,886   

Preferred Stocks

      942,588        117,136        – 0  –      1,059,724   

Equity Linked-Notes

      – 0  –      – 0  –      801,858        801,858   

Options Purchased—Puts

      – 0  –      384,256        – 0  –      384,256   

Collateralized Mortgage Obligations

      – 0  –      – 0  –      331,892        331,892   

Bank Loans

      – 0  –      – 0  –      250,636        250,636   

Warrants

      135,329        – 0  –      – 0  –      135,329   

Common Stock Units

      132,713        – 0  –      – 0  –      132,713   

Options Purchased—Calls

      – 0  –      13,937        – 0  –      13,937   

Short-Term Investments

      75,665,002        – 0  –      – 0  –      75,665,002   

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

      4,413,167        – 0  –      – 0  –      4,413,167   

Liabilities:

         

Mutual Funds

        (45,311,831 )      – 0  –      – 0  –        (45,311,831 ) 

Common Stocks:

         

Consumer Discretionary

      (8,596,672 )      (1,672,134 )      – 0  –      (10,268,806 ) 

Information Technology

      (5,854,499 )      (2,126,756 )      – 0  –      (7,981,255 ) 

Industrials

      (4,878,599 )      (1,497,324 )      – 0  –      (6,375,923 ) 

Energy

      (4,777,933 )      (308,688 )      – 0  –      (5,086,621 ) 

Health Care

      (4,438,703 )      – 0  –      – 0  –      (4,438,703 ) 

Financials

      (2,459,842 )      (301,365 )      – 0  –      (2,761,207 ) 

Materials

      (1,829,504 )      (825,412 )      – 0  –      (2,654,916 ) 

Consumer Staples

      (1,660,475 )      (424,463 )      – 0  –      (2,084,938 ) 

Telecommunication Services

      (188,283 )      – 0  –      – 0  –      (188,283 ) 

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     71   

Notes to Consolidated Financial Statements

 

 

Investments in Securities:

    Level 1     Level 2     Level 3     Total  

Government Issues

    $ – 0  –    $ (4,357,808 )    $ – 0  –    $ (4,357,808 ) 

Depository Receipts

      (1,801,062 )      (205,609 )      – 0  –      (2,006,671 ) 

Corporate Bonds

      – 0  –      (1,429,395 )      – 0  –      (1,429,395 ) 

Real Estate Investment Trust Units

      (458,480 )      – 0  –      – 0  –      (458,480 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total Investments in Securities

      200,187,985        54,154,670        7,137,149        261,479,804   

Other Financial Instruments*:

         

Assets:

         

Forward Currency Exchange Contracts

      – 0  –      826,695        – 0  –      826,695   

Credit Default Swaps

        424,060          424,060   

Total Return Swaps

      – 0  –      2,145,186        – 0  –      2,145,186   

Liabilities:

         

Forward Currency Exchange Contracts

      – 0  –      (253,376 )      – 0  –      (253,376 ) 

Centrally Cleared Credit Default Swaps

        (5,708 )        (5,708 )# 

Credit Default Swaps

        (683,530 )        (683,530 ) 

Total Return Swaps

      – 0  –      (708,908 )      – 0  –      (708,908 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total^

    $   200,187,985      $   55,899,089      $   7,137,149      $   263,224,223   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

*   Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/depreciation on the instrument.

 

#   Only variation margin receivable/payable at period end is reported within the statement of assets and liabilities. This amount reflects cumulative appreciation/(depreciation) of exchange-traded derivatives as reported in the consolidated portfolio of investments.

 

^   There were de minimis transfers under 1% of net assets between Level 1 and Level 2 during the reporting period.

The Fund recognizes all transfers between levels of the fair value hierarchy assuming the financial instruments were transferred at the beginning of the reporting period.

The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value.

 

      Corporate
Bonds		     Municipals     Convertible
Bonds		  

Balance as of 5/31/15

    $ 3,905,418      $ 520,445      $ 2,260,146   

Accrued discounts/(premiums)

      (13,165 )      275        18,095   

Realized gain (loss)

      (357,242 )      1,468        (4,094 ) 

Change in unrealized appreciation/depreciation

      (195,501 )      (998 )      (910,018 ) 

Purchases

      1,080,569        – 0  –      2,650,238   

Sales

      (1,499,546 )      (213,251 )      (2,162,284 ) 

Transfers in to Level 3

      672,208        – 0  –      – 0  – 

Transfers out of Level 3

      – 0  –      – 0  –      – 0  – 
  

 

 

    

 

 

    

 

 

  

Balance as of 11/30/15

    $   3,592,741      $   307,939      $   1,852,083   
  

 

 

    

 

 

    

 

 

  

Net change in unrealized appreciation/depreciation from investments held as of 11/30/15*

    $ (233,001 )    $ (754 )    $ (869,615 ) 
  

 

 

    

 

 

    

 

 

  

 

72   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Notes to Consolidated Financial Statements

 

 

      Equity
Linked
Notes		     Collateralized
Mortgage
Obligations		     Bank
Loans		  

Balance as of 5/31/15

    $ 1,471,381      $ 402,258      $ – 0  – 

Accrued discounts/(premiums)

      – 0  –      – 0  –      2,357   

Realized gain (loss)

      (79,291 )      – 0  –      (16,069 ) 

Change in unrealized appreciation/depreciation

      (199,085 )      (1,983 )      (43,934 ) 

Purchases/Payups

      – 0  –      111,000        615,274   

Sales/Paydowns

      (391,147 )      (179,383 )      (306,992 ) 

Transfers in to Level 3

      – 0  –      – 0  –      – 0  – 

Transfers out of Level 3

      – 0  –      – 0  –      – 0  – 
  

 

 

    

 

 

    

 

 

  

Balance as of 11/30/15

    $ 801,858      $   331,892      $ 250,636   
  

 

 

    

 

 

    

 

 

  

Net change in unrealized appreciation/depreciation from investments held as of 11/30/15*

    $ (199,085 )    $ (1,983 )    $ (43,934 ) 
  

 

 

    

 

 

    

 

 

  
      Total              

Balance as of 5/31/15

    $ 8,559,648       

Accrued discounts/(premiums)

      7,562       

Realized gain (loss)

      (455,228 )     

Change in unrealized appreciation/depreciation

      (1,351,519 )     

Purchases/Payups

      4,457,081       

Sales/Paydowns

      (4,752,603 )     

Transfers in to Level 3

      672,208       

Transfers out of Level 3

      – 0  –     
  

 

 

      

Balance as of 11/30/15

    $   7,137,149 +     
  

 

 

      

Net change in unrealized appreciation/depreciation from investments held as of 11/30/15*

    $ (1,348,372 )     
  

 

 

      

 

*   The unrealized appreciation/depreciation is included in net change in unrealized appreciation/depreciation on investments and other financial instruments in the accompanying consolidated statement of operations.

 

+   There were de minimis transfers under 1% of net assets during the reporting period.

As of November 30, 2015, all Level 3 securities were priced by third party vendors.

The Adviser established the Committee to oversee the pricing and valuation of all securities held in the Fund. The Committee operates under pricing and valuation policies and procedures established by the Adviser and approved by the Board, including pricing policies which set forth the mechanisms and processes to be employed on a daily basis to implement these policies and procedures. In particular, the pricing policies describe how to determine market quotations for securities and other instruments. The Committee’s responsibilities include: 1) fair value and liquidity determinations (and oversight of any third parties to whom any responsibility for fair value and liquidity determinations is delegated), and 2) regular monitoring of the Adviser’s pricing and valuation policies and procedures and modification or enhancement of these policies and procedures (or recommendation of the modification of these policies and procedures) as the Committee believes appropriate.

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     73   

Notes to Consolidated Financial Statements

 

 

The Committee is also responsible for monitoring the implementation of the pricing policies by the Adviser’s Pricing Group (the “Pricing Group”) and a third party which performs certain pricing functions in accordance with the pricing policies. The Pricing Group is responsible for the oversight of the third party on a day-to-day basis. The Committee and the Pricing Group perform a series of activities to provide reasonable assurance of the accuracy of prices including: 1) periodic vendor due diligence meetings, review of methodologies, new developments and processes at vendors, 2) daily comparison of security valuation versus prior day for all securities that exceeded established thresholds, and 3) daily review of unpriced, stale, and variance reports with exceptions reviewed by senior management and the Committee.

In addition, several processes outside of the pricing process are used to monitor valuation issues including: 1) performance and performance attribution reports are monitored for anomalous impacts based upon benchmark performance, and 2) the Adviser reviews all portfolios for performance and analytics (which are generated using the Adviser’s prices).

3. Currency Translation

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

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

4. Taxes

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

 

74   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Notes to Consolidated Financial Statements

 

 

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

5. Investment Income and Investment Transactions

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

6. Class Allocations

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

7. Dividends and Distributions

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

8. Offering Expenses

Offering expenses of $422,236 were deferred and amortized on a straight line basis over a one year period starting from July 31, 2014 (commencement of operations).

NOTE B

Advisory Fee and Other Transactions with Affiliates

Under the terms of the investment advisory agreement, the Fund pays the Adviser an advisory fee at an annual rate of 1.90% of the Fund’s average daily net assets. The Adviser compensates the Sub-Advisers out of the investment advisory fee it receives from the Fund. The fee is accrued daily and paid monthly. The Adviser has agreed to waive its fees and bear certain expenses to the extent necessary to limit total operating expenses (excluding expenses associated with securities sold short, acquired fund fees and expenses other than the advisory fees of any AllianceBernstein Mutual Funds in which the Fund may invest, except

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     75   

Notes to Consolidated Financial Statements

 

 

advisory fees borne by the Fund in connection with the investment of securities lending collateral, interest expense, taxes, extraordinary expenses, and brokerage commissions and other transaction costs) on an annual basis (the “Expense Caps”) to 2.24%, 2.99%, 1.99%, 2.49%, 2.24%, 1.99% and 1.99% of daily average net assets for Class A, Class C, Advisor Class, Class R, Class K, Class I and Class Z shares, respectively. Any fees waived and expenses borne by the Adviser through May 31, 2015 are subject to repayment by the Fund until May 31, 2018. Any fees waived and expenses borne by the Adviser from June 1, 2015 through July 31, 2015 are subject to repayment by the Fund until May 31, 2019. In each case, no repayment will be made that would cause the Fund’s total annual fund operating expenses to exceed the net fee percentage set forth per the Expense Caps. The Expense Caps may not be terminated by the Adviser before September 30, 2016. For the six months ended November 30, 2015, such reimbursements/waivers amounted to $786,882, of which $285,188 is subject to repayment.

The Fund compensates AllianceBernstein Investor Services, Inc. (“ABIS”), a wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Fund. ABIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. Such compensation retained by ABIS amounted to $39,802 for the six months ended November 30, 2015.

AllianceBernstein Investments, Inc. (the “Distributor”), a wholly-owned subsidiary of the Adviser, serves as the distributor of the Fund’s shares. The Distributor has advised the Fund that it has retained front-end sales charges of $713 from the sale of Class A shares and received $0 in contingent deferred sales charges imposed upon redemptions by shareholders of Class C shares for the six months ended November 30, 2015.

