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: 811-00126
AB RELATIVE VALUE 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: October 31, 2019
Date of reporting period: April 30, 2019
ITEM 1. REPORTS TO STOCKHOLDERS.
APR 04.30.19
SEMI-ANNUAL REPORT
AB RELATIVE VALUE FUND
Beginning January 1, 2021, as permitted by new regulations adopted by the Securities and Exchange Commission, the Fund’s annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website address to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically at any time by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by calling the Fund at (800) 221 5672.
You may elect to receive all future reports in paper form free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports; if you invest directly with the Fund, you can call the Fund at (800) 221 5672. Your election to receive reports in paper form will apply to all funds held in your account with your financial intermediary or, if you invest directly, to all AB Mutual Funds you hold.
| Investment Products Offered | • Are Not FDIC Insured • May Lose Value • Are Not Bank Guaranteed | |
Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.abfunds.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.
This shareholder report must be preceded or accompanied by the Fund’s prospectus for individuals who are not current shareholders of the Fund.
You may obtain a description of the Fund’s proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AB’s website at www.abfunds.com, or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AB at (800) 227 4618.
The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT reports are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-PORT may also be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC 0330. AB publishes full portfolio holdings for the Fund monthly at www.abfunds.com.
AllianceBernstein Investments, Inc. (ABI) is the distributor of the AB family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the Adviser of the funds.
The [A/B] logo is a registered service mark of AllianceBernstein and AllianceBernstein® is a registered service mark used by permission of the owner, AllianceBernstein L.P.
| FROM THE PRESIDENT |
|
Dear Shareholder,
We are pleased to provide this report for AB Relative Value Fund (the “Fund”). Please review the discussion of Fund performance, the market conditions during the reporting period and the Fund’s investment strategy.
As always, AB strives to keep clients ahead of what’s next by:
| + | Transforming uncommon insights into uncommon knowledge with a global research scope |
| + | Navigating markets with seasoned investment experience and sophisticated solutions |
| + | Providing thoughtful investment insights and actionable ideas |
Whether you’re an individual investor or a multi-billion-dollar institution, we put knowledge and experience to work for you.
AB’s global research organization connects and collaborates across platforms and teams to deliver impactful insights and innovative products. Better insights lead to better opportunities—anywhere in the world.
For additional information about AB’s range of products and shareholder resources, please log on to www.abfunds.com.
Thank you for your investment in the AB Mutual Funds.
Sincerely,
Robert M. Keith
President and Chief Executive Officer, AB Mutual Funds
| abfunds.com | AB RELATIVE VALUE FUND | 1 | |
SEMI-ANNUAL REPORT
June 17, 2019
This report provides management’s discussion of fund performance for AB Relative Value Fund for the semi-annual reporting period ended April 30, 2019.
The Fund’s investment objective is long-term growth of capital.
NAV RETURNS AS OF APRIL 30, 2019 (unaudited)
| 6 Months | 12 Months | |||||||
| AB RELATIVE VALUE FUND1 | ||||||||
| Class A Shares | 5.04% | 7.76% | ||||||
| Class B Shares2 | 4.52% | 6.86% | ||||||
| Class C Shares | 4.68% | 6.85% | ||||||
| Advisor Class Shares3 | 5.16% | 8.05% | ||||||
| Class R Shares3 | 4.93% | 7.51% | ||||||
| Class K Shares3 | 5.13% | 7.88% | ||||||
| Class I Shares3 | 5.26% | 8.11% | ||||||
| Class Z Shares3 | 5.21% | 8.06% | ||||||
| Russell 1000 Value Index | 7.90% | 9.06% | ||||||
| 1 | Includes the impact of proceeds received and credited to the Fund resulting from class-action settlements, which enhanced the performance of all share classes of the Fund for the six- and 12-month periods ended April 30, 2019, by 0.13% and 0.14%, respectively. |
| 2 | Effective January 31, 2009, Class B shares are no longer available for purchase to new investors. Please see Note A for additional information. |
| 3 | 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. |
INVESTMENT RESULTS
The table above shows the Fund’s performance compared to its benchmark, the Russell 1000 Value Index, for the six- and 12-month periods ended April 30, 2019.
All share classes underperformed the benchmark for both periods, before sales charges. During the six-month period, security selection in health care and industrials, along with an underweight to utilities, detracted from performance, relative to the benchmark. An overweight to industrials, an underweight to energy and security selection in the consumer discretionary sector contributed.
| 2 | AB RELATIVE VALUE FUND | abfunds.com | |
During the 12-month period, security selection in the energy and industrials sectors, as well as an underweight to utilities, detracted from performance. Security selection in the consumer discretionary and communication services sectors, and an underweight to energy, contributed.
The Fund did not utilize derivatives during the six- or 12-month periods.
MARKET REVIEW AND INVESTMENT STRATEGY
In the six-month period ended April 30, 2019, US equities rallied, helped mostly by strong performance during the first three months of 2019. In the US, growth stocks outperformed value stocks, and large-cap equities outperformed their small-cap peers. Stocks plummeted early in the six-month period amid rising interest rates, US-China trade tensions and global growth concerns. In January, performance reversed as corporate earnings had a strong start to the season. Furthermore, the US Federal Reserve turned more dovish in its rhetoric, suggesting that rate increases would be kept on hold for the time being.
The Fund’s Senior Investment Management Team (the “Team”) remains committed to using bottom-up research to build a Fund comprised of well-managed companies that are attractively valued relative to their long-term earnings power. The Team’s objective is to find companies that stand out and deploy capital wisely, allowing these companies to grow dividends and enhance the long-term value of their shares.
INVESTMENT POLICIES
The Fund invests primarily in the equity securities of US companies that the Adviser believes are undervalued. The Adviser believes that, over time, a company’s stock price will come to reflect its intrinsic economic value. The Fund may invest in companies of any size and in any industry.
The Adviser depends heavily upon the fundamental analysis and research of its large internal research staff in making investment decisions for the Fund. In determining a company’s intrinsic economic value, the Adviser takes into account many fundamental and financial factors that it believes bear on the company’s ability to perform in the future, including earnings growth, prospective cash flows, dividend growth and growth in book value. The Adviser then ranks each of the companies in its research universe in the relative order of disparity between their intrinsic economic values and their current stock prices, with companies with the greatest disparities receiving the highest rankings (i.e., being considered the most undervalued). The Adviser anticipates that the Fund’s portfolio normally will include companies ranking in the top three deciles of the Adviser’s valuation model.
(continued on next page)
| abfunds.com | AB RELATIVE VALUE FUND | 3 | |
The Fund may enter into derivatives transactions, such as options, futures contracts, forwards and swaps. The Fund may use options strategies involving the purchase and/or writing of various combinations of call and/or put options, including on individual securities and stock indices, futures contracts (including futures contracts on individual securities and stock indices) or shares of exchange-traded funds (“ETFs”). These transactions may be used, for example, in an effort to earn extra income, to adjust exposure to individual securities or markets, or to protect all or a portion of the Fund’s portfolio from a decline in value, sometimes within certain ranges.
The Fund may, at times, invest in shares of ETFs in lieu of making direct investments in equity securities. ETFs may provide more efficient and economical exposure to the type of companies and geographic locations in which the Fund seeks to invest than direct investments.
| 4 | AB RELATIVE VALUE FUND | abfunds.com | |
DISCLOSURES AND RISKS
Benchmark Disclosure
The Russell 1000® Value Index is unmanaged and does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Russell 1000 Value Index represents the performance of large-cap value companies within the US. 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. It includes the risk that a particular style of investing, such as the Fund’s value approach, may be underperforming the market generally.
Foreign (Non-US) Risk: Investments in securities of non-US issuers may involve more risk than those of US issuers. These securities may fluctuate more widely in price and may be more difficult to trade or dispose of due to adverse market, economic, political, regulatory or other factors.
Currency Risk: Fluctuations in currency exchange rates may negatively affect the value of the Fund’s investments or reduce its returns.
Derivatives Risk: Derivatives may be difficult to price or unwind and leveraged so that small changes may produce disproportionate losses for the Fund. Derivatives may also be subject to counterparty risk to a greater degree than more traditional investments.
Industry/Sector Risk: Investments in a particular industry or group of related industries may have more risk because market or economic factors affecting that industry could have a significant effect on the value of the Fund’s investments.
Management Risk: The Fund is subject to management risk because it is an actively managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions for the Fund, but there is no guarantee that its techniques will produce the intended results.
These risks are fully discussed in the Fund’s prospectus. As with all investments, you may lose money by investing in the Fund.
| abfunds.com | AB RELATIVE VALUE FUND | 5 | |
DISCLOSURES AND RISKS (continued)
An Important Note About Historical Performance
The investment return and principal value of an investment in the Fund will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Performance shown in this report represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by visiting www.abfunds.com.
All fees and expenses related to the operation of the Fund have been deducted. Net asset value (“NAV”) returns do not reflect sales charges; if sales charges were reflected, the Fund’s quoted performance would be lower. SEC returns reflect the applicable sales charges for each share class: a 4.25% maximum front-end sales charge for Class A shares; the applicable contingent deferred sales charge for Class B shares (4% year 1, 3% year 2, 2% year 3, 1% year 4) and a 1% 1-year contingent deferred sales charge for Class C shares. Returns for the different share classes will vary due to different expenses associated with each class. Performance assumes reinvestment of distributions and does not account for taxes.
| 6 | AB RELATIVE VALUE FUND | abfunds.com | |
HISTORICAL PERFORMANCE
AVERAGE ANNUAL RETURNS AS OF APRIL 30, 2019 (unaudited)
| NAV Returns | SEC Returns (reflects applicable sales charges) |
|||||||
| CLASS A SHARES | ||||||||
| 1 Year | 7.76% | 3.13% | ||||||
| 5 Years | 9.07% | 8.12% | ||||||
| 10 Years | 13.82% | 13.31% | ||||||
| CLASS B SHARES | ||||||||
| 1 Year | 6.86% | 3.09% | ||||||
| 5 Years | 8.28% | 8.28% | ||||||
| 10 Years1 | 13.15% | 13.15% | ||||||
| CLASS C SHARES | ||||||||
| 1 Year | 6.85% | 5.91% | ||||||
| 5 Years | 8.29% | 8.29% | ||||||
| 10 Years | 13.02% | 13.02% | ||||||
| ADVISOR CLASS SHARES2 | ||||||||
| 1 Year | 8.05% | 8.05% | ||||||
| 5 Years | 9.35% | 9.35% | ||||||
| 10 Years | 14.11% | 14.11% | ||||||
| CLASS R SHARES2 | ||||||||
| 1 Year | 7.51% | 7.51% | ||||||
| 5 Years | 8.84% | 8.84% | ||||||
| 10 Years | 13.55% | 13.55% | ||||||
| CLASS K SHARES2 | ||||||||
| 1 Year | 7.88% | 7.88% | ||||||
| 5 Years | 9.12% | 9.12% | ||||||
| 10 Years | 13.88% | 13.88% | ||||||
| CLASS I SHARES2 | ||||||||
| 1 Year | 8.11% | 8.11% | ||||||
| 5 Years | 9.40% | 9.40% | ||||||
| 10 Years | 14.25% | 14.25% | ||||||
| CLASS Z SHARES2 | ||||||||
| 1 Year | 8.06% | 8.06% | ||||||
| 5 Years | 9.40% | 9.40% | ||||||
| Since Inception3 | 10.24% | 10.24% | ||||||
The Fund’s current prospectus fee table shows the Fund’s total operating expense ratios as 0.99%, 1.77%, 1.74%, 0.74%, 1.35%, 1.02%, 0.74% and 0.63% for Class A, Class B, 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 will limit the Fund’s annual operating expenses to 0.90%, 1.65%, 1.65%, 0.65%, 1.15%, 0.90%, 0.65% and 0.61% for Class A, Class B, Class C, Advisor Class, Class R,
(footnotes continued on next page)
| abfunds.com | AB RELATIVE VALUE FUND | 7 | |
HISTORICAL PERFORMANCE (continued)
Class K, Class I and Class Z shares, respectively. These waivers/reimbursements may not be terminated prior to February 28, 2020 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.