The Fund may invest in the AB Fixed-Income Shares, Inc.—Government STIF Portfolio (“Government STIF Portfolio”), an open-end management investment company managed by the Adviser. The Government STIF Portfolio is offered as a cash management option to mutual funds and other institutional accounts of the Adviser, and is not available for direct purchase by members of the public. The Government STIF Portfolio pays no investment management fees but does bear its own expenses. A summary of the Fund’s transactions in shares of the Government STIF Portfolio for the six months ended November 30, 2015 is as follows:

 

Market Value

May 31, 2015

(000)

   Purchases
at Cost
(000)		     Sales
Proceeds
(000)		     Market Value
November 30, 2015
(000)		     Dividend
Income
(000)		  
$    52,160   $     226,287      $     206,105      $     72,342      $     33   

 

76   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Notes to Consolidated Financial Statements

 

 

Brokerage commissions paid on investment transactions for the six months ended November 30, 2015 amounted to $561,325, of which $22 and $0, respectively, was paid to Sanford C. Bernstein & Co. LLC and Sanford C. Bernstein Limited, affiliates of the Adviser.

NOTE C

Distribution Services Agreement

The Fund has adopted a Distribution Services Agreement (the “Agreement”) pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Agreement, the Fund pays distribution and servicing fees to the Distributor at an annual rate of up to .25% of the Fund’s average daily net assets attributable to Class A shares, 1% of the Fund’s average daily net assets attributable to Class C shares, .50% of the Fund’s average daily net assets attributable to Class R shares and .25% of the Fund’s average daily net assets attributable to Class K shares. There are no distribution and servicing fees on the Advisor Class, Class I and Class Z shares. The fees are accrued daily and paid monthly. The Agreement provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. Since the commencement of the Fund’s operations, the Distributor has incurred expenses in excess of the distribution costs reimbursed by the Fund in the amounts of $3,689, $0 and $0 for Class C, Class R and Class K shares, respectively. While such costs may be recovered from the Fund in future periods so long as the Agreement is in effect, the rate of the distribution and servicing fees payable under the Agreement may not be increased without a shareholder vote. In accordance with the Agreement, there is no provision for recovery of unreimbursed distribution costs incurred by the Distributor beyond the current fiscal year for Class A shares. The Agreement also provides that the Adviser may use its own resources to finance the distribution of the Fund’s shares.

NOTE D

Investment Transactions

Purchases and sales of investment securities (excluding short-term investments) for the six months ended November 30, 2015, were as follows:

 

    Purchases     Sales     Securities
Sold Short		     Covers on
Securities
Sold Short		  

Investment securities (excluding U.S. government securities)

   $     246,476,322      $     277,122,684      $     146,345,749      $     140,869,738   

U.S. government securities

     12,075,217        13,017,068        16,366,765        22,906,940   

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     77   

Notes to Consolidated Financial Statements

 

 

The cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes. Accordingly, gross unrealized appreciation and unrealized depreciation (excluding foreign currency, written options and swap transactions) are as follows:

 

Gross Unrealized

     Net
Unrealized
Appreciation
on
Investments		      Net
Unrealized
Appreciation
on
Securities
Sold Short		     Net
Unrealized
Appreciation/
(Depreciation)		  

Appreciation
on
Investments

    Depreciation
on
Investments		         

$ 20,149,997

    $  (18,031,832 )    $  2,118,165       $  1,604,448 (a)    $  3,722,613   

 

(a)   Gross unrealized appreciation was $5,419,667 and gross unrealized depreciation was $(3,815,219), resulting in net unrealized appreciation of $1,604,448.

1. Derivative Financial Instruments

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

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

 

  •  

Forward Currency Exchange Contracts

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

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

During the six months ended November 30, 2015, the Fund held forward currency exchange contracts for hedging purposes.

 

  •  

Option Transactions

For hedging and investment purposes, the Fund may purchase and write (sell) put and call options on U.S. and foreign securities, including

 

78   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Notes to Consolidated Financial Statements

 

 

government securities, and foreign currencies that are traded on U.S. and foreign securities exchanges and over-the-counter markets. Among other things, the Fund may use options transactions for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under “Currency Transactions” and may use options strategies involving the purchase and/or writing of various combinations of call and/or put options, for hedging and investment purposes.

The risk associated with purchasing an option is that the Fund pays a premium whether or not the option is exercised. Additionally, the Fund bears the risk of loss of the premium and change in market value should the counterparty not perform under the contract. Put and call options purchased are accounted for in the same manner as portfolio securities. The cost of securities acquired through the exercise of call options is increased by premiums paid. The proceeds from securities sold through the exercise of put options are decreased by the premiums paid.

When the Fund writes an option, the premium received by the Fund is recorded as a liability and is subsequently adjusted to the current market value of the option written. Premiums received from written options which expire unexercised are recorded by the Fund on the expiration date as realized gains from options written. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium received is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium received is added to the proceeds from the sale of the underlying security or currency in determining whether the Fund has realized a gain or loss. If a put option is exercised, the premium received reduces the cost basis of the security or currency purchased by the Fund. In writing an option, the Fund bears the market risk of an unfavorable change in the price of the security or currency underlying the written option. Exercise of an option written by the Fund could result in the Fund selling or buying a security or currency at a price different from the current market value.

The Fund may also invest in options on swap agreements, also called “swaptions”. 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 on 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.

During the six months ended November 30, 2015, the Fund held purchased options for hedging and non-hedging purposes. During the six months ended November 30, 2015, the Fund held written options for hedging and non-hedging purposes.

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     79   

Notes to Consolidated Financial Statements

 

 

For the six months ended November 30, 2015, the Fund had the following transactions in written options:

 

      Number of
Contracts		     Premiums
Received		  

Options written outstanding as of 05/31/15

      540      $ 36,846   

Options written

      1,572        177,343   

Options assigned

      (13 )      (1,224 ) 

Options expired

      (187 )      (32,307 ) 

Options bought back

      (1,912 )      (180,658 ) 

Options exercised

      – 0  –      – 0  – 
  

 

 

    

 

 

  

Options written outstanding as of 11/30/15

      – 0  –    $ – 0  – 
  

 

 

    

 

 

  

 

  •  

Swaps

The Fund may enter into swaps to hedge its exposure to interest rates, credit risk, equity markets and currencies. The Fund may also enter into swaps for non-hedging purposes as a means of gaining market exposures, including by making direct investments in foreign currencies, as described below under “Currency Transactions” or in order to take a “long” or “short” position with respect to an underlying referenced asset described below under “Total Return Swaps”. A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. The payment flows are usually netted against each other, with the difference being paid by one party to the other. In addition, collateral may be pledged or received by the Fund in accordance with the terms of the respective swaps to provide value and recourse to the Fund or its counterparties in the event of default, bankruptcy or insolvency by one of the parties to the swap.

Risks may arise as a result of the failure of the counterparty to the swap to comply with the terms of the swap. The loss incurred by the failure of a counterparty is generally limited to the net interim payment to be received by the Fund, and/or the termination value at the end of the contract. Therefore, the Fund considers the creditworthiness of each counterparty to a swap in evaluating potential counterparty risk. This risk is mitigated by having a netting arrangement between the Fund and the counterparty and by the posting of collateral by the counterparty to the Fund to cover the Fund’s exposure to the counterparty. Additionally, risks may arise from unanticipated movements in interest rates or in the value of the underlying securities. The Fund accrues for the interim payments on swaps on a daily basis, with the net amount recorded within unrealized appreciation/depreciation of swaps on the consolidated statement of assets and liabilities, where applicable. Once the interim payments are settled in cash, the net amount is recorded as realized gain/(loss) on swaps on the consolidated statement of operations, in addition to any realized gain/(loss) recorded upon the termination of swaps. Upfront premiums paid or

 

80   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Notes to Consolidated Financial Statements

received are recognized as cost or proceeds on the consolidated statement of assets and liabilities and are amortized on a straight line basis over the life of the contract. Amortized upfront premiums are included in net realized gain/(loss) from swaps on the consolidated statement of operations. Fluctuations in the value of swaps are recorded as a component of net change in unrealized appreciation/depreciation of swaps on the consolidated statement of operations.

Certain standardized swaps, including certain interest rate swaps and credit default swaps, are (or soon will be) 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. Centralized clearing will be required for additional categories of swaps on a phased-in basis based on requirements published by the Securities and Exchange Commission and Commodity Futures Trading Commission.

At the time the Fund enters into a centrally cleared swap, the Fund deposits and maintains as collateral an initial margin with the broker, as required by the clearinghouse on which the transaction is effected. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. Risks may arise from the potential of a counterparty to meet the terms of the contract. The credit/counterparty risk for centrally cleared swaps is generally less than non-centrally cleared swaps, since the clearinghouse, which is the issuer or counterparty to each centrally cleared swap, has robust risk mitigation standards, including the requirement to provide initial and variation margin. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed.

Such receipts or payments are known as variation margin and are recorded by the Portfolio as unrealized gains or losses. Risks may arise from the potential of a counterparty to meet the terms of the contract. The credit/counterparty risk for exchange-traded swaps is generally less than privately negotiated swaps, since the clearinghouse, which is the issuer or counterparty to each exchange-traded swap, has robust risk mitigation standards, including the requirement to provide initial and variation margin. When the contract is closed, the Portfolio records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed.

Credit Default Swaps:

The Fund may enter into credit default swaps, including to manage its exposure to the market or certain sectors of the market, to reduce its risk

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     81   

Notes to Consolidated Financial Statements

exposure to defaults by corporate and sovereign issuers held by the Fund, or to create exposure to corporate or sovereign issuers to which it is not otherwise exposed. The Fund may purchase credit protection (“Buy Contract”) or provide credit protection (“Sale Contract”) on the referenced obligation of the credit default swap. During the term of the swap, the Fund receives/(pays) fixed payments from/(to) the respective counterparty, calculated at the agreed upon rate applied to the notional amount. If the Fund is a buyer/(seller) of protection and a credit event occurs, as defined under the terms of the swap, the Fund will either (i) receive from the seller/(pay to the buyer) of protection an amount equal to the notional amount of the swap (the “Maximum Payout Amount”) and deliver/(take delivery of) the referenced obligation or (ii) receive/(pay) a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation.

In certain circumstances Maximum Payout Amounts may be partially offset by recovery values of the respective referenced obligations, upfront premium received upon entering into the agreement, or net amounts received from settlement of buy protection credit default swaps entered into by the Fund for the same reference obligation with the same counterparty. As of November 30, 2015, the Fund did not have Buy Contracts outstanding with respect to the same referenced obligation and same counterparty for its Sales Contracts outstanding.

Credit default swaps may involve greater risks than if a Fund had invested in the referenced obligation directly. Credit default swaps are subject to general market risk, liquidity risk, counterparty risk and credit risk. If the Fund is a buyer of protection and no credit event occurs, it will lose the payments it made to its counterparty. If the Fund is a seller of protection and a credit event occurs, the value of the referenced obligation received by the Fund coupled with the periodic payments previously received, may be less than the Maximum Payout Amount it pays to the buyer, resulting in a net loss to the Fund.

During the six months ended November 30, 2015, the Fund held credit default swaps for hedging and non-hedging purposes.

Implied credit spreads over U.S. Treasuries of comparable maturity utilized in determining the market value of credit default swaps on issuers as of period end are disclosed in the consolidated portfolio of investments. The implied spreads serve as an indicator of the current status of the payment/performance risk and typically reflect the likelihood of default by the issuer of the referenced obligation. The implied credit spread of a particular reference obligation also reflects the cost of buying/selling protection and may reflect upfront payments required to be made to enter into the agreement. Widening credit spreads typically represent a deterioration of the referenced obligation’s credit soundness and greater likelihood of

 

82   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Notes to Consolidated Financial Statements

default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as “Defaulted” indicates a credit event has occurred for the referenced obligation.

Total Return Swaps:

The Fund may enter into total return swaps in order take a “long” or “short” position with respect to an underlying referenced asset. The Fund is subject to market price volatility of the underlying referenced asset. A total return swap involves commitments to pay interest in exchange for a market linked return based on a notional amount. To the extent that the total return of the security, group of securities or index underlying the transaction exceeds or falls short of the offsetting interest obligation, the Fund will receive a payment from or make a payment to the counterparty.