| 1 | Assumes conversion of Class B shares into Class A shares after eight years. |
| 2 | These share classes are offered at NAV to eligible investors and their SEC returns are the same as their NAV returns. Please note that these share classes are for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund. |
| 3 | Inception date: 10/15/2013. |
| 8 | AB RELATIVE VALUE FUND | abfunds.com | |
HISTORICAL PERFORMANCE (continued)
SEC AVERAGE ANNUAL RETURNS
AS OF THE MOST RECENT CALENDAR QUARTER-END
MARCH 31, 2019 (unaudited)
| SEC Returns (reflects applicable sales charges) |
||||
| CLASS A SHARES | ||||
| 1 Year | 0.57% | |||
| 5 Years | 7.40% | |||
| 10 Years | 13.70% | |||
| CLASS B SHARES | ||||
| 1 Year | 0.58% | |||
| 5 Years | 7.51% | |||
| 10 Years1 | 13.48% | |||
| CLASS C SHARES | ||||
| 1 Year | 3.48% | |||
| 5 Years | 7.52% | |||
| 10 Years | 13.35% | |||
| ADVISOR CLASS SHARES2 | ||||
| 1 Year | 5.60% | |||
| 5 Years | 8.62% | |||
| 10 Years | 14.49% | |||
| CLASS R SHARES2 | ||||
| 1 Year | 4.82% | |||
| 5 Years | 8.06% | |||
| 10 Years | 13.93% | |||
| CLASS K SHARES2 | ||||
| 1 Year | 5.20% | |||
| 5 Years | 8.38% | |||
| 10 Years | 14.25% | |||
| CLASS I SHARES2 | ||||
| 1 Year | 5.50% | |||
| 5 Years | 8.64% | |||
| 10 Years | 14.61% | |||
| CLASS Z SHARES2 | ||||
| 1 Year | 5.44% | |||
| 5 Years | 8.64% | |||
| Since Inception3 | 9.73% | |||
| 1 | Assumes conversion of Class B shares into Class A shares after eight years. |
| 2 | Please note that these share classes are for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund. |
| 3 | Inception date: 10/15/2013. |
| abfunds.com | AB RELATIVE VALUE FUND | 9 | |
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.
| 10 | AB RELATIVE VALUE FUND | abfunds.com | |
EXPENSE EXAMPLE (continued)
| Beginning Account Value November 1, 2018 |
Ending Account Value April 30, 2019 |
Expenses Paid During Period* |
Annualized Expense Ratio* |
Total Expenses Paid During Period+ |
Total Annualized Expense Ratio+ |
|||||||||||||||||||
| Class A | ||||||||||||||||||||||||
| Actual |
$ | 1,000 | $ | 1,050.40 | $ | 4.52 | 0.89 | % | $ | 4.58 | 0.90 | % | ||||||||||||
| Hypothetical** |
$ | 1,000 | $ | 1,020.38 | $ | 4.46 | 0.89 | % | $ | 4.51 | 0.90 | % | ||||||||||||
| Class B | ||||||||||||||||||||||||
| Actual |
$ | 1,000 | $ | 1,045.20 | $ | 8.32 | 1.64 | % | $ | 8.37 | 1.65 | % | ||||||||||||
| Hypothetical** |
$ | 1,000 | $ | 1,016.66 | $ | 8.20 | 1.64 | % | $ | 8.25 | 1.65 | % | ||||||||||||
| Class C | ||||||||||||||||||||||||
| Actual |
$ | 1,000 | $ | 1,046.80 | $ | 8.32 | 1.64 | % | $ | 8.37 | 1.65 | % | ||||||||||||
| Hypothetical** |
$ | 1,000 | $ | 1,016.66 | $ | 8.20 | 1.64 | % | $ | 8.25 | 1.65 | % | ||||||||||||
| Advisor Class | ||||||||||||||||||||||||
| Actual |
$ | 1,000 | $ | 1,051.60 | $ | 3.26 | 0.64 | % | $ | 3.31 | 0.65 | % | ||||||||||||
| Hypothetical** |
$ | 1,000 | $ | 1,021.62 | $ | 3.21 | 0.64 | % | $ | 3.26 | 0.65 | % | ||||||||||||
| Class R | ||||||||||||||||||||||||
| Actual |
$ | 1,000 | $ | 1,049.30 | $ | 5.79 | 1.14 | % | $ | 5.84 | 1.15 | % | ||||||||||||
| Hypothetical** |
$ | 1,000 | $ | 1,019.14 | $ | 5.71 | 1.14 | % | $ | 5.76 | 1.15 | % | ||||||||||||
| Class K | ||||||||||||||||||||||||
| Actual |
$ | 1,000 | $ | 1,051.30 | $ | 4.53 | 0.89 | % | $ | 4.58 | 0.90 | % | ||||||||||||
| Hypothetical** |
$ | 1,000 | $ | 1,020.38 | $ | 4.46 | 0.89 | % | $ | 4.51 | 0.90 | % | ||||||||||||
| Class I | ||||||||||||||||||||||||
| Actual |
$ | 1,000 | $ | 1,052.60 | $ | 3.26 | 0.64 | % | $ | 3.31 | 0.65 | % | ||||||||||||
| Hypothetical** |
$ | 1,000 | $ | 1,021.62 | $ | 3.21 | 0.64 | % | $ | 3.26 | 0.65 | % | ||||||||||||
| Class Z | ||||||||||||||||||||||||
| Actual |
$ | 1,000 | $ | 1,052.10 | $ | 3.05 | 0.60 | % | $ | 3.10 | 0.61 | % | ||||||||||||
| Hypothetical** |
$ | 1,000 | $ | 1,021.82 | $ | 3.01 | 0.60 | % | $ | 3.06 | 0.61 | % | ||||||||||||
| * | Expenses are equal to each classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). |
| ** | Assumes 5% annual return before expenses. |
| + | In connection with the Fund’s investments in affiliated/unaffiliated underlying portfolios, the Fund incurs no direct expenses, but bears proportionate shares of the fees and expenses (i.e., operating, administrative and investment advisory fees) of the affiliated/unaffiliated underlying portfolios. The Adviser has contractually agreed to waive its fees from the Fund in an amount equal to the Fund’s pro rata share of certain acquired fund fees and expenses of the affiliated underlying portfolios. The Fund’s total expenses are equal to the classes’ annualized expense ratio plus the Fund’s pro rata share of the weighted average expense ratio of the affiliated/unaffiliated underlying portfolios in which it invests, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). |
| abfunds.com | AB RELATIVE VALUE FUND | 11 | |
PORTFOLIO SUMMARY
April 30, 2019 (unaudited)
PORTFOLIO STATISTICS
Net Assets ($mil): $1,819.7
TEN LARGEST HOLDINGS2
| Company |
U.S. $ Value | Percent of Net Assets |
||||||
| Verizon Communications, Inc. | $ | 79,961,342 | 4.4 | % | ||||
| JPMorgan Chase & Co. | 64,190,737 | 3.5 | ||||||
| Berkshire Hathaway, Inc. – Class B | 63,617,388 | 3.5 | ||||||
| Walmart, Inc. | 58,621,680 | 3.2 | ||||||
| Raytheon Co. | 54,427,783 | 3.0 | ||||||
| Roche Holding AG (Sponsored ADR) | 52,693,012 | 2.9 | ||||||
| Capital One Financial Corp. | 52,351,664 | 2.9 | ||||||
| Phillips 66 | 51,502,529 | 2.8 | ||||||
| Comcast Corp. – Class A | 50,382,014 | 2.8 | ||||||
| Reinsurance Group of America, Inc. – Class A | 41,310,565 | 2.3 | ||||||
| $ | 569,058,714 | 31.3 | % | |||||
| 1 | All data are as of April 30, 2019. The Fund’s sector breakdown is expressed as a percentage of total investments and may vary over time. |
| 2 | Long-term investments. |
Please note: The sector classifications presented herein are based on the Global Industry Classification Standard (GICS) which was developed by Morgan Stanley Capital International and Standard & Poor’s. The components are divided into sector, industry group, and industry sub-indices as classified by the GICS for each of the market capitalization indices in the broad market. These sector classifications are broadly defined. The “Portfolio of Investments” section of the report reflects more specific industry information and is consistent with the investment restrictions discussed in the Fund’s prospectus.