During the six months ended November 30, 2015, the Fund held total return swaps for hedging and non-hedging purposes.

The Fund typically enters into International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreement”) or similar master agreements (collectively, “Master Agreements”) with its derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Fund typically may offset with the counterparty certain derivative financial instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default or termination.

Various Master Agreements govern the terms of certain transactions with counterparties, including transactions such as derivative transactions, repurchase and reverse repurchase agreements. These Master Agreements typically attempt to reduce the counterparty risk associated with such transactions by specifying credit protection mechanisms and providing standardization that improves legal certainty. Cross-termination provisions under Master Agreements typically provide that a default in connection with one transaction between the Fund and a counterparty gives the non-defaulting party the right to terminate any other transactions in place with the defaulting party to create one single net payment due to/due from the defaulting party. In the event of a default by a Master Agreements counterparty, the return of collateral with market value in excess of the Fund’s net liability, held by the defaulting party, may be delayed or denied.

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

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     83   

Notes to Consolidated Financial Statements

 

At November 30, 2015, the Fund had entered into the following derivatives:

 

    

Asset Derivatives

    

Liability Derivatives

  

Derivative Type

  

Consolidated
Statement of
Assets and
Liabilities
Location

   Fair Value    

Consolidated
Statement of
Assets and
Liabilities
Location

   Fair Value  

Credit contracts

       Receivable/Payable for variation margin on exchange traded derivatives   $ 5,708 * 

Foreign exchange contracts

  

Unrealized appreciation on forward currency exchange contracts

  

$

826,695

  

  

Unrealized depreciation on forward currency exchange contracts

  

 

253,376

  

Equity contracts

   Investments in securities, at value     398,192       

Credit contracts

   Unrealized appreciation on credit default swaps     424,060      Unrealized depreciation on credit default swaps     683,530   

Equity contracts

   Unrealized appreciation on total return swaps     2,145,186      Unrealized depreciation on total return swaps     708,908   
   

 

 

      

 

 

  

Total

     $   3,794,133        $   1,651,522   
   

 

 

      

 

 

  

 

*   Only variation margin receivable/payable at period end is reported within the consolidated statement of assets and liabilities. This amount reflects cumulative appreciation/(depreciation) of exchange-traded derivatives as reported in the consolidated portfolio of investments.

The effect of derivative instruments on the consolidated statement of operations for the six months ended November 30, 2015:

 

Derivative Type

  

Location of Gain
or (Loss) on
Derivatives

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

Foreign exchange contracts

   Net realized gain (loss) on foreign currency transactions; Net change in unrealized appreciation/depreciation of foreign currency denominated assets and liabilities   $ (18,916 )    $   660,151   

Equity contracts

   Net realized gain (loss) on investment transactions; Net change in unrealized appreciation/depreciation of investments     221,527        91,913   

 

84   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Notes to Consolidated Financial Statements

 

 

Derivative Type

  

Location of Gain
or (Loss) on
Derivatives

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

Equity contracts

   Net realized gain (loss) on options written; Net change in unrealized appreciation/depreciation of options written   $ 13,159      $ (5,983 ) 

Credit contracts

   Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps     522,944        (428,598 ) 

Equity contracts

   Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps     356,885          1,736,602   
   

 

 

    

 

 

  

Total

     $   1,095,599      $   2,054,085   
   

 

 

    

 

 

  

The following table represents the average monthly volume of the Fund’s derivative transactions during the six months ended November 30, 2015:

 

Forward Currency Exchange Contracts:

   

Average principal amount of buy contracts

    $ 6,345,897   

Average principal amount of sale contracts

    $ 27,047,770   
  

Purchased Options:

   

Average monthly cost

    $ 1,367,881   
  

Credit Default Swaps:

   

Average notional amount of buy contracts

    $ 227,950 (a) 

Average notional amount of sale contracts

    $ 33,902,493   
  

Centrally Cleared Credit Default Swaps:

   

Average notional amount of sale contracts

    $ 2,860,000 (a) 
  

Total Return Swaps:

   

Average notional amount

    $     30,504,610   

 

(a)   Positions were open for less than one month during the period.

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

All derivatives held at period end were subject to netting arrangements. The following table presents the Fund’s derivative assets and liabilities by counterparty net of

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     85   

Notes to Consolidated Financial Statements

 

 

amounts available for offset under Master Agreements (“MA”) and net of the related collateral received/ pledged by the Fund as of November 30, 2015:

 

AB Multi-Manager Alternative Strategies Fund   

Counterparty

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

Exchange-Traded Derivatives:

  

Morgan Stanley Co., Inc.**

   $ 745,904      $ – 0  –    $ – 0  –    $ – 0  –    $ 745,904   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 745,904      $ – 0  –    $ – 0  –    $ – 0  –    $ 745,904   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

OTC Derivatives:

  

Bank of America, NA

   $ 35,864      $ – 0  –    $ – 0  –    $ – 0  –    $ 35,864   

Credit Suisse International/ Credit Suisse Securities (USA) LLC

     367,058        (201,422 )      – 0  –      – 0  –      165,636   

Goldman Sachs & Co./ Goldman Sachs International

     128,620        (128,620 )      – 0  –      – 0  –      – 0  – 

Morgan Stanley Capital Services LLC/ Morgan Stanley Co., Inc.

     3,075,834        (721,325 )      – 0  –      – 0  –      2,354,509   

State Street Bank & Trust Co.

     249,017        (6,751 )      – 0  –      – 0  –      242,266   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $     3,856,393      $     (1,058,118 )    $     – 0  –    $     – 0  –    $     2,798,275 ^ 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

Counterparty

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

OTC Derivatives:

  

Citibank, NA

   $ 5,496      $ – 0  –    $ – 0  –    $ – 0  –    $ 5,496   

Credit Suisse International/ Credit Suisse Securities (USA) LLC

     201,422        (201,422 )      – 0  –      – 0  –      – 0  – 

Goldman Sachs & Co./ Goldman Sachs International

     1,280,657        (128,620 )      (540,000 )      – 0  –      612,037   

Morgan Stanley Capital Services LLC/ Morgan Stanley Co., Inc.

     721,325        (721,325 )      – 0  –      – 0  –      – 0  – 

State Street Bank & Trust Co.

     6,751        (6,751 )      – 0  –      – 0  –      – 0  – 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $     2,215,651      $     (1,058,118 )    $     (540,000 )    $     – 0  –    $     617,533 ^ 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

*   The actual collateral received/pledged may be more than the amount reported due to overcollateralization.

 

**   Cash has been posted for initial margin requirements for exchange traded derivatives outstanding at November 30, 2015.

 

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

 

86   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Notes to Consolidated Financial Statements

 

 

 

AllianceBernstein Multi-Manager Alternative Strategies Fund (Cayman) Ltd.   

Counterparty

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

OTC Derivatives:

  

Credit Suisse International

   $ 150,371      $ – 0  –    $ – 0  –    $ – 0  –    $ 150,371   

Goldman Sachs & Co.

     134,014        – 0  –      – 0  –      – 0  –      134,014   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $     284,385      $     – 0  –    $     – 0  –    $     – 0  –    $     284,385 ^ 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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

2. Currency Transactions

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

3. Short Sales

The Fund may sell securities short. A short sale is a transaction in which the Fund sells securities it does not own, but has borrowed, in anticipation of a decline in the market price of the securities. The Fund is obligated to replace the borrowed securities at their market price at the time of settlement. The Fund’s obligation to replace the securities borrowed in connection with a short sale will be fully secured by collateral deposited with the broker. The Fund is liable to the buyer for any dividends/interest payable on securities while those securities are in a short position. These dividends/interest are recorded as an expense of the Fund. Short sales by the Fund involve certain risks and special considerations. Possible losses from short sales differ from losses that could be incurred from a purchase of a security because losses from short sales may be unlimited, whereas losses from purchases cannot exceed the total amount invested.

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     87   

Notes to Consolidated Financial Statements

 

 

NOTE E

Securities Lending

The Fund may enter into securities lending transactions. Under the Fund’s securities lending program, all loans of securities will be collateralized continually by cash. The Fund will be compensated for the loan from a portion of the net return from the income earned on cash collateral after a rebate is paid to the borrower (in some cases, this rebate may be a “negative rebate” or fee paid by the borrower to the Fund in connection with the loan), and payments are made for fees of the securities lending agent and for certain other administrative expenses. It is the policy of the Fund to receive collateral consisting of cash in an amount exceeding the value of the securities loaned. The Fund will have the right to call a loan and obtain the securities loaned at any time on notice to the borrower within the normal and customary settlement time for the securities. While the securities are on loan, the borrower is obligated to pay the Fund amounts equal to any income or other distributions from the securities. The Fund will not have the right to vote on any securities during the existence of a loan, but will have the right to regain ownership of loaned securities in order to exercise voting or other ownership rights. The lending agent has agreed to indemnify the Fund in the case of default of any securities borrower. Collateral received and securities loaned are marked to market daily to ensure that the securities loaned are secured by collateral. The lending agent will invest the cash collateral received in AB Exchange Reserves, an eligible money market vehicle, in accordance with the investment restrictions of the Fund, and as approved by the Board. The collateral received on securities loaned is recorded as an asset as well as a corresponding liability in the consolidated statement of assets and liabilities. When the Fund lends securities, its investment performance will continue to reflect changes in the value of the securities loaned. At November 30, 2015, the Fund had securities on loan with a value of $4,190,309 and had received cash collateral which has been invested into AB Exchange Reserves of $4,413,167. The cash collateral will be adjusted on the next business day to maintain the required collateral amount. The Fund earned securities lending income of $66,865 and $4,191 from the borrowers and AB Exchange Reserves, respectively, for the six months ended November 30, 2015; these amounts are reflected in the consolidated statement of operations. A principal risk of lending portfolio securities is that the borrower will fail to return the loaned securities upon termination of the loan and that the collateral will not be sufficient to replace the loaned securities. A summary of the Fund’s transactions in shares of AB Exchange Reserves for the six months ended November 30, 2015 is as follows:

 

Market Value
May 31, 2015
(000)

   Purchases
at Cost
(000)		     Sales
Proceeds
(000)		     Market Value
November 30, 2015
(000)		  
$    8,799   $     28,605      $     32,991      $     4,413   

 

88   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Notes to Consolidated Financial Statements

 

 

NOTE F

Capital Stock

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

 

            
     Shares         Amount      
     Six Months Ended
November 30, 2015
(unaudited)		     July 31, 2014(a) to
May 31, 2015		         Six Months Ended
November 30, 2015
(unaudited)		     July 31, 2014(a) to
May 31, 2015		      
  

 

 

    
Class A             

Shares sold

      218,356        21,702        $ 2,229,789      $ 221,615     

 

    

Shares redeemed

      (1,613 )      (1,752 )        (16,205 )      (18,040 )   

 

    

Net increase

      216,743        19,950        $ 2,213,584      $ 203,575     

 

    
            
Class C             

Shares sold

      47,810        10,568        $ 477,191      $ 106,986     

 

    

Shares redeemed

      (2,875 )      – 0  –        (28,302 )      – 0  –   

 

    

Net increase

      44,935        10,568        $ 448,889      $ 106,986     

 

    
            
Advisor Class             

Shares sold

      871,187        334,377        $ 8,787,477      $ 3,434,898     

 

    

Shares redeemed

      (50,201 )      (7,816 )        (505,667 )      (80,417 )   

 

    

Net increase

      820,986        326,561        $ 8,281,810      $ 3,354,481     

 

    
            
Class R             

Shares sold

      – 0  –      1,000        $ – 0  –    $ 10,003     

 

    

Net increase

      – 0  –      1,000        $ – 0  –    $ 10,003     

 

    
            
Class K             

Shares sold

      98        7,581        $ 990      $ 77,716     

 

    

Net increase

      98        7,581        $ 990      $ 77,716     

 

    
            
Class I             

Shares sold

      – 0  –      1,000        $ – 0  –    $ 10,003     

 

    

Net increase

      – 0  –      1,000        $ – 0  –    $ 10,003     

 

    
            
Class Z             

Shares sold

      617,154        41,514,837        $ 6,239,010      $ 415,453,768     

 

    

Shares redeemed

      (2,332,796 )      (3,497,451 )        (23,547,127 )      (35,219,904 )   

 

    

Net increase (decrease)

      (1,715,642 )      38,017,386        $ (17,308,117 )    $ 380,233,864     

 

    

 

(a)   

Commencement of operations.