| 12 | AB RELATIVE VALUE FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS
April 30, 2019 (unaudited)
| Company | Shares | U.S. $ Value | ||||||
|
|
||||||||
| COMMON STOCKS – 86.5% |
||||||||
| Financials – 21.4% |
||||||||
| Banks – 5.6% |
||||||||
| Citigroup, Inc. |
527,320 | $ | 37,281,524 | |||||
| JPMorgan Chase & Co. |
553,130 | 64,190,737 | ||||||
|
|
|
|||||||
| 101,472,261 | ||||||||
|
|
|
|||||||
| Capital Markets – 3.1% |
||||||||
| Goldman Sachs Group, Inc. (The) |
127,190 | 26,190,965 | ||||||
| Northern Trust Corp. |
139,284 | 13,726,438 | ||||||
| TD Ameritrade Holding Corp. |
300,980 | 15,825,528 | ||||||
|
|
|
|||||||
| 55,742,931 | ||||||||
|
|
|
|||||||
| Consumer Finance – 2.9% |
||||||||
| Capital One Financial Corp. |
563,952 | 52,351,664 | ||||||
|
|
|
|||||||
| Diversified Financial Services – 3.5% |
||||||||
| Berkshire Hathaway, Inc. – Class B(a) |
293,560 | 63,617,388 | ||||||
|
|
|
|||||||
| Insurance – 6.3% |
||||||||
| Aflac, Inc. |
224,500 | 11,310,310 | ||||||
| Allstate Corp. (The) |
386,510 | 38,287,681 | ||||||
| Fidelity National Financial, Inc. |
619,430 | 24,746,228 | ||||||
| Reinsurance Group of America, Inc. – Class A |
272,659 | 41,310,565 | ||||||
|
|
|
|||||||
| 115,654,784 | ||||||||
|
|
|
|||||||
| 388,839,028 | ||||||||
|
|
|
|||||||
| Industrials – 13.3% |
||||||||
| Aerospace & Defense – 3.3% |
||||||||
| Curtiss-Wright Corp. |
44,270 | 5,044,124 | ||||||
| Raytheon Co. |
306,480 | 54,427,783 | ||||||
|
|
|
|||||||
| 59,471,907 | ||||||||
|
|
|
|||||||
| Airlines – 1.6% |
||||||||
| Delta Air Lines, Inc. |
275,160 | 16,039,076 | ||||||
| Southwest Airlines Co. |
236,138 | 12,805,764 | ||||||
|
|
|
|||||||
| 28,844,840 | ||||||||
|
|
|
|||||||
| Construction & Engineering – 0.8% |
||||||||
| EMCOR Group, Inc. |
166,450 | 14,005,103 | ||||||
|
|
|
|||||||
| Electrical Equipment – 1.2% |
||||||||
| Acuity Brands, Inc. |
72,630 | 10,627,948 | ||||||
| Hubbell, Inc. |
85,480 | 10,907,248 | ||||||
|
|
|
|||||||
| 21,535,196 | ||||||||
|
|
|
|||||||
| Machinery – 4.0% |
||||||||
| Altra Industrial Motion Corp. |
585,946 | 21,967,115 | ||||||
| Crane Co. |
270,895 | 23,039,620 | ||||||
| PACCAR, Inc. |
97,220 | 6,967,757 | ||||||
| Parker-Hannifin Corp. |
58,550 | 10,602,234 | ||||||
| WABCO Holdings, Inc.(a) |
84,847 | 11,237,137 | ||||||
|
|
|
|||||||
| 73,813,863 | ||||||||
|
|
|
|||||||
| abfunds.com | AB RELATIVE VALUE FUND | 13 | |
PORTFOLIO OF INVESTMENTS (continued)
| Company | Shares | U.S. $ Value | ||||||
|
|
||||||||
| Professional Services – 0.3% |
||||||||
| Robert Half International, Inc. |
101,560 | $ | 6,305,861 | |||||
|
|
|
|||||||
| Road & Rail – 2.1% |
||||||||
| Kansas City Southern |
100,215 | 12,340,475 | ||||||
| Knight-Swift Transportation Holdings, Inc. |
269,090 | 8,974,152 | ||||||
| Norfolk Southern Corp. |
37,720 | 7,695,634 | ||||||
| Saia, Inc.(a) |
151,885 | 9,779,875 | ||||||
|
|
|
|||||||
| 38,790,136 | ||||||||
|
|
|
|||||||
| 242,766,906 | ||||||||
|
|
|
|||||||
| Health Care – 12.6% |
||||||||
| Biotechnology – 3.1% |
||||||||
| Biogen, Inc.(a) |
110,544 | 25,341,107 | ||||||
| Celgene Corp.(a) |
159,190 | 15,068,925 | ||||||
| Gilead Sciences, Inc. |
251,320 | 16,345,853 | ||||||
|
|
|
|||||||
| 56,755,885 | ||||||||
|
|
|
|||||||
| Health Care Providers & Services – 3.2% |
||||||||
| Anthem, Inc. |
113,520 | 29,859,166 | ||||||
| Cigna Corp.(a) |
177,892 | 28,256,365 | ||||||
|
|
|
|||||||
| 58,115,531 | ||||||||
|
|
|
|||||||
| Pharmaceuticals – 6.3% |
||||||||
| Bristol-Myers Squibb Co. |
196,980 | 9,145,781 | ||||||
| Eli Lilly & Co. |
96,080 | 11,245,203 | ||||||
| Pfizer, Inc. |
1,007,410 | 40,910,920 | ||||||
| Roche Holding AG (Sponsored ADR) |
1,593,860 | 52,693,012 | ||||||
|
|
|
|||||||
| 113,994,916 | ||||||||
|
|
|
|||||||
| 228,866,332 | ||||||||
|
|
|
|||||||
| Communication Services – 9.9% |
||||||||
| Diversified Telecommunication Services – 4.4% |
||||||||
| Verizon Communications, Inc. |
1,398,170 | 79,961,342 | ||||||
|
|
|
|||||||
| Entertainment – 1.8% |
||||||||
| Walt Disney Co. (The) |
242,750 | 33,249,468 | ||||||
|
|
|
|||||||
| Media – 3.7% |
||||||||
| Comcast Corp. – Class A |
1,157,409 | 50,382,014 | ||||||
| Discovery, Inc. – Class A(a) |
542,645 | 16,767,730 | ||||||
|
|
|
|||||||
| 67,149,744 | ||||||||
|
|
|
|||||||
| 180,360,554 | ||||||||
|
|
|
|||||||
| Energy – 8.0% |
||||||||
| Energy Equipment & Services – 0.4% |
||||||||
| Dril-Quip, Inc.(a) |
148,088 | 6,450,713 | ||||||
|
|
|
|||||||
| Oil, Gas & Consumable Fuels – 7.6% |
||||||||
| Apache Corp. |
198,384 | 6,528,818 | ||||||
| ConocoPhillips |
629,452 | 39,731,010 | ||||||
| 14 | AB RELATIVE VALUE FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Company | Shares | U.S. $ Value | ||||||
|
|
||||||||
| Exxon Mobil Corp. |
301,190 | $ | 24,179,533 | |||||
| Noble Energy, Inc. |
252,963 | 6,845,179 | ||||||
| Occidental Petroleum Corp. |
166,630 | 9,811,174 | ||||||
| Phillips 66 |
546,330 | 51,502,529 | ||||||
|
|
|
|||||||
| 138,598,243 | ||||||||
|
|
|
|||||||
| 145,048,956 | ||||||||
|
|
|
|||||||
| Information Technology – 7.1% |
||||||||
| Communications Equipment – 2.9% |
||||||||
| Cisco Systems, Inc. |
720,100 | 40,289,595 | ||||||
| F5 Networks, Inc.(a) |
84,720 | 13,292,568 | ||||||
|
|
|
|||||||
| 53,582,163 | ||||||||
|
|
|
|||||||
| Electronic Equipment, Instruments & Components – 1.8% |
||||||||
| Dolby Laboratories, Inc. – Class A |
217,067 | 14,042,064 | ||||||
| FLIR Systems, Inc. |
172,940 | 9,155,444 | ||||||
| Keysight Technologies, Inc.(a) |
113,640 | 9,890,089 | ||||||
|
|
|
|||||||
| 33,087,597 | ||||||||
|
|
|
|||||||
| IT Services – 2.0% |
||||||||
| Akamai Technologies, Inc.(a) |
141,990 | 11,367,719 | ||||||
| Cognizant Technology Solutions Corp. – Class A |
193,560 | 14,122,138 | ||||||
| Euronet Worldwide, Inc.(a) |
70,860 | 10,621,205 | ||||||
|
|
|
|||||||
| 36,111,062 | ||||||||
|
|
|
|||||||
| Technology Hardware, Storage & Peripherals – 0.4% |
||||||||
| Apple, Inc. |
33,597 | 6,741,910 | ||||||
|
|
|
|||||||
| 129,522,732 | ||||||||
|
|
|
|||||||
| Consumer Discretionary – 6.2% |
||||||||
| Auto Components – 0.3% |
||||||||
| BorgWarner, Inc. |
151,210 | 6,316,042 | ||||||
|
|
|
|||||||
| Household Durables – 2.7% |
||||||||
| DR Horton, Inc. |
817,720 | 36,233,173 | ||||||
| Garmin Ltd. |
139,770 | 11,983,880 | ||||||
|
|
|
|||||||
| 48,217,053 | ||||||||
|
|
|
|||||||
| Internet & Direct Marketing Retail – 1.5% |
||||||||
| Expedia Group, Inc. |
207,130 | 26,893,759 | ||||||
|
|
|
|||||||
| Specialty Retail – 1.3% |
||||||||
| Murphy USA, Inc.(a) |
284,760 | 24,338,437 | ||||||
|
|
|
|||||||
| Textiles, Apparel & Luxury Goods – 0.4% |
||||||||
| Tapestry, Inc. |
211,690 | 6,831,236 | ||||||
|
|
|
|||||||
| 112,596,527 | ||||||||
|
|
|
|||||||
| abfunds.com | AB RELATIVE VALUE FUND | 15 | |
PORTFOLIO OF INVESTMENTS (continued)
| Company | Shares | U.S. $ Value | ||||||
|
|
||||||||
| Consumer Staples – 4.2% |
||||||||
| Food & Staples Retailing – 3.7% |
||||||||
| Walgreens Boots Alliance, Inc. |
164,550 | $ | 8,814,943 | |||||
| Walmart, Inc. |
570,028 | 58,621,680 | ||||||
|
|
|
|||||||
| 67,436,623 | ||||||||
|
|
|
|||||||
| Tobacco – 0.5% |
||||||||
| Altria Group, Inc. |
183,130 | 9,949,453 | ||||||
|
|
|
|||||||
| 77,386,076 | ||||||||
|
|
|
|||||||
| Real Estate – 3.8% |
||||||||
| Equity Real Estate Investment Trusts (REITs) – 1.6% |
||||||||
| Regency Centers Corp. |
443,620 | 29,797,956 | ||||||
|
|
|
|||||||
| Real Estate Management & Development – 2.2% |
||||||||
| CBRE Group, Inc. – Class A(a) |
765,190 | 39,843,443 | ||||||
|
|
|
|||||||
| 69,641,399 | ||||||||
|
|
|
|||||||
| Total Common Stocks |
1,575,028,510 | |||||||
|
|
|
|||||||
| SHORT-TERM INVESTMENTS – 13.5% |
||||||||
| Investment Companies – 13.5% |
||||||||
| AB Fixed Income Shares, Inc. – Government Money Market Portfolio – Class AB, |
245,301,856 | 245,301,856 | ||||||
|
|
|
|||||||
| Total Investments – 100.0% |
1,820,330,366 | |||||||
| Other assets less liabilities – 0.0% |
(645,632 | ) | ||||||
|
|
|
|||||||
| Net Assets – 100.0% |
$ | 1,819,684,734 | ||||||
|
|
|
|||||||
| (a) | Non-income producing security. |
| (b) | Affiliated investments. |
| (c) | The rate shown represents the 7-day yield as of period end. |
| (d) | To obtain a copy of the fund’s shareholder report, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AB at (800) 227-4618. |
Glossary:
ADR – American Depositary Receipt
See notes to financial statements.