NOTE G

Risks Involved in Investing in the Fund

Allocation and Management Risk—The Adviser will invest the assets of the Fund primarily by allocating Fund assets to the Sub-Advisers. The success of the Fund depends, in part, upon the ability of the Sub-Advisers to develop and implement strategies to achieve the Fund’s investment objective. There is no assurance that the Adviser’s allocation decisions will result in the desired effects. Subjective

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     89   

Notes to Consolidated Financial Statements

 

decisions made by the Adviser (e.g., with respect to allocation among Strategies) and/or the Sub-Advisers may cause the Fund to incur losses or to miss profit opportunities on which it might otherwise have capitalized. The success of the Fund’s investment program depends primarily on the trading and investing skills of the Sub-Advisers rather than on the trading and investing skills of the Adviser itself. To the extent that the Adviser is unable to select, manage, allocate appropriate levels of capital to, and invest with Sub-Advisers that, in the aggregate, are able to produce consistently positive returns for the Fund, the performance of the Fund may be impaired.

Some Sub-Advisers have little experience managing registered investment companies which, unlike the private investment funds these Sub-Advisers have been managing, are subject to daily inflows and outflows of investor cash and are subject to certain legal and tax-related restrictions on their investments and operations. Subject to the overall supervision of the Fund’s investment program by the Adviser, each Sub-Adviser is responsible, with respect to the portion of the Fund’s assets it manages, for compliance with the Fund’s investment strategies and applicable law.

Strategies implemented by the Sub-Advisers may fail to produce the intended results. The success of a particular Sub-Adviser is dependent on the expertise of its portfolio managers. Certain Sub-Advisers may have only one or a limited number of key individuals responsible for managing the Fund’s assets. The loss of one or more key individuals from a Sub-Adviser could have a materially adverse effect on the performance of the Fund.

Short Sales Risk—The Fund may engage in short-selling, which involves the sale of a security that the Fund does not own in the hope of purchasing the same or equivalent security at a later date at a lower price. A short sale involves the risk of an increase in the market price of the security, and therefore the possibility of a theoretically unlimited loss. The Fund must borrow the security to initiate the short sale, and it may be difficult and costly to effect the purchase of the security in order to return it to the lender, particularly if the security is illiquid. The Fund may for a number of reasons be forced to unwind a short sale at a disadvantageous price.

Volatility Risk—The Fund will frequently be subject to substantial volatility, which could result from a number of causes. Furthermore, there is the risk that a disproportionate share of the Fund’s assets may be committed to one or more investment strategies or techniques, which would result in less diversification than would be suggested by the number of Sub-Advisers being employed. The allocation of Fund assets to Sub-Advisers in response to particular market conditions could increase volatility and potential for loss if such market conditions continue to worsen or react in a manner not anticipated by the Adviser.

Portfolio Turnover Risk—Certain Sub-Advisers may invest and trade securities on the basis of certain short-term market considerations. The resultant high portfolio turnover could potentially involve substantial brokerage commissions and fees.

 

90   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Notes to Consolidated Financial Statements

 

 

Special Situations Investment Risk—Special situations investing requires a Sub-Adviser to make predictions about the likelihood that an event will occur and the impact such event will have on the value of a company’s securities. If the event fails to occur or it does not have the effect foreseen, losses can result.

Fixed-Income Securities Risk—The Fund may invest in debt or other fixed-income securities of U.S. and non-U.S. issuers. The value of fixed-income securities will change in response to fluctuations in interest rates and changes in market perception of the issuer’s creditworthiness or other factors. The Fund may invest to a substantial degree in debt securities rated below investment grade, otherwise known as high-yield securities or “junk bonds.” High-yield securities may rank junior to other outstanding securities and obligations of the issuer. Moreover, high-yield securities may not be protected by financial covenants or limitations on additional indebtedness. Companies that issue high-yield securities are often highly leveraged and may not have available to them more traditional methods of financing. High-yield securities face ongoing uncertainties and exposure to adverse business, financial or economic conditions that could lead to the issuer’s inability to meet timely interest and principal payments.

Derivatives Risk—The Fund may enter into derivative transactions such as forwards, options, futures and swaps. Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Fund, and subject to counterparty risk to a greater degree than more traditional investments. Derivatives may result in significant losses, including losses that are far greater than the value of the derivatives reflected in the consolidated statement of assets and liabilities.

Non-U.S. Investments Risk—The Fund may invest in securities of non-U.S. companies and foreign countries. Investing in the securities of such companies and countries involves political and economic considerations, such as: the potential difficulty of repatriating funds, general social, political and economic instability and adverse diplomatic developments; the possibility of imposition of withholding or other taxes on income or capital gains; the small size of the securities markets in such countries and the low volume of trading, resulting in potential lack of liquidity and price volatility; fluctuations in the rate of exchange between currencies and costs associated with currency conversion; and certain government policies that may restrict the Fund’s investment opportunities. The economies of non-U.S. countries may differ favorably or unfavorably from the United States economy in such respects as growth of gross domestic product, rate of inflation, currency depreciation, asset reinvestment, resource self-sufficiency and balance of payments position. In addition, accounting and financial reporting standards that prevail in non-U.S. countries generally are not equivalent to U.S. standards and, consequently, less information may be available to investors in companies located in non-U.S. countries than is available to investors in companies located in the United States.

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     91   

Notes to Consolidated Financial Statements

 

 

Currency Risk—The Fund may invest a portion of its assets in instruments denominated in currencies other than the U.S. dollar, the prices of which are determined with reference to currencies other than the U.S. dollar. The Fund, however, generally values its securities and other assets in U.S. dollars. To the extent unhedged, the value of the Fund’s assets will fluctuate with currency exchange rates as well as with the price changes of the Fund’s investments. Thus, an increase in the value of the U.S. dollar compared to the other currencies in which the Fund makes its investments will reduce the effect of increases and magnify the effect of decreases in the prices of the Fund’s securities in their local markets. The Fund may utilize financial instruments such as currency options and forward contracts to hedge currency fluctuations, but there can be no assurance that such hedging transactions (if implemented) will be effective.

Multi-Manager Risk—The multi-manager strategy employed by the Fund involves special risks, which include:

 

•  

Offsetting positions. Sub-Advisers may make investment decisions which conflict with each other; for example, at any particular time, one Sub-Adviser may be purchasing shares of an issuer whose shares are being sold by another Sub-Adviser. Consequently, the Fund could indirectly incur transaction costs without accomplishing any net investment result.

 

•  

Proprietary investment strategy risk—Sub-Advisers may use proprietary or licensed investment strategies that are based on considerations and factors that are not fully disclosed to the Board or the Adviser. Moreover, these proprietary or licensed investment strategies, which may include quantitative mathematical models or systems, may be changed or refined over time. A Sub-Adviser (or the licensor of the strategies used by the Sub-Adviser) may make certain changes to the strategies the Sub-Adviser has previously used, may not use such strategies at all (or the Sub-Adviser’s license may be revoked), and may use additional strategies, where such changes or discretionary decisions, and the reasons for such changes or decisions, are also not fully disclosed to the Board or the Adviser. These strategies may involve risks under some market conditions that are not anticipated by the Adviser or the Fund.

Non-Diversification Risk—The Fund is a “non-diversified” investment company, which means that the Fund may invest a larger portion of its assets in a smaller number of issuers than a diversified investment company. This increases the risks of investing in the Fund because the performance of each security in which the Fund invests has a greater impact on the Fund’s performance. To the extent that the Fund invests a relatively high percentage of its assets in securities of a limited number of companies, the Fund may also be more susceptible than a diversified investment company to any single economic, political or regulatory occurrence.

Leverage Risk—Leverage creates exposure to gains and losses in a greater amount than the dollar amount made in an investment by attempting to

 

92   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Notes to Consolidated Financial Statements

enhance return or value without increasing the investment amount. Leverage can magnify the effects of changes in the value of the Fund’s investments and make the Fund more volatile. The use of leverage may cause the Fund to liquidate portfolio positions when it may not be advantageous to do so.

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

NOTE H

Distributions to Shareholders

As of May 31, 2015, the components of accumulated earnings/(deficit) on a tax basis were as follows:

 

Undistributed ordinary income

    $ 2,716,278   

Accumulated capital and other losses

      (770,272 )(a) 

Unrealized appreciation/(depreciation)

      11,655,389 (b) 
  

 

 

  

Total accumulated earnings/(deficit)

    $     13,601,395 (c) 
  

 

 

  

 

(a)   

As of May 31, 2015, the Fund’s cumulative deferred loss on straddles was $702,130 and deferred losses on unsettled short sales was $68,142.

 

(b)   

The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the tax deferral of losses on wash sales, the tax treatment of swaps and passive foreign investment companies (PFICs), the realization for tax purposes of gains/losses on certain derivative instruments, the tax treatment of earnings from the Subsidiary and the recognition of gains on constructive sales for tax purposes.

 

(c)   

The difference between book-basis and tax-basis components of accumulated earnings/(deficit) is attributable primarily to the tax treatment of defaulted securities and the tax treatment of earnings from the Subsidiary.

For tax purposes, net capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses incurred for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses.

NOTE I

Joint Credit Facility

A number of open-end mutual funds managed by the Adviser, including the Fund, participate in a $280 million revolving credit facility (the “Facility”) intended to provide short-term financing, if necessary, subject to certain restrictions in connection with abnormal redemption activity. Commitment fees related to the Facility are paid by the participating funds and are included in miscellaneous expenses in the consolidated statement of operations. The Fund did not utilize the Facility during the six months ended November 30, 2015.

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     93   

Notes to Consolidated Financial Statements

NOTE J

New Accounting Pronouncement

In May 2015, the Financial Accounting Standards Board issued an Accounting Standards Update (“ASU”), ASU 2015-07, which removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The ASU also removes the disclosure requirement for investments not valued at net asset value. The ASU is effective for annual periods beginning after December 15, 2015 and interim periods within those annual periods. At this time, management is evaluating the implications of these changes on the consolidated financial statements.

NOTE K

Subsequent Events

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

 

94   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Notes to Consolidated Financial Statements

CONSOLIDATED FINANCIAL HIGHLIGHTS

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

 

    Class A  
    Six Months
Ended
November 30,
2015		     July 31,
2014(a) to
May 31,
2015		  
 

 

 

  

Net asset value, beginning of period

     $  10.33        $  10.00   
 

 

 

  

Income From Investment Operations

    

Net investment loss(b)(c)

     (.03 )      (.07 ) 

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

     (.30 )      .40   
 

 

 

  

Net increase (decrease) in net asset value from operations

     (.33 )      .33   
 

 

 

  

Net asset value, end of period

     $  10.00        $  10.33   
 

 

 

  

Total Return

    

Total investment return based on net asset value(d)

     (3.10 )%      3.20  % 

Ratios/Supplemental Data

    

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

     $2,367        $206   

Ratio to average net assets of:

    

Expenses, net of waivers/reimbursements(e)^

     2.96  %      3.13  % 

Expenses, before waivers/reimbursements(e)^

     3.46  %      4.44  % 

Net investment loss(c)^

     (.65 )%      (.86 )% 

Portfolio turnover rate

     87  %      190  % 

Portfolio turnover rate (including securities sold short)

     107  %      251  % 

See footnote summary on page 102.

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     95   

Consolidated Financial Highlights

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

 

    Class C  
    Six Months
Ended
November 30,
2015		     July 31,
2014(a) to
May 31,
2015		  
 

 

 

  

Net asset value, beginning of period

     $  10.27        $  10.00   
 

 

 

  

Income From Investment Operations

    

Net investment loss(b)(c)

     (.07 )      (.14 ) 

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

     (.30 )      .41   
 

 

 

  

Net increase (decrease) in net asset value from operations

     (.37 )      .27   
 

 

 

  

Net asset value, end of period

     $  9.90        $  10.27   
 

 

 

  

Total Return

    

Total investment return based on net asset value(d)

     (3.51 )%      2.60  % 

Ratios/Supplemental Data

    

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

     $549        $108   

Ratio to average net assets of:

    

Expenses, net of waivers/reimbursements(e)^

     3.70  %      3.90  % 

Expenses, before waivers/reimbursements(e)^

     4.21  %      5.37  %* 

Net investment loss(c)^

     (1.39 )%      (1.67 )% 

Portfolio turnover rate

     87  %      190  % 

Portfolio turnover rate (including securities sold short)

     107  %      251  % 

See footnote summary on page 102.

 

96   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Consolidated Financial Highlights

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

 

    Advisor Class  
    Six Months
Ended
November 30,
2015		     July 31,
2014(a) to
May 31,
2015		  
 

 

 

  

Net asset value, beginning of period

     $  10.35        $  10.00   
 

 

 

  

Income From Investment Operations

    

Net investment loss(b)(c)

     (.02 )      (.04 ) 

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

     (.30 )      .39   
 

 

 

  

Net increase (decrease) in net asset value from operations

     (.32 )      .35   
 

 

 

  

Net asset value, end of period

     $  10.03        $  10.35   
 

 

 

  

Total Return

    

Total investment return based on net asset value(d)

     (3.09 )%      3.50  % 

Ratios/Supplemental Data

    

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

     $11,514        $3,380   

Ratio to average net assets of:

    

Expenses, net of waivers/reimbursements(e)^

     2.68  %      2.82  % 

Expenses, before waivers/reimbursements(e)^

     3.20  %      3.76  % 

Net investment loss(c)^

     (.35 )%      (.52 )% 

Portfolio turnover rate

     87  %      190  % 

Portfolio turnover rate (including securities sold short)

     107  %      251  % 

See footnote summary on page 102.

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     97   

Consolidated Financial Highlights

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

 

    Class R  
    Six Months
Ended
November 30,
2015		     July 31,
2014(a) to
May 31,
2015		  
 

 

 

  

Net asset value, beginning of period

     $  10.30        $  10.00   
 

 

 

  

Income From Investment Operations

    

Net investment loss(b)(c)

     (.05 )      (.10 ) 

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

     (.29 )      .40   
 

 

 

  

Net increase (decrease) in net asset value from operations

     (.34 )      .30   
 

 

 

  

Net asset value, end of period

     $  9.96        $  10.30   
 

 

 

  

Total Return

    

Total investment return based on net asset value(d)

     (3.30 )%      3.00  % 

Ratios/Supplemental Data

    

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

     $10        $10   

Ratio to average net assets of:

    

Expenses, net of waivers/reimbursements(e)^

     3.26  %      3.25  % 

Expenses, before waivers/reimbursements(e)^

     3.68  %      3.78  % 

Net investment loss(c)^

     (1.07 )%      (1.16 )% 

Portfolio turnover rate

     87  %      190  % 

Portfolio turnover rate (including securities sold short)

     107  %      251  % 

See footnote summary on page 102.

 

98   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Consolidated Financial Highlights

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

 

    Class K  
    Six Months
Ended
November 30,
2015		     July 31,
2014(a) to
May 31,
2015		  
 

 

 

  

Net asset value, beginning of period

     $  10.32        $  10.00   
 

 

 

  

Income From Investment Operations

    

Net investment loss(b)(c)

     (.04 )      (.07 ) 

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

     (.29 )      .39   
 

 

 

  

Net increase (decrease) in net asset value from operations

     (.33 )      .32   
 

 

 

  

Net asset value, end of period

     $  9.99        $  10.32   
 

 

 

  

Total Return

    

Total investment return based on net asset value(d)

     (3.20 )%      3.20  % 

Ratios/Supplemental Data

    

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

     $77        $78   

Ratio to average net assets of:

    

Expenses, net of waivers/reimbursements(e)^

     3.03  %      3.06  % 

Expenses, before waivers/reimbursements(e)^

     3.47  %      3.49  % 

Net investment loss(c)^

     (.81 )%      (.87 )% 

Portfolio turnover rate

     87  %      190  % 

Portfolio turnover rate (including securities sold short)

     107  %      251  % 

See footnote summary on page 102.

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     99   

Consolidated Financial Highlights

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

 

    Class I  
    Six Months
Ended
November 30,
2015		     July 31,
2014(a) to
May 31,
2015		  
 

 

 

  

Net asset value, beginning of period

     $  10.34        $  10.00   
 

 

 

  

Income From Investment Operations

    

Net investment loss(b)(c)

     (.03 )      (.06 ) 

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

     (.28 )      .40   
 

 

 

  

Net increase (decrease) in net asset value from operations

     (.31 )      .34   
 

 

 

  

Net asset value, end of period

     $  10.03        $  10.34   
 

 

 

  

Total Return

    

Total investment return based on net asset value(d)

     (3.00 )%      3.40  % 

Ratios/Supplemental Data

    

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

     $10        $10   

Ratio to average net assets of:

    

Expenses, net of waivers/reimbursements(e)^

     2.78  %      2.76  % 

Expenses, before waivers/reimbursements(e)^

     3.16  %      3.26  % 

Net investment loss(c)^

     (.57 )%      (.66 )% 

Portfolio turnover rate

     87  %      190  % 

Portfolio turnover rate (including securities sold short)

     107  %      251  % 

See footnote summary on page 102.

 

100   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Consolidated Financial Highlights

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

 

    Class Z  
    Six Months
Ended
November 30,
2015		     July 31,
2014(a) to
May 31,
2015		  
 

 

 

  

Net asset value, beginning of period

     $  10.34        $  10.00   
 

 

 

  

Income From Investment Operations

    

Net investment loss(b)(c)

     (.03 )      (.06 ) 

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

     (.28 )      .40   
 

 

 

  

Net increase (decrease) in net asset value from operations

     (.31 )      .34   
 

 

 

  

Net asset value, end of period

     $  10.03        $  10.34   
 

 

 

  

Total Return

    

Total investment return based on net asset value(d)

     (3.00 )%      3.40  % 

Ratios/Supplemental Data

    

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

     $363,972        $393,258   

Ratio to average net assets of:

    

Expenses, net of waivers/reimbursements(e)^

     2.78  %      2.76  % 

Expenses, before waivers/reimbursements(e)^

     3.19  %      3.25  % 

Net investment loss(c)^

     (.57 )%      (.67 )% 

Portfolio turnover rate

     87  %      190  % 

Portfolio turnover rate (including securities sold short)

     107  %      251  % 

See footnote summary on page 102.

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     101   

Consolidated Financial Highlights

(a)   Commencement of operations.

 

(b)   Based on average shares outstanding.

 

(c)   Net of fees and expenses waived/reimbursed by the Adviser.

 

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

 

(e)   The expense ratios presented below exclude expenses on securities sold short:

 

     Six Months Ended
November 30, 2015		     July 31, 2014(a)
to  May 31, 2015		  

Class A

     

Net of waivers^

      2.24 %      2.24 % 

Before waivers^

      2.74 %      3.55 % 

Class C

     

Net of waivers^

      2.99 %      2.99 % 

Before waivers^

      3.50 %      16.36 % 

Advisor Class

     

Net of waivers^

      1.99 %      1.99 % 

Before waivers^

      2.51 %      2.93 % 

Class R

     

Net of waivers^

      2.49 %      2.49 % 

Before waivers^

      2.91 %      3.03 % 

Class K

     

Net of waivers^

      2.24 %      2.24 % 

Before waivers^

      2.67 %      2.67 % 

Class I

     

Net of waivers^

      1.99 %      1.99 % 

Before waivers^

      2.37 %      2.49 % 

Class Z

     

Net of waivers^

      1.99 %      1.99 % 

Before waivers^

      2.40 %      2.48 % 

 

^   Annualized.

 

*   Restatement.

See notes to consolidated financial statements.

 

102   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Consolidated Financial Highlights

BOARD OF DIRECTORS

 

Marshall C. Turner, Jr.(1) , Chairman

John H. Dobkin(1)

Michael J. Downey(1)

William H. Foulk, Jr.(1)

D. James Guzy(1)

  

Nancy P. Jacklin(1)

Robert M. Keith, President and Chief Executive Officer

Garry L. Moody(1)

Earl D. Weiner(1)

OFFICERS

Philip L. Kirstein,

Senior Vice President and Independent Compliance Officer

Marc H. Gamsin(2), Vice President

Greg Outcalt(2), Vice President

Joseph J. Mantineo, Treasurer and Chief Financial Officer

   

Emilie D. Wrapp, Secretary

Phyllis J. Clarke, Controller

Vincent S. Noto, Chief Compliance Officer

 

Custodian and Accounting Agent

State Street Bank and Trust Company

State Street Corporation CCB/5

1 Iron Street

Boston, MA 02210

 

Principal Underwriter

AllianceBernstein Investments, Inc. 1345 Avenue of the Americas

New York, NY 10105

 

Transfer Agent

AllianceBernstein Investor Services, Inc. P.O. Box 786003

San Antonio, TX 78278-6003

Toll-Free (800) 221-5672

   

Independent Registered Public

Accounting Firm

Ernst & Young LLP

5 Times Square

New York, NY 10036

 

Legal Counsel

Seward & Kissel LLP

One Battery Park Plaza

New York, NY 10004

 

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

 

(2)   The day-to-day management of, and investment decisions for, the Fund are made by its senior management team. Messrs. Gamsin and Outcalt are the investment professionals with the most significant responsibility for the day-to-day management of the Fund’s portfolio.

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     103   

Board of Directors

 

 

Approval of Sub-Advisory Agreements

At meetings of the Board of Directors of AB Cap Fund, Inc. (the “Company”) held on June 24, 2015 and November 3-5, 2015, the Adviser recommended the appointment of each of the sub-advisers listed below as additional Sub-Advisers to AB Multi-Manager Alternative Strategies Fund (the “Fund”), a series of the Company:

 

  •  

Brigade Capital Management, LP (at June meeting)

 

  •  

One River Asset Management, LLC (at November meeting)

The recommendation of each Sub-Adviser was made by the Adviser in the ordinary course of its ongoing evaluation of prospective sub-advisers. The Adviser explained that its recommendation to engage each Sub-Adviser to manage a portion of the Fund’s assets was based on, among other factors, the Adviser’s evaluation of the Sub-Adviser’s performance during various time periods and market cycles; the Sub-Adviser’s reputation, experience, investment philosophy and policies; the Sub-Adviser’s training of its principals and key personnel; and the Adviser’s analysis that the Sub-Adviser’s investment strategy is complementary to the investment strategies of the Fund’s other sub-advisers.