| 16 | AB RELATIVE VALUE FUND | abfunds.com | |
STATEMENT OF ASSETS & LIABILITIES
April 30, 2019 (unaudited)
| Assets |
| |||
| Investments in securities, at value |
||||
| Unaffiliated issuers (cost $1,363,636,971) |
$ | 1,575,028,510 | ||
| Affiliated issuers (cost $245,301,856) |
245,301,856 | |||
| Receivable for capital stock sold |
7,096,718 | |||
| Receivable for investment securities sold |
6,127,603 | |||
| Unaffiliated dividends receivable |
1,668,769 | |||
| Affiliated dividends receivable |
473,296 | |||
|
|
|
|||
| Total assets |
1,835,696,752 | |||
|
|
|
|||
| Liabilities |
| |||
| Payable for investment securities purchased |
13,658,600 | |||
| Payable for capital stock redeemed |
1,014,211 | |||
| Advisory fee payable |
703,136 | |||
| Distribution fee payable |
329,990 | |||
| Transfer Agent fee payable |
117,193 | |||
| Administrative fee payable |
23,330 | |||
| Directors’ fees payable |
2,519 | |||
| Accrued expenses and other liabilities |
163,039 | |||
|
|
|
|||
| Total liabilities |
16,012,018 | |||
|
|
|
|||
| Net Assets |
$ | 1,819,684,734 | ||
|
|
|
|||
| Composition of Net Assets |
| |||
| Capital stock, at par |
$ | 3,341,414 | ||
| Additional paid-in capital |
1,565,321,892 | |||
| Distributable earnings |
251,021,428 | |||
|
|
|
|||
| $ | 1,819,684,734 | |||
|
|
|
|||
Net Asset Value Per Share—27 billion shares of capital stock authorized, $.01 par value
| Class | Net Assets | Shares Outstanding |
Net Asset Value |
|||||||||
|
|
||||||||||||
| A | $ | 1,321,964,329 | 243,310,192 | $ | 5.43 | * | ||||||
|
|
||||||||||||
| B | $ | 9,612,029 | 1,756,211 | $ | 5.47 | |||||||
|
|
||||||||||||
| C | $ | 53,866,591 | 9,933,400 | $ | 5.42 | |||||||
|
|
||||||||||||
| Advisor | $ | 293,109,355 | 53,478,333 | $ | 5.48 | |||||||
|
|
||||||||||||
| R | $ | 7,646,848 | 1,432,396 | $ | 5.34 | |||||||
|
|
||||||||||||
| K | $ | 25,361,251 | 4,726,205 | $ | 5.37 | |||||||
|
|
||||||||||||
| I | $ | 35,142,372 | 6,337,420 | $ | 5.55 | |||||||
|
|
||||||||||||
| Z | $ | 72,981,959 | 13,167,278 | $ | 5.54 | |||||||
|
|
||||||||||||
| * | The maximum offering price per share for Class A shares was $5.67 which reflects a sales charge of 4.25%. |
See notes to financial statements.
| abfunds.com | AB RELATIVE VALUE FUND | 17 | |
STATEMENT OF OPERATIONS
Six Months Ended April 30, 2019 (unaudited)
| Investment Income | ||||||||
| Dividends |
||||||||
| Unaffiliated issuers (net of foreign taxes withheld of $40,765) |
$ | 15,468,004 | ||||||
| Affiliated issuers |
2,356,747 | $ | 17,824,751 | |||||
|
|
|
|||||||
| Expenses | ||||||||
| Advisory fee (see Note B) |
4,685,397 | |||||||
| Distribution fee—Class A |
1,587,706 | |||||||
| Distribution fee—Class B |
48,562 | |||||||
| Distribution fee—Class C |
267,636 | |||||||
| Distribution fee—Class R |
18,095 | |||||||
| Distribution fee—Class K |
29,987 | |||||||
| Transfer agency—Class A |
772,854 | |||||||
| Transfer agency—Class B |
8,116 | |||||||
| Transfer agency—Class C |
33,610 | |||||||
| Transfer agency—Advisor Class |
147,175 | |||||||
| Transfer agency—Class R |
8,820 | |||||||
| Transfer agency—Class K |
20,582 | |||||||
| Transfer agency—Class I |
17,965 | |||||||
| Transfer agency—Class Z |
6,487 | |||||||
| Custodian |
94,149 | |||||||
| Registration fees |
67,359 | |||||||
| Printing |
67,244 | |||||||
| Administrative |
40,342 | |||||||
| Audit and tax |
25,718 | |||||||
| Legal |
21,120 | |||||||
| Directors’ fees |
12,173 | |||||||
| Miscellaneous |
33,773 | |||||||
|
|
|
|||||||
| Total expenses |
8,014,870 | |||||||
| Less: expenses waived and reimbursed by the Adviser (see Note B) |
(640,460 | ) | ||||||
|
|
|
|||||||
| Net expenses |
7,374,410 | |||||||
|
|
|
|||||||
| Net investment income |
10,450,341 | |||||||
|
|
|
|||||||
| Realized and Unrealized Gain on Investment Transactions | ||||||||
| Net realized gain on investment transactions |
38,386,928 | |||||||
| Net change in unrealized appreciation/depreciation of investments |
36,574,467 | |||||||
|
|
|
|||||||
| Net gain on investment transactions |
74,961,395 | |||||||
|
|
|
|||||||
| Net Increase in Net Assets from Operations |
$ | 85,411,736 | ||||||
|
|
|
See notes to financial statements.
| 18 | AB RELATIVE VALUE FUND | abfunds.com | |
STATEMENT OF CHANGES IN NET ASSETS
| Six Months Ended April 30, 2019 (unaudited) |
Year Ended October 31, 2018 |
|||||||
| Increase (Decrease) in Net Assets from Operations | ||||||||
| Net investment income |
$ | 10,450,341 | $ | 16,388,538 | ||||
| Net realized gain on investment transactions |
38,386,928 | 213,758,172 | ||||||
| Net change in unrealized appreciation/depreciation of investments |
36,574,467 | (105,836,427 | ) | |||||
| Contributions from Affiliates |
– 0 | – | 131,963 | |||||
|
|
|
|
|
|||||
| Net increase in net assets from operations |
85,411,736 | 124,442,246 | ||||||
| Distributions to Shareholders |
||||||||
| Class A |
(162,123,984 | ) | (161,828,934 | ) | ||||
| Class B |
(1,154,006 | ) | (1,518,544 | ) | ||||
| Class C |
(6,629,946 | ) | (6,905,725 | ) | ||||
| Advisor Class |
(29,785,194 | ) | (19,657,774 | ) | ||||
| Class R |
(896,900 | ) | (828,618 | ) | ||||
| Class K |
(3,036,359 | ) | (2,481,665 | ) | ||||
| Class I |
(3,983,945 | ) | (3,660,067 | ) | ||||
| Class Z |
(7,938,895 | ) | (5,194,187 | ) | ||||
| Capital Stock Transactions | ||||||||
| Net increase |
214,783,931 | 56,965,390 | ||||||
| Capital Contributions | ||||||||
| Proceeds from regulatory settlement |
– 0 | – | 2,050,215 | |||||
|
|
|
|
|
|||||
| Total increase (decrease) |
84,646,438 | (18,617,663 | ) | |||||
| Net Assets | ||||||||
| Beginning of period |
1,735,038,296 | 1,753,655,959 | ||||||
|
|
|
|
|
|||||
| End of period |
$ | 1,819,684,734 | $ | 1,735,038,296 | ||||
|
|
|
|
|
|||||
See notes to financial statements.
| abfunds.com | AB RELATIVE VALUE FUND | 19 | |
NOTES TO FINANCIAL STATEMENTS
April 30, 2019 (unaudited)
NOTE A
Significant Accounting Policies
AB Relative Value Fund, Inc. (the “Fund”) is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The Fund offers Class A, Class B, Class C, Advisor Class, Class R, Class K, Class I and Class Z shares. Class T shares have been authorized but currently are not offered. Class A shares are sold with a front-end sales charge of up to 4.25% for purchases not exceeding $1,000,000. With respect to purchases of $1,000,000 or more, Class A shares redeemed within one year of purchase may be subject to a contingent deferred sales charge of 1%. Class B shares are currently sold with a contingent deferred sales charge which declines from 4% to 0% depending on the period of time the shares are held. Effective January 31, 2009, sales of Class B shares of the Fund to new investors were suspended. Class B shares will only be issued (i) upon the exchange of Class B shares from another AB mutual fund, (ii) for purposes of dividend reinvestment, (iii) through the Fund’s Automatic Investment Program (the “Program”) for accounts that established the Program prior to January 31, 2009, and (iv) for purchases of additional shares by Class B shareholders as of January 31, 2009. The ability to establish a new Program for accounts containing Class B shares was suspended as of January 31, 2009. Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase. Class C shares are subject to a contingent deferred sales charge of 1% on redemptions made within the first year after purchase, and 0% after the first year of purchase. Class C shares will automatically convert to Class A shares ten years after the end of the calendar month of purchase. Class R and Class K shares are sold without an initial or contingent deferred sales charge. Advisor Class, Class I and Class Z shares are sold without an initial or contingent deferred sales charge and are not subject to ongoing distribution expenses. All nine classes of shares have identical voting, dividend, liquidation and other rights, except that the classes bear different distribution and transfer agency expenses. Each class has exclusive voting rights with respect to its distribution plan. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The Fund is an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the Fund.
| 20 | AB RELATIVE VALUE FUND | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
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 Fund’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, AllianceBernstein L.P. (the “Adviser”) will have discretion to determine the best valuation (e.g., last trade price in the case of listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; U.S. Government securities and any other debt instruments having 60 days or less remaining until maturity are generally valued at market by an independent pricing vendor, if a market price is available. If a market price is not available, the securities are valued at amortized cost. This methodology is commonly used for short term securities that have an original maturity of 60 days or less, as well as short term securities that had an original term to maturity that exceeded 60 days. In instances when amortized cost is utilized, the Valuation Committee (the “Committee”) must reasonably conclude that the utilization of amortized cost is approximately the same as the fair value of the security. 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. Open end mutual funds are
| abfunds.com | AB RELATIVE VALUE FUND | 21 | |
NOTES TO FINANCIAL STATEMENTS (continued)
valued at the closing net asset value per share, while exchange traded funds are valued at the closing market price per share.
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value as deemed appropriate by the Adviser. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer’s financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Fund generally values many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available.
2. Fair Value Measurements
In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.
| • | Level 1—quoted prices in active markets for identical investments |
| • | Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| • | Level 3—significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
| 22 | AB RELATIVE VALUE FUND | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
Where readily available market prices or relevant bid prices are not available for certain equity investments, such investments may be valued based on similar publicly traded investments, movements in relevant indices since last available prices or based upon underlying company fundamentals and comparable company data (such as multiples to earnings or other multiples to equity). Where an investment is valued using an observable input, such as another publicly traded security, the investment will be classified as Level 2. If management determines that an adjustment is appropriate based on restrictions on resale, illiquidity or uncertainty, and such adjustment is a significant component of the valuation, the investment will be classified as Level 3. An investment will also be classified as Level 3 where management uses company fundamentals and other significant inputs to determine the valuation.
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of April 30, 2019:
| Investments in |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Assets: |
| |||||||||||||||
| Common Stocks(a) |
$ | 1,575,028,510 | $ | – 0 | – | $ | – 0 | – | $ | 1,575,028,510 | ||||||
| Short-Term Investments |
245,301,856 | – 0 | – | – 0 | – | 245,301,856 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Investments in Securities |
1,820,330,366 | – 0 | – | – 0 | – | 1,820,330,366 | ||||||||||
| Other Financial Instruments(b) |
– 0 | – | – 0 | – | – 0 | – | – 0 | – | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 1,820,330,366 | $ | – 0 | – | $ | – 0 | – | $ | 1,820,330,366 | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (a) | See Portfolio of Investments for sector classifications. |
| (b) | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/(depreciation) on the instrument. Other financial instruments may also include swaps with upfront premiums, options written and swaptions written which are valued at market value. |
3. 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.
| abfunds.com | AB RELATIVE VALUE FUND | 23 | |
NOTES TO FINANCIAL STATEMENTS (continued)
In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Fund’s tax positions taken or expected to be taken on federal and state income tax returns for all open tax years (the current and the prior three tax years) and has concluded that no provision for income tax is required in the Fund’s financial statements.
4. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date or as soon as the Fund is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date the securities are purchased or sold. Investment gains or losses are determined on the identified cost basis. The Fund amortizes premiums and accretes discounts as adjustments to interest income.
5. 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. Realized and unrealized gains and losses are allocated among the various share classes based on respective net assets.
6. Dividends and Distributions
Dividends and distributions to shareholders, if any, are recorded on the ex-dividend date. Income dividends and capital gains distributions are determined in accordance with federal tax regulations and may differ from those determined in accordance with U.S. GAAP. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification.
NOTE B
Advisory Fee and Other Transactions with Affiliates
Under the terms of the investment advisory agreement, the Fund pays the Adviser an advisory fee at an annual rate of .55% of the first $2.5 billion, .45% of the next $2.5 billion and .40% in excess of $5 billion, of the Fund’s average daily net assets. 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 on an annual basis (the “Expense Caps”) to .90%, 1.65%, 1.65%, .65%, 1.15%, .90%, .65% and .65% of the daily average net assets for the Class A, Class B, Class C, Advisor Class, Class R, Class K, Class I and Class Z shares, respectively. The Expense Caps will remain in effect until February 28, 2020 and then may be extended by the Adviser for additional one-year terms. For the six months ended April 30, 2019, such reimbursements/waivers amounted to $537,543.
| 24 | AB RELATIVE VALUE FUND | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
During 2017, AXA S.A. (“AXA”), a French holding company for the AXA Group, a worldwide leader in life, property and casualty and health insurance and asset management, announced its intention to pursue the sale of a minority stake in its subsidiary, AXA Equitable Holdings, Inc. (“AXA Equitable”), the holding company for a diversified financial services organization, through an initial public offering (“IPO”). AXA Equitable is the holding company for a diverse group of financial services companies, including an approximately 65.2% economic interest in the Adviser and a 100% interest in AllianceBernstein Corporation, the general partner of the Adviser. In March 2018, AXA announced its intention to sell its entire interest in AXA Equitable over time, subject to market conditions and other factors (the “Plan”). During the second quarter of 2018, AXA Equitable completed the IPO. Additional secondary offerings of AXA Equitable shares were completed in the Fourth Quarter of 2018 and the First and Second Quarters of 2019, and AXA Equitable also repurchased shares from AXA in connection with each of these secondary offerings pursuant to agreements with AXA. Following the IPO and subsequent transactions, including secondary offerings and share repurchases, AXA owns approximately 40.1% of the outstanding shares of common stock of AXA Equitable. Contemporaneously with the IPO, AXA sold $862.5 million aggregate principal amount of its 7.25% mandatorily exchangeable notes (the “MxB Notes”) due May 15, 2021 and exchangeable into up to 43,125,000 shares of common stock (or approximately 7% of the outstanding shares of common stock of AXA Equitable). AXA retains ownership (including voting rights) of such shares of common stock until the MxB Notes are exchanged, which may be on a date that is earlier than the maturity date at AXA’s option upon the occurrence of certain events.
It is anticipated that one or more of the transactions contemplated by the Plan may ultimately result in the indirect transfer of a “controlling block” of voting securities of the Adviser (a “Change of Control Event”) and therefore may be deemed an “assignment” causing a termination of each Fund’s current investment advisory agreement. In order to ensure that the existing investment advisory services could continue uninterrupted, at meetings held in late July through early August 2018, the Boards of Directors/Trustees (each a “Board” and collectively, the “Boards”) approved new investment advisory agreements with the Adviser, in connection with the Plan. The Boards also agreed to call and hold a joint meeting of shareholders on October 11, 2018, for shareholders of each Fund to (1) approve the new investment advisory agreement with the Adviser that would be effective after the first Change of Control Event and (2) approve any future advisory agreement approved by the Board and that has terms not materially different from the current agreement, in the event there are subsequent Change of Control Events arising from completion of the Plan that terminate the advisory agreement after the first Change of Control
| abfunds.com | AB RELATIVE VALUE FUND | 25 | |
NOTES TO FINANCIAL STATEMENTS (continued)
Event. Approval of a future advisory agreement means that shareholders may not have another opportunity to vote on a new agreement with the Adviser even upon a change of control, as long as no single person or group of persons acting together gains “control” (as defined in the 1940 Act) of AXA Equitable.
At the December 11, 2018 adjourned shareholder meeting, shareholders approved the new and future investment advisory agreements.
Pursuant to the investment advisory agreement, the Fund may reimburse the Adviser for certain legal and accounting services provided to the Fund by the Adviser. For the six months ended April 30, 2019, the reimbursement for such services amounted to $40,342.
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 $487,382 for the six months ended April 30, 2019.
During the year ended October 31, 2018, the Adviser reimbursed the Fund $131,963 in connection with an error made by the Adviser in processing a claim for class action settlement proceeds on behalf of the Fund.
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 $7,817 from the sale of Class A shares and received $2,993, $2,578 and $1,704 in contingent deferred sales charges imposed upon redemptions by shareholders of Class A, Class B and Class C shares, respectively, for the six months ended April 30, 2019.
The Fund may invest in AB Government Money Market Portfolio (the “Government Money Market Portfolio”) which has a contractual annual advisory fee rate of .20% of the portfolio’s average daily net assets and bears its own expenses. Effective August 1, 2018, the Adviser has contractually agreed to waive .10% of the advisory fee of Government Money Market Portfolio (resulting in a net advisory fee of .10%) until August 31, 2020. In connection with the investment by the Fund in Government Money Market Portfolio, the Adviser has contractually agreed to waive its advisory fee from the Fund in an amount equal to the Fund’s pro rata share of the effective advisory fee of Government Money Market Portfolio, as borne indirectly by the Fund as an acquired fund fee and expense. For the six months ended April 30, 2019, such waiver amounted to $102,917.
| 26 | AB RELATIVE VALUE FUND | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
A summary of the Fund’s transactions in AB mutual funds for the six months ended April 30, 2019 is as follows:
| Fund |
Market Value 10/31/18 (000) |
Purchases at Cost (000) |
Sales Proceeds (000) |
Market Value 4/30/19 (000) |
Dividend Income (000) |
|||||||||||||||
| Government Money Market Portfolio |
$ | 280,779 | $ | 390,604 | $ | 426,081 | $ | 245,302 | $ | 2,357 | ||||||||||
Brokerage commissions paid on investment transactions for the six months ended April 30, 2019 amounted to $252,053, 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 annual rate of up to .30% of the Fund’s average daily net assets attributable to Class A shares, 1% of the Fund’s average daily net assets attributable to both Class B and 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. Effective February 29, 2016, payments under the Class A plan are limited to an annual rate of .25% of Class A shares’ average daily net asset assets. Prior to February 29, 2016, payments under the Class A plan were limited to .28% of Class A shares’ average daily net assets. The fees are accrued daily and paid monthly. Since the commencement of the Fund’s operations, the Distributor has incurred expenses in excess of the distribution costs reimbursed by the Fund in the amounts of $8,512,373, $11,359,207, $257,430 and $152,717 for Class B, 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.
| abfunds.com | AB RELATIVE VALUE FUND | 27 | |
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE D
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments) for the six months ended April 30, 2019 were as follows:
| Purchases | Sales | |||||||
| Investment securities (excluding U.S. government securities) |
$ | 642,259,911 | $ | 633,762,833 | ||||
| U.S. government securities |
– 0 | – | – 0 | – | ||||
The cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes. Accordingly, gross unrealized appreciation and unrealized depreciation are as follows:
| Gross unrealized appreciation |
$ | 231,612,354 | ||
| Gross unrealized depreciation |
(20,220,815 | ) | ||
|
|
|
|||
| Net unrealized appreciation |
$ | 211,391,539 | ||
|
|
|
1. Derivative Financial Instruments
The Fund may use derivatives in an effort to earn income and enhance returns, to replace more traditional direct investments, to obtain exposure to otherwise inaccessible markets (collectively, “investment purposes”), or to hedge or adjust the risk profile of its portfolio.
The Fund did not engage in derivatives transactions for the six months ended April 30, 2019.
2. Currency Transactions
The Fund may invest in non-U.S. Dollar-denominated securities on a currency hedged or unhedged basis. The Fund may seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives, including forward currency exchange contracts, futures and options on futures, swaps, and other options. The Fund may enter into transactions for investment opportunities when it anticipates that a foreign currency will appreciate or depreciate in value but securities denominated in that currency are not held by the Fund and do not present attractive investment opportunities. Such transactions may also be used when the Adviser believes that it may be more efficient than a direct investment in a foreign currency-denominated security. The Fund may also conduct currency exchange contracts on a spot basis (i.e., for cash at the spot rate prevailing in the currency exchange market for buying or selling currencies).