The Independent Directors unanimously approved each proposed Sub-Advisory Agreement in respect of the Fund for an initial two-year period. Prior to approval of each Sub-Advisory Agreement, the Independent Directors had requested from the Adviser and the Sub-Adviser, and received and evaluated, extensive materials. They reviewed each proposed Sub-Advisory Agreement with the Adviser and with experienced counsel who are independent of the Adviser and the Sub-Adviser, who advised on the relevant legal standards. The Independent Directors also discussed each proposed approval in private sessions with counsel and the Company’s Senior Officer.

The Independent Directors also considered all other factors they believed relevant, including the specific matters discussed below. In their deliberations, the Independent Directors did not identify any particular information that was all-important or controlling, and different Directors may have attributed different weights to the various factors. The Independent Directors concluded that the Adviser’s recommendation of each Sub-Adviser was reasonable and had the potential to benefit the Fund. The Independent Directors also determined that the overall arrangements between the Adviser and each Sub-Adviser, as provided in the its Sub-Advisory Agreement, including the sub-advisory fee payable by the Adviser to the Sub-Adviser, were fair and reasonable in light of the services to be performed, expenses to be incurred and such other matters as the

 

104   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

Directors considered relevant in the exercise of their business judgment. The material factors and conclusions that formed the basis for the Independent Directors’ determination included the following:

Nature, Extent and Quality of Services to be Provided

In determining to approve each Sub-Advisory Agreement, the Independent Directors relied to a significant extent on the due diligence review performed by the Adviser to develop a recommendation to the Directors for each Sub-Adviser to serve as a sub-adviser. The Independent Directors also reviewed extensive materials concerning each Sub-Adviser and met with representatives of each Sub-Adviser. The Independent Directors’ review of each Sub-Adviser and the nature, extent and quality of the services to be provided by it covered, among other things: historical investment performance; information about the strategy to be used by each sub-adviser in managing the Allocated Portion, including differences between such strategy and that used by each Sub-Adviser in managing non-investment company assets; the reputation of each Sub-Adviser in the investment management industry; its compensation structure and ability to attract and retain talented professionals; its policies and procedures to address potential conflicts of interest, including with respect to the fair allocation of investment opportunities among its various accounts; its risk management program and organization; and its compliance program. The Directors also received a report from the Company’s Chief Compliance Officer concerning the compliance programs of each Sub-Adviser and a summary of material differences between the compliance policies and procedures of each Sub-Adviser and those of the Adviser.

Cost of Services to be Provided and Profitability

The Independent Directors noted that the Fund’s compliance policies and procedures require each Sub-Adviser to provide information about the profitability of its relationship with the Fund and collateral benefits from such relationship in connection with future continuances of each Sub-Advisory Agreement. With respect to benefits relating to soft dollar arrangements (whereby the Adviser receives brokerage and research services from brokers that execute transactions for certain clients, including the Fund), the Independent Directors recognized that since the Sub-Advisers of the Fund will place trading orders, benefits of soft dollar arrangements in respect of the Fund would normally accrue to the Sub-Advisers rather than the Adviser. In the case of the Sub-Advisory Agreement with Brigade Capital Management, LP, the Adviser informed the Independent Directors that the Allocated Portion would primarily include fixed-income securities so Brigade’s soft dollar benefit would be limited. The Independent Directors also considered the amount and competitiveness of the sub-advisory fee payable to each Sub-Adviser, noting that such fee had been negotiated by the Adviser (which is not affiliated with either Sub-Adviser) and was payable by the Adviser out of the advisory fee paid to the Adviser by the Fund. Accordingly, the retention of the Sub-Advisers would not directly or indirectly result in an increase in the aggregate advisory fee rate payable by the Fund. The

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     105   

Independent Directors also reviewed the form of each Sub-Advisory Agreement and the Adviser informed them that each Sub-Advisory Agreement was substantially similar to the Fund’s other sub-advisory agreements. The Independent Directors reviewed information showing the expected impact of the addition of each Sub-Adviser on the Adviser’s profitability.

Economies of Scale

The Independent Directors noted that the advisory and sub-advisory fee schedules for the Fund do not contain breakpoints and that they had discussed their strong preference, and that of the Company’s Senior Officer, for breakpoints in advisory contracts with the Adviser. The Independent Directors considered their understanding that the Fund was not expected to outgrow its expense cap or become profitable to the Adviser until it had gathered very substantial assets, and informed the Adviser that they would monitor the Fund’s assets and its profitability to the Adviser and anticipated revisiting the question of breakpoints in the future if circumstances warranted doing so.

Consideration of Amendments to Sub-Advisory Agreements

At the November 3-5, 2015 meeting of the Board, the Adviser also recommended that the termination provisions in each of the Sub-Advisory Agreements between the Adviser and the Sub-Advisers of the Fund set forth below be amended to provide that they may be terminated (i) by the Board, or by a vote of a majority of the outstanding voting securities of the Fund, upon 60 days’ prior written notice to the Adviser and the Sub-Adviser, (ii) by the Sub-Adviser upon 90 days’ prior written notice to the Adviser and the Fund, or (iii) by the Adviser, without payment of any penalty, upon 60 days’ prior written notice to the Sub-Adviser. The Adviser did not propose any changes to the provisions permitting immediate termination by the Adviser upon the occurrence of any material breach by the Sub-Adviser. Each Sub-Advisory Agreement prior to such amendments permitted termination by the Board, by the Adviser, or by both, on 30 days’ notice. These amendments would affect the Sub-Advisory Agreements with Chilton Investment Company LLC, Kynikos Associates LP, Lyrical Asset Management LP, MPAM Credit Trading Partners L.P., and Passport Capital, LLC. The Adviser explained that the amendments would relieve the Adviser of a burdensome reporting obligation caused by the shorter notice period without, in its view, having any effect on its ongoing ability to manage the Fund. The Adviser also expressed its belief that the amendments would not be material to an investor’s investment decision in respect of the Fund and noted that a majority of the sub-advisory agreements currently require 60 days’ notice from the Adviser to the sub-adviser for termination. The Adviser had provided the Independent Directors with a memorandum explaining its analysis and the form of amendment prior to the meeting. After discussion with experienced counsel who are independent of the Adviser and with the Adviser, the Independent Directors concluded that the proposed amendments were not material and unanimously approved the proposed amendments to the Sub-Advisory Agreements.

 

106   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

 

 

THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS

SUMMARY OF SENIOR OFFICER’S EVALUATION OF INVESTMENT ADVISORY AGREEMENT1

The following is a summary of the evaluation of the Investment Advisory Agreement between AllianceBernstein L.P. (the “Adviser”) and AllianceBernstein Cap Fund, Inc. (the “Fund”) in respect of AllianceBernstein Multi-Manager Alternative Strategies Fund (the “Portfolio”),2 prepared by Philip L. Kirstein, the Senior Officer of the Fund for the Directors of the Fund, as required by the August 2004 agreement between the Adviser and the New York State Attorney General (the “NYAG”). The Senior Officer’s evaluation of the Investment Advisory Agreement is not meant to diminish the responsibility or authority of the Board of Directors of the Fund to perform its duties pursuant to Section 15 of the Investment Company Act of 1940 (the “40 Act”) and applicable state law. The purpose of the summary is to provide shareholders with a synopsis of the independent evaluation of the reasonableness of the advisory fees proposed to be paid by the Portfolio which was provided to the Directors in connection with their review of the proposed initial approval of the Investment Advisory Agreement.

The Portfolio is an open end fund, registered under the 1940 Act, that invests primarily in “alternative” or non-traditional investments in portfolio sleeves managed by various unaffiliated sub-advisers (the “Sub-Advisers”) overseen by the Adviser. Sub-Advisers are retained by the Adviser with the Board of Directors’ approval to manage the individual sleeves in the Portfolios. The Portfolio, to a lesser extent, may invest in registered investment companies sponsored or advised by third party managers.

The Portfolio’s investment objective is to seek long term growth of capital. The Portfolio’s primary strategies are Long/Short Equity (20%-60%), Special Situations (10%-40%), Credit (10-40%) and Global Macro (0-20%).

Long Short Equity: In a Long/Short Equity strategy, a Sub-Adviser generally seeks to buy certain securities in the expectation that they will increase in value and sell other securities short in the expectation that they will decrease in value.

Special Situations: Special Situations strategies seek to take advantage of information inefficiencies resulting from a particular corporate event and exploit differences between the market value and estimated actual value of a security or instrument that may not be related to a specific corporate event.

 

1   The Senior Officer’s fee evaluation was completed on April 25, 2014 and discussed with the Board of Directors on May 6-8, 2014.

 

2  

Future references to the Portfolio do not include “AllianceBernstein.” References in the fee summary pertaining to performance and expense ratios refer to the Class A shares of the Portfolio.

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     107   

 

 

Credit: A Sub-Adviser that employs Credit Strategies generally invests in a variety of fixed income and other securities. This strategy also includes opportunistic trading and investing in securities of distressed companies and high yield. The Portfolio may invest in various Credit Strategies that involve taking a long or short position in different financial instruments.

Global Macro: Global Macro strategies aim to identify and exploit imbalances in global economies and asset classes. Through encompassing many approaches and styles, macro strategies are linked by the utilization of macroeconomic and technical factors, rather than “bottom-up” individual security analysis, as the primary basis for management.

The Adviser proposed the Bank of America/Merrill Lynch 3-Month T-Bill Index as the Portfolio’s benchmark. The Portfolio will have a secondary benchmark, the HFRX Global Hedge Fund Index. The Adviser anticipates that Lipper will place the Portfolio in its Alternative Multi-Strategies category, and that Morningstar will place the Portfolio in its Multi-Alternative category.

The Senior Officer’s evaluation considered the following factors:

 

  1. Advisory fees charged to institutional and other clients of the Adviser for like services;

 

  2. Advisory fees charged by other mutual fund companies for like services;

 

  3. Costs to the Adviser and its affiliates of supplying services pursuant to the advisory agreement, excluding any intra-corporate profit;

 

  4. Profit margins of the Adviser and its affiliates from supplying such services;

 

  5. Possible economies of scale as the Portfolio grows larger; and

 

  6. Nature and quality of the Adviser’s services including the performance of the Portfolio.

These factors, with the exception of the first factor, are generally referred to as the “Gartenberg factors,” which were articulated by the United States Court of Appeals for the Second Circuit in 1982. Gartenberg v. Merrill Lynch Asset Management, Inc., 694 F. 2d 923 (2d Cir. 1982). On March 30, 2010, the Supreme Court held the Gartenberg decision was correct in its basic formulation of what Section 36(b) requires: to face liability under Section 36(b), “an investment adviser must charge a fee that is so disproportionately large that it bears no reasonable relationship to the services rendered and could not have been the product of arm’s length bargaining.” Jones v. Harris Associates L.P., 130 S. Ct. 1418 (2010). In the Jones decision, the Court stated the Gartenberg approach fully incorporates the correct understanding of fiduciary duty within the context of Section 36(b) and noted with approval that “Gartenberg insists that all relevant circumstances be taken into account” and “uses the range of fees that might result from arm’s length bargaining as the benchmark for reviewing challenged fees.”3

 

3   Jones v. Harris at 1427.

 

108   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

 

 

INVESTMENT ADVISORY FEES, NET ASSETS, & EXPENSE RATIOS

The Adviser proposed that the Portfolio pays the advisory fee set forth below for receiving the services to be provided pursuant to the Investment Advisory Agreement.

 

Portfolio   Advisory Fee
Multi-Manager Alternative Strategies Fund4   1.90% of average daily net assets

The Adviser will pay the investment advisory fee earned by each of the Sub-Advisers out of the investment advisory fee it receives from the Portfolio. The Adviser has indicated that it expects to pay each of the original Sub-Advisers 1.00% for managing the Portfolio’s assets within its respective sleeve. It is possible that in the future, the Adviser will pay one or more Sub-Advisers an amount that is more or less than 1.00%. As a result, the Adviser has a potential conflict of interest since the less advisory fees it pays to the Sub-Advisers the more revenue it retains. Accordingly, the conditions of the exemptive relief, which the Adviser has requested from the SEC, attempt to address this potential conflict. For example, whenever a Sub-Adviser is hired or terminated, the Adviser will provide the Board with information disclosing the expected impact the Sub-Adviser’s hiring or termination on the Adviser’s profitability. In addition, on a quarterly basis, the Adviser will provide the Board with information regarding the impact of hiring or terminating any Sub-Adviser during the year on the Adviser’s profitability.

The Portfolio‘s Expense Limitation Agreement calls for the Adviser to establish expense caps, set forth below, for a one year period after the date the date that shares of the Portfolio is first offered to the public. The Expense Limitation Agreement also provides a mechanism for reimbursing the Adviser for its expense cap subsidy. Under the Expense Limitation Agreement, the Adviser may be able to recoup all or a portion of the amounts waived or reimbursed until the end of three fiscal years after the fiscal period in which the amounts were waived or reimbursed to the extent that the reimbursements do not cause the expense ratios of the Portfolio’s share classes to exceed the expense caps. The Adviser’s ability to recoup offering expenses will terminate with the agreement.5

 

4   Since the Portfolio does not fall within any NYAG specific category, the Portfolio is considered, by default, in the Specialty category. The proposed advisory fee for the Portfolio has a higher effective fee rate than the advisory fee schedule of the Specialty category, in which the Portfolio would have been categorized, had the Adviser proposed to implement the NYAG related fee schedule. The advisory fee schedule of the Specialty category is as follows: 75 bp on the first $2.5 billion, 65 bp on the next $2.5 billion, and 60 bp on the balance.

 

5   The Adviser has proposed that the Board authorize the issuance of Class 1, 2 and B shares for the Portfolio.

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     109   

 

 

 

Portfolio   Expense Cap Pursuant to
Expense Limitation
Undertaking		        Estimated
Gross
Expense
Ratio6 		   

Fiscal

Year End

Multi-Manager Alternative Strategies Fund7  

Class A

Class C

Class R

Class K

Class I

Advisor

Class Z

    

 

 

 

 

 

 

 2.24%

2.99%

2.49%

2.24%

1.99%

1.99%

1.99%

   

  

  

  

  

  

  

       

 

 

 

 

 

 

 2.54%

3.31%

3.00%

2.69%

2.36%

2.29%

2.26%

   

  

  

  

  

  

  

   May 31

 

I. ADVISORY FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS

The advisory fees charged to investment companies which the Adviser manages and sponsors are normally higher than those charged to similar sized institutional accounts, including pension plans and sub-advised investment companies. The fee differential reflects, among other things, different services provided to such clients, and different liabilities assumed. Services to be provided by the Adviser to the Portfolio that are not provided to non-investment company clients and sub-advised investment companies include providing office space and personnel to serve as Fund Officers, who among other responsibilities, make the certifications required under the Sarbanes-Oxley Act of 2002, and coordinating with and monitoring the Portfolio’s third party service providers such as Fund counsel, auditors, custodians, transfer agents and pricing services. The accounting, administrative, legal and compliance requirements for the Portfolio will be more costly than those for institutional assets due to the greater complexities and time required for investment companies, although the Adviser will be reimbursed for providing some of these services. Also, retail mutual funds managed by the Adviser are widely held. Servicing the Portfolio’s investors will be more time consuming and labor intensive compared to institutional clients since the Adviser needs to communicate with a more extensive network of financial intermediaries and shareholders. The Adviser also believes that it incurs substantial entrepreneurial risk when offering a new mutual fund since establishing a new mutual fund requires a large upfront investment and it may take a long time for the fund to achieve profitability since the fund must be priced to scale from inception in order to be competitive and assets are acquired one account at a time. Managing the cash flow of an investment company may be more difficult than managing that of a stable pool of assets, such as an institutional account with little cash movement in either direction, particularly, if a fund is in net redemption and the Adviser is frequently forced to sell securities to raise cash for redemptions. However, managing a fund with positive cash flow may be easier at times than managing a stable pool of assets. Finally, in recent years, investment advisers have been sued by institutional clients and have suffered reputational damage both by the attendant publicity and outcomes other than complete victories. Accordingly, the legal and reputational risks associated with institutional accounts are greater than previously thought, although still not equal to those related to the mutual fund industry.

 

6   The Portfolio’s estimated gross expense ratios are based on an initial estimate of the Portfolio’s net assets at $500 million.

 

7   According to the Adviser, at a projected Portfolio net asset level of $1 billion, the gross expense ratio for Class A shares is 2.39%.

 

110   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

 

 

The Investment Advisory Agreements for the Portfolio includes provisions permitting the Adviser to retain Sub-Advisers for the Portfolio and specifying that the Adviser has an obligation to oversee the services provided by any Sub-Adviser that is retained.

Notwithstanding the Adviser’s view that managing an investment company is not comparable to managing other institutional accounts because the services provided are different, the Supreme Court has indicated consideration should be given to the advisory fees charged to institutional accounts with a similar investment style as the Portfolio.8 However, the Adviser has represented that there is no category in the Form ADV for institutional products that have a substantially similar investment style as the Portfolio.9

The Adviser manages the AllianceBernstein Multi-Manager Alternative Fund, (the “MMA Fund”), a closed end U.S. registered fund that has somewhat similar investment style strategy as that contemplated for the Portfolio. The MMA Fund allocates its assets among the following strategies: Long/Short Equity, Event Driven, Credit Distressed, Emerging Markets and Global Macro. The MMA Fund is offered and sold only to accredited investors. In addition, the MMA Fund invests in private investment vehicles (“hedge funds”) managed by entities unaffiliated with the Adviser. Set forth in the table below is the advisory fee charged to the MMA Fund:

 

Portfolio    Fund   Fee
Multi-Manager Alternative Strategies Fund    MMA Fund   1.50% of average daily net assets

The Adviser has represented that it does not manage any sub-advisory relationship that has a substantially similar investment style as either of the Portfolios.

 

II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.

Lipper, Inc. (“Lipper”), an analytical service that is not affiliated with the Adviser, compared the fees charged to the Portfolio with fees charged to other investment companies for similar services offered by other investment advisers.10

 

8   The Supreme Court stated that “courts may give such comparisons the weight that they merit in light of the similarities and differences between the services that the clients in question require, but the courts must be wary of inapt comparisons.” Among the significant differences the Supreme Court noted that may exist between services provided to mutual funds and institutional accounts are “higher marketing costs.” Jones v. Harris at 1428.

 

9   The Adviser has indicated that with respect to institutional accounts with assets greater than $300 million, it will negotiate a fee schedule. Discounts that are negotiated vary based upon each client relationship.

 

10   The Supreme Court cautioned against accepting mutual fund fee comparisons without careful scrutiny since “these comparisons are problematic because these fees, like those challenged, may not be the product of negotiations conducted at arm’s length.” Jones v. Harris at 1429.

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     111   

 

 

Lipper’s analysis included the comparison of the Portfolio’s contractual management fee, estimated at an initial asset level of $500 million, to the median of the Portfolio’s Lipper Expense Group (“EG”)11 and the Portfolio’s contractual management fee ranking.12

Lipper describes an EG as a representative sample of comparable funds. Lipper’s standard methodology for screening funds to be included in an EG entails the consideration of several fund criteria, including fund type, investment classification/objective, load type and similar 12b-1/non-12b-1 service fees, asset (size) comparability, expense components and attributes. An EG will typically consist of seven to twenty funds.13

 

Portfolio   Contractual
Management
Fee (%)14		    

Lipper

EG

Median (%)

    

Lipper

EG

Rank

  

Lipper

EG

Quintile

Multi-Manager Alternative Strategies Fund     1.900        1.948      5/11   3

funds with at least $500MM

     1.900        1.725      5/6   5

funds with less than $500MM15

     N/A        2.015      N/A   N/A

Lipper also compared the Portfolio’s projected total expense ratio to the medians of the Portfolio’s EG and Lipper Expense Universe (“EU”). The EU is as a broader group compared to the EG, consisting of all funds that have the same investment classification/objective and load type as the subject Portfolio.16

 

11   Lipper does not consider average account size when constructing EGs. Funds with relatively small average account sizes tend to have higher transfer agent expense ratio than comparable sized funds that have relatively large average account sizes. There are limitations to Lipper expense category data because different funds categorize expenses differently.

 

12   The contractual management fee is calculated by Lipper using the Portfolio’s contractual management fee rate at a hypothetical asset level. The hypothetical asset level is based on the combined net assets of all classes of the Portfolio, rounded up to the next $25 million. Lipper’s total expense ratio information is based on the most recent annual report except as otherwise noted. A ranking of “1” would mean that Portfolio had the lowest effective fee rate in the Lipper peer group.

 

13   Since the initial estimate of the Portfolio’s net assets is $500 million, the Senior Officer also compared the Portfolio’s contractual management fee and total expense ratio to its Lipper peers whose net assets are at least $500 million.

 

14   The contractual management fee does not reflect any expense reimbursements made by the Portfolio to the Adviser for certain clerical, legal, accounting, administrative, and other services. In addition, the contractual management fee does not reflect any advisory fee waivers for expense caps.

 

15   Since Multi-Manager Alternative Strategies Fund has a projected initial asset estimate of $500 million, the Portfolio is not compared to peers below $500 million. Accordingly, “N/A” is listed under Contractual Management Fee, Lipper EG Rank and Lipper EG Quintile.

 

16   Except for asset (size) comparability, Lipper uses the same criteria for selecting an EG peer when selecting an EU peer. Unlike the EG, the EU allows for the same adviser to be represented by more than just one fund.

 

112   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

 

 

 

Portfolio  

Total

Expense

Ratio
(%)17

    

Lipper

EG

Median
(%)

    

Lipper

EG

Rank

  

Lipper

EG

Quintile

  

Lipper
EU

Median
(%)

    

Lipper
EU

Rank

  

Lipper

EU

Quintile

Multi-Manager Alternative Strategies Fund     2.240        2.550      5/11   3     1.947      16/23   4

funds with at least $500MM

     2.240        2.220      4/6   4      

funds with less than $500MM15

     N/A        2.740      N/A   N/A      

Based on this analysis, the Portfolio’s contractual management fee is lower than the overall EG median and the EG median for funds with a portfolio net asset level below $500 million; however, such fee is higher than the EG median for funds with a portfolio net asset level of $500 million or higher. The Portfolio’s total expense ratio is also lower than the overall EG median and the EG median for funds with a portfolio net asset level below $500 million; however, such expense ratio is higher than the EG median for funds with a portfolio net asset level of $500 million or higher.

 

III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO THE MANAGEMENT FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.

The Adviser utilizes two profitability reporting systems, which operate independently but are aligned with each other, to estimate the Adviser’s profitability in connection with investment advisory services provided to the Portfolio. The Senior Officer has retained a consultant to provide independent advice regarding the alignment of the two profitability systems as well as the methodologies and allocations utilized by both profitability systems. See Section IV for additional discussion.

 

IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH SERVICES.

The Portfolio has not yet commenced operations. Therefore, there is no historic profitability data with respect to the Adviser’s investment services to the Portfolio.