| 28 | AB RELATIVE VALUE FUND | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE E
Capital Stock
Each class consists of 3,000,000,000 authorized shares. Transactions in capital shares for each class were as follows:
| Shares | Amount | |||||||||||||||||||||||
| Six Months Ended April 30, 2019 (unaudited) |
Year Ended October 31, 2018 |
Six Months Ended April 30, 2019 (unaudited) |
Year Ended October 31, 2018 |
|||||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Class A |
|
|||||||||||||||||||||||
| Shares sold |
9,708,024 | 6,949,956 | $ | 52,684,662 | $ | 41,738,365 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
| Shares issued in reinvestment of dividends and distributions |
28,932,335 | 24,518,525 | 142,347,083 | 141,717,073 | ||||||||||||||||||||
|
|
||||||||||||||||||||||||
| Shares converted from Class B |
239,204 | 547,593 | 1,289,688 | 3,261,296 | ||||||||||||||||||||
|
|
||||||||||||||||||||||||
| Shares converted from Class C |
366,589 | 982,675 | 1,945,750 | 5,778,975 | ||||||||||||||||||||
|
|
||||||||||||||||||||||||
| Shares redeemed |
(18,832,415 | ) | (30,911,094 | ) | (100,805,705 | ) | (185,581,867 | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||
| Net increase |
20,413,737 | 2,087,655 | $ | 97,461,478 | $ | 6,913,842 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
| Class B |
|
|||||||||||||||||||||||
| Shares sold |
53,551 | 139,449 | $ | 283,200 | $ | 831,845 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
| Shares issued in reinvestment of dividends and distributions |
227,317 | 255,303 | 1,129,765 | 1,483,310 | ||||||||||||||||||||
|
|
||||||||||||||||||||||||
| Shares converted to Class A |
(237,812 | ) | (546,686 | ) | (1,289,688 | ) | (3,261,296 | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||
| Shares redeemed |
(104,639 | ) | (312,321 | ) | (559,816 | ) | (1,867,228 | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||
| Net decrease |
(61,583 | ) | (464,255 | ) | $ | (436,539 | ) | $ | (2,813,369 | ) | ||||||||||||||
|
|
||||||||||||||||||||||||
| Class C |
|
|||||||||||||||||||||||
| Shares sold |
1,061,449 | 1,067,922 | $ | 5,628,473 | $ | 6,344,083 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
| Shares issued in reinvestment of dividends and distributions |
1,185,314 | 1,085,279 | 5,831,745 | 6,272,912 | ||||||||||||||||||||
|
|
||||||||||||||||||||||||
| Shares converted to Class A |
(367,231 | ) | (985,702 | ) | (1,945,750 | ) | (5,778,975 | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||
| Shares redeemed |
(1,471,613 | ) | (1,908,927 | ) | (7,563,418 | ) | (11,414,451 | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||
| Net increase (decrease) |
407,919 | (741,428 | ) | $ | 1,951,050 | $ | (4,576,431 | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||
| abfunds.com | AB RELATIVE VALUE FUND | 29 | |
NOTES TO FINANCIAL STATEMENTS (continued)
| Shares | Amount | |||||||||||||||||||||||
| Six Months Ended April 30, 2019 (unaudited) |
Year Ended October 31, 2018 |
Six Months Ended April 30, 2019 (unaudited) |
Year Ended October 31, 2018 |
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Advisor Class |
|
|||||||||||||||||||||||
| Shares sold |
21,422,782 | 15,640,670 | $ | 115,096,265 | $ | 94,767,317 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
| Shares issued in reinvestment of dividends and distributions |
4,919,136 | 2,803,352 | 24,398,915 | 16,315,506 | ||||||||||||||||||||
|
|
||||||||||||||||||||||||
| Shares redeemed |
(8,330,460 | ) | (8,782,250 | ) | (43,315,406 | ) | (53,159,016 | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||
| Net increase |
18,011,458 | 9,661,772 | $ | 96,179,774 | $ | 57,923,807 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
| Class R |
|
|||||||||||||||||||||||
| Shares sold |
173,279 | 547,640 | $ | 887,072 | $ | 3,200,960 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
| Shares issued in reinvestment of dividends and distributions |
185,310 | 145,627 | 896,899 | 828,618 | ||||||||||||||||||||
|
|
||||||||||||||||||||||||
| Shares redeemed |
(211,095 | ) | (599,091 | ) | (1,091,268 | ) | (3,539,365 | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||
| Net increase |
147,494 | 94,176 | $ | 692,703 | $ | 490,213 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
| Class K |
|
|||||||||||||||||||||||
| Shares sold |
390,404 | 856,180 | $ | 2,093,465 | $ | 5,078,405 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
| Shares issued in reinvestment of dividends and distributions |
624,764 | 433,856 | 3,036,352 | 2,481,658 | ||||||||||||||||||||
|
|
||||||||||||||||||||||||
| Shares redeemed |
(361,606 | ) | (536,754 | ) | (1,913,103 | ) | (3,183,146 | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||
| Net increase |
653,562 | 753,282 | $ | 3,216,714 | $ | 4,376,917 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
| Class I |
|
|||||||||||||||||||||||
| Shares sold |
861,106 | 1,733,802 | $ | 4,623,546 | $ | 10,907,284 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
| Shares issued in reinvestment of dividends and distributions |
793,614 | 622,460 | 3,983,944 | 3,660,067 | ||||||||||||||||||||
|
|
||||||||||||||||||||||||
| Shares redeemed |
(717,172 | ) | (1,805,728 | ) | (3,925,143 | ) | (10,907,004 | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||
| Net increase |
937,548 | 550,534 | $ | 4,682,347 | $ | 3,660,347 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
| Class Z |
|
|||||||||||||||||||||||
| Shares sold |
2,199,761 | 5,055,580 | $ | 11,745,108 | $ | 30,582,545 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
| Shares issued in reinvestment of dividends and distributions |
1,584,609 | 883,365 | 7,938,893 | 5,194,185 | ||||||||||||||||||||
|
|
||||||||||||||||||||||||
| Shares redeemed |
(1,560,639 | ) | (6,912,859 | ) | (8,647,597 | ) | (44,786,666 | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||
| Net increase (decrease) |
2,223,731 | (973,914 | ) | $ | 11,036,404 | $ | (9,009,936 | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||
| 30 | AB RELATIVE VALUE FUND | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
For the year ended October 31, 2018, the Fund recorded $2,050,215 related to settlements of regulatory proceedings. This amount is presented in the Fund’s statement of changes in net assets. Neither the Fund nor its affiliates were involved in the proceedings or the calculation of the payment.
NOTE F
Risks Involved in Investing in the Fund
Foreign (Non-U.S.) Risk—Investments in securities of non-U.S. issuers may involve more risk than those of U.S. issuers. These securities may fluctuate more widely in price and may be more difficult to trade or dispose of due to adverse market, economic, political, regulatory or other factors.
Currency Risk—Fluctuations in currency exchange rates may negatively affect the value of the Fund’s investments or reduce its returns.
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 on the statement of assets and liabilities.
Industry/Sector Risk—Investments in a particular industry or group of related industries may have more risk because market or economic factors affecting that industry could have a significant effect on the value of the Fund’s investments.
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 G
Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Fund, participate in a $325 million revolving credit facility (the “Facility”) intended to provide short-term financing, 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 did not utilize the Facility during the six months ended April 30, 2019.
| abfunds.com | AB RELATIVE VALUE FUND | 31 | |
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE H
Distributions to Shareholders
The tax character of distributions to be paid for the year ending October 31, 2019 will be determined at the end of the current fiscal year. The tax character of distributions paid during the fiscal years ended October 31, 2018 and October 31, 2017 were as follows:
| 2018 | 2017 | |||||||
| Distributions paid from: |
||||||||
| Ordinary income |
$ | 50,920,272 | $ | 45,560,928 | ||||
| Net long-term capital gains |
151,155,242 | 63,117,328 | ||||||
|
|
|
|
|
|||||
| Total taxable distributions paid |
$ | 202,075,514 | $ | 108,678,256 | ||||
|
|
|
|
|
|||||
As of October 31, 2018, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| Undistributed ordinary income |
$ | 59,546,486 | ||
| Undistributed capital gains |
154,194,903 | |||
| Unrealized appreciation/(depreciation) |
167,417,532 | (a) | ||
|
|
|
|||
| Total accumulated earnings/(deficit) |
$ | 381,158,921 | ||
|
|
|
| (a) | The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales. |
For tax purposes, net realized capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of October 31, 2018, the Fund did not have any capital loss carryforwards.
NOTE I
Recent Accounting Pronouncements
In August 2018, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement which removes, modifies and adds disclosures to Topic 820. The amendments in this ASU 2018-13 (“ASU”) apply to all entities that are required, under existing U.S. GAAP, to make disclosures about recurring or nonrecurring fair value measurements. The amendments in this ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Management has evaluated the impact of the amendments and elected to early adopt the ASU. The adoption of this ASU did not have a material impact on the disclosure and presentation of the financial statements of the Fund.
| 32 | AB RELATIVE VALUE FUND | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE J
Subsequent Events
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Fund’s financial statements through this date.
| abfunds.com | AB RELATIVE VALUE FUND | 33 | |
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class A | ||||||||||||||||||||||||
| Six Months (unaudited) |
Year Ended October 31, | |||||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Net asset value, beginning of period |
$ 5.94 | $ 6.24 | $ 5.49 | $ 5.63 | $ 5.68 | $ 5.10 | ||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Income From Investment Operations |
||||||||||||||||||||||||
| Net investment income(a)(b) |
.03 | .06 | .05 | † | .06 | .05 | .05 | |||||||||||||||||
| Net realized and unrealized gain on investment transactions |
.19 | .38 | 1.09 | .02 | †† | .21 | .57 | |||||||||||||||||
| Capital contributions |
– 0 | – | .00 | (c) | – 0 | – | .01 | – 0 | – | – 0 | – | |||||||||||||
|
|
|
|||||||||||||||||||||||
| Net increase in net asset value from operations |
.22 | .44 | 1.14 | .09 | .26 | .62 | ||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Less: Dividends and Distributions |
||||||||||||||||||||||||
| Dividends from net investment income |
(.06 | ) | (.05 | ) | (.10 | ) | (.05 | ) | (.04 | ) | (.04 | ) | ||||||||||||
| Distributions from net realized gain on investment transactions |
(.67 | ) | (.69 | ) | (.29 | ) | (.18 | ) | (.27 | ) | – 0 | – | ||||||||||||
|
|
|
|||||||||||||||||||||||
| Total dividends and distributions |
(.73 | ) | (.74 | ) | (.39 | ) | (.23 | ) | (.31 | ) | (.04 | ) | ||||||||||||
|
|
|
|||||||||||||||||||||||
| Net asset value, end of period |
$ 5.43 | $ 5.94 | $ 6.24 | $ 5.49 | $ 5.63 | $ 5.68 | ||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Total Return |
||||||||||||||||||||||||
| Total investment return based on net asset value(d)* |
5.04 | % | 7.39 | % | 21.54 | %† | 1.81 | % | 4.74 | % | 12.30 | % | ||||||||||||
| Ratios/Supplemental Data |
||||||||||||||||||||||||
| Net assets, end of period |
$1,322 | $1,325 | $1,379 | $1,157 | $1,244 | $1,312 | ||||||||||||||||||
| Ratio to average net assets of: |
||||||||||||||||||||||||
| Expenses, net of waivers/reimbursements(e)‡ |
.89 | %^ | .88 | % | .87 | % | .91 | % | .95 | % | .98 | % | ||||||||||||
| Expenses, before waivers/reimbursements(e)‡ |
.96 | %^ | .97 | % | .98 | % | 1.00 | % | .98 | % | 1.00 | % | ||||||||||||
| Net investment income(b) |
1.21 | %^ | .92 | % | .82 | %† | 1.06 | % | .96 | % | 1.00 | % | ||||||||||||
| Portfolio turnover rate |
42 | % | 110 | % | 85 | % | 72 | % | 71 | % | 54 | % | ||||||||||||
| ‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying |
| |||||||||||||||||||||||
| portfolios |
.01 | %^ | .02 | % | .03 | % | .01 | % | 0 | % | 0 | % | ||||||||||||
See footnote summary on page 42.
| 34 | AB RELATIVE VALUE FUND | abfunds.com | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class B | ||||||||||||||||||||||||
| Six Months (unaudited) |
Year Ended October 31, | |||||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Net asset value, beginning of period |
$ 5.94 | $ 6.23 | $ 5.46 | $ 5.59 | $ 5.64 | $ 5.06 | ||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Income From Investment Operations |
||||||||||||||||||||||||
| Net investment income(a)(b) |
.01 | .01 | .01 | † | .02 | .01 | .01 | |||||||||||||||||
| Net realized and unrealized gain on investment transactions |
.19 | .39 | 1.09 | .02 | †† | .21 | .57 | |||||||||||||||||
| Capital contributions |
– 0 | – | .00 | (c) | – 0 | – | .01 | – 0 | – | – 0 | – | |||||||||||||
|
|
|
|||||||||||||||||||||||
| Net increase in net asset value from operations |
.20 | .40 | 1.10 | .05 | .22 | .58 | ||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Less: Dividends and Distributions |
||||||||||||||||||||||||
| Dividends from net investment income |
(.00 | )(c) | – 0 | – | (.04 | ) | (.00 | )(c) | – 0 | – | – 0 | – | ||||||||||||
| Distributions from net realized gain on investment transactions |
(.67 | ) | (.69 | ) | (.29 | ) | (.18 | ) | (.27 | ) | – 0 | – | ||||||||||||
|
|
|
|||||||||||||||||||||||
| Total dividends and distributions |
(.67 | ) | (.69 | ) | (.33 | ) | (.18 | ) | (.27 | ) | – 0 | – | ||||||||||||
|
|
|
|||||||||||||||||||||||
| Net asset value, end of period |
$ 5.47 | $ 5.94 | $ 6.23 | $ 5.46 | $ 5.59 | $ 5.64 | ||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Total Return |
||||||||||||||||||||||||
| Total investment return based on net asset value(d)* |
4.52 | % | 6.68 | % | 20.86 | %† | .96 | % | 3.95 | % | 11.46 | % | ||||||||||||
| Ratios/Supplemental Data |
||||||||||||||||||||||||
| Net assets, end of period |
$9,612 | $10,791 | $14,222 | $17,974 | $24,209 | $32,473 | ||||||||||||||||||
| Ratio to average net assets of: |
||||||||||||||||||||||||
| Expenses, net of waivers/reimbursements(e)‡ |
1.64 | %^ | 1.63 | % | 1.63 | % | 1.64 | % | 1.65 | % | 1.70 | % | ||||||||||||
| Expenses, before waivers/reimbursements(e)‡ |
1.76 | %^ | 1.75 | % | 1.76 | % | 1.78 | % | 1.73 | % | 1.75 | % | ||||||||||||
| Net investment income(b) |
.45 | %^ | .17 | % | .10 | %† | .34 | % | .27 | % | .28 | % | ||||||||||||
| Portfolio turnover rate |
42 | % | 110 | % | 85 | % | 72 | % | 71 | % | 54 | % | ||||||||||||
| ‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying |
| |||||||||||||||||||||||
| portfolios |
.01 | %^ | .02 | % | .03 | % | .01 | % | 0 | % | 0 | % | ||||||||||||
See footnote summary on page 42.
| abfunds.com | AB RELATIVE VALUE FUND | 35 | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class C | ||||||||||||||||||||||||
| Six Months (unaudited) |
Year Ended October 31, | |||||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Net asset value, beginning of period |
$ 5.90 | $ 6.20 | $ 5.45 | $ 5.58 | $ 5.64 | $ 5.07 | ||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Income From Investment Operations |
||||||||||||||||||||||||
| Net investment income(a)(b) |
.01 | .01 | .01 | † | .02 | .01 | .02 | |||||||||||||||||
| Net realized and unrealized gain on investment transactions |
.20 | .38 | 1.08 | .03 | †† | .20 | .56 | |||||||||||||||||
| Capital contributions |
– 0 | – | .00 | (c) | – 0 | – | .01 | – 0 | – | – 0 | – | |||||||||||||
|
|
|
|||||||||||||||||||||||
| Net increase in net asset value from operations |
.21 | .39 | 1.09 | .06 | .21 | .58 | ||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Less: Dividends and Distributions |
||||||||||||||||||||||||
| Dividends from net investment income |
(.02 | ) | – 0 | – | (.05 | ) | (.01 | ) | (.00 | )(c) | (.01 | ) | ||||||||||||
| Distributions from net realized gain on investment transactions |
(.67 | ) | (.69 | ) | (.29 | ) | (.18 | ) | (.27 | ) | – 0 | – | ||||||||||||
|
|
|
|||||||||||||||||||||||
| Total dividends and distributions |
(.69 | ) | (.69 | ) | (.34 | ) | (.19 | ) | (.27 | ) | (.01 | ) | ||||||||||||
|
|
|
|||||||||||||||||||||||
| Net asset value, end of period |
$ 5.42 | $ 5.90 | $ 6.20 | $ 5.45 | $ 5.58 | $ 5.64 | ||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Total Return |
||||||||||||||||||||||||
| Total investment return based on net asset value(d)* |
4.68 | % | 6.53 | % | 20.77 | %† | 1.21 | % | 3.84 | % | 11.48 | % | ||||||||||||
| Ratios/Supplemental Data |
||||||||||||||||||||||||
| Net assets, end of period (000’s omitted) |
$53,867 | $56,237 | $63,674 | $193,912 | $212,394 | $220,054 | ||||||||||||||||||
| Ratio to average net assets of: |
||||||||||||||||||||||||
| Expenses, net of waivers/reimbursements(e)‡ |
1.64 | %^ | 1.63 | % | 1.63 | % | 1.64 | % | 1.65 | % | 1.68 | % | ||||||||||||
| Expenses, before waivers/reimbursements(e)‡ |
1.72 | %^ | 1.72 | % | 1.74 | % | 1.75 | % | 1.70 | % | 1.72 | % | ||||||||||||
| Net investment income(b) |
.46 | %^ | .18 | % | .13 | %† | .33 | % | .25 | % | .29 | % | ||||||||||||
| Portfolio turnover rate |
42 | % | 110 | % | 85 | % | 72 | % | 71 | % | 54 | % | ||||||||||||
| ‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying |
| |||||||||||||||||||||||
| portfolios |
.01 | %^ | .02 | % | .03 | % | .01 | % | 0 | % | 0 | % | ||||||||||||
See footnote summary on page 42.
| 36 | AB RELATIVE VALUE FUND | abfunds.com | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Advisor Class | ||||||||||||||||||||||||
| Six Months (unaudited) |
Year Ended October 31, | |||||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Net asset value, beginning of period |
$ 6.00 | $ 6.30 | $ 5.53 | $ 5.65 | $ 5.71 | $ 5.12 | ||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Income From Investment Operations |
||||||||||||||||||||||||
| Net investment income(a)(b) |
.04 | .07 | .06 | † | .07 | .09 | .07 | |||||||||||||||||
| Net realized and unrealized gain on investment transactions |
.19 | .39 | 1.11 | .03 | †† | .18 | .58 | |||||||||||||||||
| Capital contributions |
– 0 | – | .00 | (c) | – 0 | – | .01 | – 0 | – | – 0 | – | |||||||||||||
|
|
|
|||||||||||||||||||||||
| Net increase in net asset value from operations |
.23 | .46 | 1.17 | .11 | .27 | .65 | ||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Less: Dividends and Distributions |
||||||||||||||||||||||||
| Dividends from net investment income |
(.08 | ) | (.07 | ) | (.11 | ) | (.05 | ) | (.06 | ) | (.06 | ) | ||||||||||||
| Distributions from net realized gain on investment transactions |
(.67 | ) | (.69 | ) | (.29 | ) | (.18 | ) | (.27 | ) | – 0 | – | ||||||||||||
|
|
|
|||||||||||||||||||||||
| Total dividends and distributions |
(.75 | ) | (.76 | ) | (.40 | ) | (.23 | ) | (.33 | ) | (.06 | ) | ||||||||||||
|
|
|
|||||||||||||||||||||||
| Net asset value, end of period |
$ 5.48 | $ 6.00 | $ 6.30 | $ 5.53 | $ 5.65 | $ 5.71 | ||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Total Return |
||||||||||||||||||||||||
| Total investment return based on net asset value(d)* |
5.16 | % | 7.60 | % | 22.09 | %† | 2.01 | % | 4.90 | % | 12.75 | % | ||||||||||||
| Ratios/Supplemental Data |
||||||||||||||||||||||||
| Net assets, end of period (000’s omitted) |
$293,109 | $212,812 | $162,527 | $108,998 | $82,681 | $1,401,685 | ||||||||||||||||||
| Ratio to average net assets of: |
||||||||||||||||||||||||
| Expenses, net of waivers/reimbursements(e)‡ |
.64 | %^ | .63 | % | .62 | % | .64 | % | .65 | % | .65 | % | ||||||||||||
| Expenses, before waivers/reimbursements(e)‡ |
.72 | %^ | .72 | % | .73 | % | .74 | % | .66 | % | .68 | % | ||||||||||||
| Net investment income(b) |
1.45 | %^ | 1.17 | % | 1.05 | %† | 1.31 | % | 1.51 | % | 1.32 | % | ||||||||||||
| Portfolio turnover rate |
42 | % | 110 | % | 85 | % | 72 | % | 71 | % | 54 | % | ||||||||||||
| ‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying |
| |||||||||||||||||||||||
| portfolios |
.01 | %^ | .02 | % | .03 | % | .01 | % | 0 | % | 0 | % | ||||||||||||
See footnote summary on page 42.
| abfunds.com | AB RELATIVE VALUE FUND | 37 | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class R | ||||||||||||||||||||||||
| Six Months (unaudited) |
Year Ended October 31, | |||||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Net asset value, beginning of period |
$ 5.84 | $ 6.14 | $ 5.40 | $ 5.53 | $ 5.59 | $ 5.03 | ||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Income From Investment Operations |
||||||||||||||||||||||||
| Net investment income(a)(b) |
.02 | .04 | .03 | † | .04 | .04 | .04 | |||||||||||||||||
| Net realized and unrealized gain on investment transactions |
.19 | .37 | 1.08 | .04 | †† | .20 | .55 | |||||||||||||||||
| Capital contributions |
– 0 | – | .00 | (c) | – 0 | – | .01 | – 0 | – | – 0 | – | |||||||||||||
|
|
|
|||||||||||||||||||||||
| Net increase in net asset value from operations |
.21 | .41 | 1.11 | .09 | .24 | .59 | ||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Less: Dividends and Distributions |
||||||||||||||||||||||||
| Dividends from net investment income |
(.04 | ) | (.02 | ) | (.08 | ) | (.04 | ) | (.03 | ) | (.03 | ) | ||||||||||||
| Distributions from net realized gain on investment transactions |
(.67 | ) | (.69 | ) | (.29 | ) | (.18 | ) | (.27 | ) | – 0 | – | ||||||||||||
|
|
|
|||||||||||||||||||||||
| Total dividends and distributions |
(.71 | ) | (.71 | ) | (.37 | ) | (.22 | ) | (.30 | ) | (.03 | ) | ||||||||||||
|
|
|
|||||||||||||||||||||||
| Net asset value, end of period |
$ 5.34 | $ 5.84 | $ 6.14 | $ 5.40 | $ 5.53 | $ 5.59 | ||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Total Return |
||||||||||||||||||||||||
| Total investment return based on net asset value(d)* |
4.93 | % | 7.02 | % | 21.45 | %† | 1.71 | % | 4.40 | % | 11.85 | % | ||||||||||||
| Ratios/Supplemental Data |
||||||||||||||||||||||||
| Net assets, end of period |
$7,647 | $7,503 | $7,305 | $8,396 | $5,868 | $6,866 | ||||||||||||||||||
| Ratio to average net assets of: |
||||||||||||||||||||||||
| Expenses, net of waivers/reimbursements(e)‡ |
1.14 | %^ | 1.13 | % | 1.13 | % | 1.14 | % | 1.15 | % | 1.19 | % | ||||||||||||
| Expenses, before waivers/reimbursements(e)‡ |
1.34 | %^ | 1.33 | % | 1.33 | % | 1.35 | % | 1.31 | % | 1.34 | % | ||||||||||||
| Net investment income(b) |
.95 | %^ | .67 | % | .60 | %† | .80 | % | .77 | % | .79 | % | ||||||||||||
| Portfolio turnover rate |
42 | % | 110 | % | 85 | % | 72 | % | 71 | % | 54 | % | ||||||||||||
| ‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying |
| |||||||||||||||||||||||
| portfolios |
.01 | %^ | .02 | % | .03 | % | .01 | % | 0 | % | 0 | % | ||||||||||||
See footnote summary on page 42.