In addition to the Adviser’s direct profits from managing the Portfolio, certain of the Adviser’s affiliates have business relationships with the Portfolio and may earn a profit from providing other services to the Portfolio. The courts have referred to this type of business opportunity as “fall-out benefits” to the Adviser and indicated that such benefits should be factored into the evaluation of the total relationship between the Portfolio and the Adviser. Neither case law nor common business practice precludes the Adviser’s affiliates from earning a reasonable profit on this type of relationship provided the affiliates’ charges and services are competitive and the relationship otherwise complies with the 40 Act restrictions. These affiliates provide transfer agent, distribution and brokerage related services to the Portfolio and receive transfer agent fees, Rule 12b-1

 

17   Projected total expense ratio information pertains to the Portfolio’s Class A shares.

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     113   

 

 

payments, front-end sales loads, contingent deferred sales charges (“CDSC”) and brokerage commissions. In addition, the Adviser benefits from soft dollar arrangements which offset expenses the Adviser would otherwise incur.

AllianceBernstein Investments, Inc. (“ABI”), an affiliate of the Adviser, is the Fund’s principal underwriter. ABI and the Adviser have disclosed in the Portfolio’s prospectus that they may make revenue sharing payments from their own resources, in addition to resources derived from sales loads and Rule 12b-1 fees, to firms that sell shares of the Portfolio. The total amount to be paid to a financial intermediary associated with the sale of shares 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 the average daily net assets attributable to that firm over the year. In 2013, ABI paid approximately 0.05% of the average monthly assets of the AllianceBernstein Mutual Funds or approximately $19.4 million for distribution services and educational support (revenue sharing payments).

Fees and reimbursements for out of pocket expenses to be charged by AllianceBernstein Investor Services, Inc. (“ABIS”), the affiliated transfer agent for the Portfolio, are based on the level of the network account and the class of shares held by the account. ABIS also receives a fee per shareholder sub-account for each account maintained by an intermediary on an omnibus basis.

The Portfolio’s Sub-Advisers may effect brokerage transactions in the future through the Adviser’s affiliate, Sanford C. Bernstein & Co., LLC (“SCB & Co.”), and its U.K. affiliate, Sanford C. Bernstein Limited (“SCB Ltd.”), collectively “SCB,” and pay commissions for such transactions. The Adviser represented that SCB’s profitability from any future business conducted with the Portfolio’s Sub-Advisers would be comparable to the profitability of SCB’s dealings with other similar third party clients. In the ordinary course of business, SCB receives and pays liquidity rebates from electronic communications networks (“ECNs”) derived from trading for its clients. These credits and charges are not being passed onto any SCB client. The Adviser also receives certain soft dollar benefits from brokers that execute agency trades for its clients. These soft dollar benefits reduce the Adviser’s cost of doing business and increase its profitability.

 

V. POSSIBLE ECONOMIES OF SCALE

The Adviser has indicated that economies of scale are being shared with shareholders through pricing to scale, breakpoints, fee reductions/waivers and enhancement to services.

In May 2012, an independent consultant, retained by the Senior Officer, provided the Board of Directors information on the Adviser’s firm-wide average costs from 2005 through 2011 and the potential economies of scale. The independent consultant noted that from 2005 through 2007 the Adviser experienced significant growth in assets under management (“AUM”). During this period, operating

 

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expenses increased, in part to keep up with growth, and in part reflecting market returns. However, from 2008 through the first quarter of 2009, AUM rapidly and significantly decreased due to declines in market value and client withdrawals. When AUM rapidly decreased, some operating expenses categories, including base compensation and office space, adjusted more slowly during this period, resulting in an increase in average costs. Since 2009, AUM have experienced less significant changes. The independent consultant noted that changes in operating expenses reflect changes in business composition and business practices in response to changes in financial markets. Finally, the independent consultant concluded that the increase in average cost and the decline in net operating margin across the Adviser since late 2008 are inconsistent with the view that there are currently reductions in average costs due to economies of scale that can be shared with the AllianceBernstein Mutual Funds managed by the Adviser through lower fees.

Previously in February 2008, the independent consultant provided the Board of Directors an update of the Deli18 study on advisory fees and various fund characteristics.19 The independent consultant first reiterated the results of his previous two dimensional comparison analysis (fund size and family size) with the Board of Directors.20 The independent consultant then discussed the results of the regression model that was utilized to study the effects of various factors on advisory fees. The regression model output indicated that the bulk of the variation in fees predicted were explained by various factors, but substantially by fund AUM, family AUM, index fund indicator and investment style. The independent consultant also compared the advisory fees of the AllianceBernstein Mutual Funds to similar funds managed by 19 other large asset managers, regardless of the fund size and each Adviser’s proportion of mutual fund assets to non-mutual fund assets.

 

VI. NATURE AND QUALITY OF THE ADVISER’S SERVICES, INCLUDING THE PERFORMANCE OF THE FUND

With assets under management of approximately $454 billion as of March 31, 2014, the Adviser has the investment experience to manage and provide non-investment services (described in Section I) to the Portfolio.

 

18   The Deli study, originally published in 2002 based on 1997 data and updated for the February 2008 Presentation, may be of diminished value due to the age of the data used in the presentation and the changes experienced in the industry over the last four years.

 

19   As mentioned previously, the Supreme Court cautioned against accepting mutual fund fee comparisons without careful scrutiny since the fees may not be the product of negotiations conducted at arm’s length. See Jones v. Harris at 1429.

 

20   The two dimensional analysis showed patterns of lower advisory fees for funds with larger asset sizes and funds from larger family sizes compared to funds with smaller asset sizes and funds from smaller family sizes, which according to the independent consultant is indicative of a sharing of economies of scale and scope. However, in less liquid and active markets, such is not the case, as the empirical analysis showed potential for diseconomies of scale in those markets. The empirical analysis also showed diminishing economies of scale and scope as funds surpassed a certain high level of assets.

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     115   

 

 

Since the Portfolio has not yet commenced operations, the Portfolio has no performance history.

CONCLUSION:

Based on the factors discussed in this evaluation and the information provided by the Adviser and the memorandum from your independent counsel, including the legal analysis and factors you need to consider when approving the Investment Advisory Agreement for the Portfolio, my conclusion is that the advisory fee proposed for the Portfolio is reasonable and within range of what would have been negotiated at arm’s length in light of all surrounding circumstances. This conclusion in respect of the Portfolio is based on my evaluation of all of these factors and no single factor was dispositive.

Dated: June 5, 2014

 

116   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

THIS PAGE IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS

AB FAMILY OF FUNDS

 

US EQUITY

 

US Core

Core Opportunities Fund

Select US Equity Portfolio

US Growth

Concentrated Growth Fund

Discovery Growth Fund

Growth Fund

Large Cap Growth Fund

Small Cap Growth Portfolio

US Value

Discovery Value Fund

Equity Income Fund

Growth & Income Fund

Small Cap Value Portfolio

Value Fund

INTERNATIONAL/ GLOBAL EQUITY

 

International/Global Core

Global Core Equity Portfolio

Global Equity & Covered Call Strategy Fund

Global Thematic Growth Fund

International Portfolio

Tax-Managed International Portfolio

International/Global Growth

International Growth Fund

International/Global Value

Asia ex-Japan Equity Portfolio

International Value Fund

FIXED INCOME

 

Municipal

High Income Municipal Portfolio

Intermediate California Municipal Portfolio

Intermediate Diversified Municipal Portfolio

Intermediate New York Municipal Portfolio

Municipal Bond Inflation Strategy

FIXED INCOME (continued)

 

Tax-Aware Fixed Income Portfolio

National Portfolio

Arizona Portfolio

California Portfolio

Massachusetts Portfolio

Michigan Portfolio

Minnesota Portfolio

New Jersey Portfolio

New York Portfolio

Ohio Portfolio

Pennsylvania Portfolio

Virginia Portfolio

Taxable

Bond Inflation Strategy

Global Bond Fund

High Income Fund

High Yield Portfolio

Intermediate Bond Portfolio

Limited Duration High Income Portfolio

Short Duration Portfolio

ALTERNATIVES

 

All Market Real Return Portfolio

Credit Long/Short Portfolio

Global Real Estate Investment Fund

Long/Short Multi-Manager Fund

Multi-Manager Alternative Strategies Fund

Select US Long/Short Portfolio

Unconstrained Bond Fund

MULTI-ASSET

 

All Market Growth Portfolio

All Market Income Portfolio

Emerging Markets Multi-Asset Portfolio

Global Risk Allocation Fund

MULTI-ASSET (continued)

 

Target-Date

Multi-Manager Select Retirement Allocation Fund

Multi-Manager Select 2010 Fund

Multi-Manager Select 2015 Fund

Multi-Manager Select 2020 Fund

Multi-Manager Select 2025 Fund

Multi-Manager Select 2030 Fund

Multi-Manager Select 2035 Fund

Multi-Manager Select 2040 Fund

Multi-Manager Select 2045 Fund

Multi-Manager Select 2050 Fund

Multi-Manager Select 2055 Fund

Wealth Strategies

Balanced Wealth Strategy

Conservative Wealth Strategy

Wealth Appreciation Strategy

Tax-Managed Balanced Wealth Strategy

Tax-Managed Conservative Wealth Strategy

Tax-Managed Wealth Appreciation Strategy

CLOSED-END FUNDS

 

AB Multi-Manager Alternative Fund

Alliance California Municipal Income Fund

AllianceBernstein Global High Income Fund

AllianceBernstein Income Fund

AllianceBernstein National Municipal Income Fund

 

We also offer Exchange Reserves, which serves as the money market fund exchange vehicle for the AB mutual funds. An investment in Exchange Reserves is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.

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

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     117   

AB Family of Funds

NOTES

 

 

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NOTES

 

 

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NOTES

 

 

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NOTES

 

 

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NOTES

 

 

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NOTES

 

 

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND  •     123   

NOTES

 

 

124   •  AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

LOGO

AB MULTI-MANAGER ALTERNATIVE STRATEGIES FUND

1345 Avenue of the Americas

New York, NY 10105

800.221.5672

 

MMAS-0152-1115                 LOGO

ITEM 2. CODE OF ETHICS.

Not applicable when filing a semi-annual report to shareholders.

 

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

Not applicable when filing a semi-annual report to shareholders.

 

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Not applicable when filing a semi-annual report to shareholders.

 

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

Not applicable to the registrant.

 

ITEM 6. SCHEDULE OF INVESTMENTS.

Please see Schedule of Investments contained in the Report to Shareholders included under Item 1 of this Form N-CSR.

 

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable to the registrant.

 

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable to the registrant.

 

ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.

Not applicable to the registrant.

 

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

There have been no material changes to the procedures by which shareholders may recommend nominees to the Fund’s Board of Directors since the Fund last provided disclosure in response to this item.

ITEM 11. CONTROLS AND PROCEDURES.

(a) The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940, as amended) are effective at the reasonable assurance level based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document.

(b) There were no changes in the registrant’s internal controls over financial reporting that occurred during the second fiscal quarter of the period that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

ITEM 12. EXHIBITS.

The following exhibits are attached to this Form N-CSR:

 

EXHIBIT
NO.

  

DESCRIPTION OF EXHIBIT

12 (b) (1)   Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
12 (b) (2)   Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
12 (c)   Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

(Registrant): AB Cap Fund, Inc.

 

By:  

/s/ Robert M. Keith

  Robert M. Keith
  President

Date: January 20, 2016

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By:  

/s/ Robert M. Keith

  Robert M. Keith
  President

Date: January 20, 2016

 

By:  

/s/ Joseph J. Mantineo

  Joseph J. Mantineo
  Treasurer and Chief Financial Officer

Date: January 20, 2016