| 38 | AB RELATIVE VALUE FUND | abfunds.com | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class K | ||||||||||||||||||||||||
| Six Months (unaudited) |
Year Ended October 31, | |||||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Net asset value, beginning of period |
$ 5.88 | $ 6.19 | $ 5.45 | $ 5.58 | $ 5.64 | $ 5.07 | ||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Income From Investment Operations |
||||||||||||||||||||||||
| Net investment income(a)(b) |
.03 | .05 | .04 | † | .06 | .06 | .05 | |||||||||||||||||
| Net realized and unrealized gain on investment transactions |
.19 | .39 | 1.09 | .03 | †† | .19 | .57 | |||||||||||||||||
| Capital contributions |
– 0 | – | .00 | (c) | – 0 | – | .01 | – 0 | – | – 0 | – | |||||||||||||
|
|
|
|||||||||||||||||||||||
| Net increase in net asset value from operations |
.22 | .44 | 1.13 | .10 | .25 | .62 | ||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Less: Dividends and Distributions |
||||||||||||||||||||||||
| Dividends from net investment income |
(.06 | ) | (.06 | ) | (.10 | ) | (.05 | ) | (.04 | ) | (.05 | ) | ||||||||||||
| Distributions from net realized gain on investment transactions |
(.67 | ) | (.69 | ) | (.29 | ) | (.18 | ) | (.27 | ) | – 0 | – | ||||||||||||
|
|
|
|||||||||||||||||||||||
| Total dividends and distributions |
(.73 | ) | (.75 | ) | (.39 | ) | (.23 | ) | (.31 | ) | (.05 | ) | ||||||||||||
|
|
|
|||||||||||||||||||||||
| Net asset value, end of period |
$ 5.37 | $ 5.88 | $ 6.19 | $ 5.45 | $ 5.58 | $ 5.64 | ||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Total Return |
||||||||||||||||||||||||
| Total investment return based on net asset value(d)* |
5.13 | % | 7.44 | % | 21.57 | %† | 1.97 | % | 4.63 | % | 12.41 | % | ||||||||||||
| Ratios/Supplemental Data |
||||||||||||||||||||||||
| Net assets, end of period (000’s omitted) |
$25,361 | $23,947 | $20,559 | $7,149 | $5,285 | $7,261 | ||||||||||||||||||
| Ratio to average net assets of: |
||||||||||||||||||||||||
| Expenses, net of waivers/reimbursements(e)‡ |
.89 | %^ | .88 | % | .87 | % | .89 | % | .90 | % | .94 | % | ||||||||||||
| Expenses, before waivers/reimbursements(e)‡ |
1.01 | %^ | 1.00 | % | 1.03 | % | 1.03 | % | 1.01 | % | 1.04 | % | ||||||||||||
| Net investment income(b) |
1.20 | %^ | .92 | % | .72 | %† | 1.05 | % | 1.02 | % | 1.00 | % | ||||||||||||
| Portfolio turnover rate |
42 | % | 110 | % | 85 | % | 72 | % | 71 | % | 54 | % | ||||||||||||
| ‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying |
| |||||||||||||||||||||||
| portfolios |
.01 | %^ | .02 | % | .03 | % | .01 | % | 0 | % | 0 | % | ||||||||||||
See footnote summary on page 42.
| abfunds.com | AB RELATIVE VALUE FUND | 39 | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class I | ||||||||||||||||||||||||
| Six Months (unaudited) |
Year Ended October 31, | |||||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Net asset value, beginning of period |
$ 6.06 | $ 6.35 | $ 5.57 | $ 5.72 | $ 5.77 | $ 5.19 | ||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Income From Investment Operations |
||||||||||||||||||||||||
| Net investment income(a)(b) |
.04 | .07 | .06 | † | .07 | .07 | .07 | |||||||||||||||||
| Net realized and unrealized gain on investment transactions |
.20 | .40 | 1.12 | .02 | †† | .21 | .58 | |||||||||||||||||
| Capital contributions |
– 0 | – | .00 | (c) | – 0 | – | .01 | – 0 | – | – 0 | – | |||||||||||||
|
|
|
|||||||||||||||||||||||
| Net increase in net asset value from operations |
.24 | .47 | 1.18 | .10 | .28 | .65 | ||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Less: Dividends and Distributions |
||||||||||||||||||||||||
| Dividends from net investment income |
(.08 | ) | (.07 | ) | (.11 | ) | (.07 | ) | (.06 | ) | (.07 | ) | ||||||||||||
| Distributions from net realized gain on investment transactions |
(.67 | ) | (.69 | ) | (.29 | ) | (.18 | ) | (.27 | ) | – 0 | – | ||||||||||||
|
|
|
|||||||||||||||||||||||
| Total dividends and distributions |
(.75 | ) | (.76 | ) | (.40 | ) | (.25 | ) | (.33 | ) | (.07 | ) | ||||||||||||
|
|
|
|||||||||||||||||||||||
| Net asset value, end of period |
$ 5.55 | $ 6.06 | $ 6.35 | $ 5.57 | $ 5.72 | $ 5.77 | ||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Total Return |
||||||||||||||||||||||||
| Total investment return based on net asset value(d)* |
5.26 | % | 7.70 | % | 22.15 | %† | 1.94 | % | 5.05 | % | 12.54 | % | ||||||||||||
| Ratios/Supplemental Data |
||||||||||||||||||||||||
| Net assets, end of period |
$35,142 | $32,720 | $30,801 | $29,127 | $16,193 | $13,860 | ||||||||||||||||||
| Ratio to average net assets of: |
||||||||||||||||||||||||
| Expenses, net of waivers/reimbursements(e)‡ |
.64 | %^ | .63 | % | .62 | % | .64 | % | .65 | % | .66 | % | ||||||||||||
| Expenses, before waivers/reimbursements(e)‡ |
.70 | %^ | .72 | % | .71 | % | .71 | % | .68 | % | .66 | % | ||||||||||||
| Net investment income(b) |
1.45 | %^ | 1.17 | % | 1.07 | %† | 1.29 | % | 1.24 | % | 1.30 | % | ||||||||||||
| Portfolio turnover rate |
42 | % | 110 | % | 85 | % | 72 | % | 71 | % | 54 | % | ||||||||||||
| ‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying |
| |||||||||||||||||||||||
| portfolios |
.01 | %^ | .02 | % | .03 | % | .01 | % | 0 | % | 0 | % | ||||||||||||
See footnote summary on page 42.
| 40 | AB RELATIVE VALUE FUND | abfunds.com | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class Z | ||||||||||||||||||||||||
| Six Months (unaudited) |
Year Ended October 31, | |||||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Net asset value, beginning of period |
$ 6.06 | $ 6.36 | $ 5.57 | $ 5.72 | $ 5.77 | $ 5.19 | ||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Income From Investment Operations |
||||||||||||||||||||||||
| Net investment income(a) |
.04 | (b) | .08 | (b) | .07 | (b)† | .08 | (b) | .07 | .07 | ||||||||||||||
| Net realized and unrealized gain on investment transactions |
.20 | .38 | 1.12 | .02 | †† | .22 | .58 | |||||||||||||||||
| Capital contributions |
– 0 | – | .00 | (c) | – 0 | – | .01 | – 0 | – | – 0 | – | |||||||||||||
|
|
|
|||||||||||||||||||||||
| Net increase in net asset value from operations |
.24 | .46 | 1.19 | .11 | .29 | .65 | ||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Less: Dividends and Distributions |
||||||||||||||||||||||||
| Dividends from net investment income |
(.09 | ) | (.07 | ) | (.11 | ) | (.08 | ) | (.07 | ) | (.07 | ) | ||||||||||||
| Distributions from net realized gain on investment transactions |
(.67 | ) | (.69 | ) | (.29 | ) | (.18 | ) | (.27 | ) | – 0 | – | ||||||||||||
|
|
|
|||||||||||||||||||||||
| Total dividends and distributions |
(.76 | ) | (.76 | ) | (.40 | ) | (.26 | ) | (.34 | ) | (.07 | ) | ||||||||||||
|
|
|
|||||||||||||||||||||||
| Net asset value, end of period |
$ 5.54 | $ 6.06 | $ 6.36 | $ 5.57 | $ 5.72 | $ 5.77 | ||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Total Return |
||||||||||||||||||||||||
| Total investment return based on net asset value(d)* |
5.21 | % | 7.60 | % | 22.18 | %† | 2.04 | % | 5.09 | % | 12.56 | % | ||||||||||||
| Ratios/Supplemental Data |
||||||||||||||||||||||||
| Net assets, end of period |
$72,982 | $66,355 | $75,777 | $64,718 | $1,234,532 | $11 | ||||||||||||||||||
| Ratio to average net assets of: |
||||||||||||||||||||||||
| Expenses, net of waivers/reimbursements(e)‡ |
.60 | %^ | .59 | % | .59 | % | .59 | % | .59 | % | .61 | % | ||||||||||||
| Expenses, before waivers/reimbursements(e)‡ |
.61 | %^ | .61 | % | .62 | % | .59 | % | .59 | % | .61 | % | ||||||||||||
| Net investment income |
1.48 | %(b)^ | 1.22 | %(b) | 1.10 | %(b)† | 1.50 | %(b) | 1.18 | % | 1.37 | % | ||||||||||||
| Portfolio turnover rate |
42 | % | 110 | % | 85 | % | 72 | % | 71 | % | 54 | % | ||||||||||||
| ‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying |
| |||||||||||||||||||||||
| portfolios |
.01 | %^ | .02 | % | .03 | % | .01 | % | 0 | % | 0 | % | ||||||||||||
See footnote summary on page 42.
| abfunds.com | AB RELATIVE VALUE FUND | 41 | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| (a) | Based on average shares outstanding. |
| (b) | Net of fees and expenses waived/reimbursed by the Adviser. |
| (c) | Amount is less than $.005. |
| (d) | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Initial sales charges or contingent deferred sales charges are not reflected in the calculation of total investment return. Total return does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Total investment return calculated for a period of less than one year is not annualized. |
| (e) | In connection with the Fund’s investments in affiliated underlying portfolios, the Fund incurs no direct expenses, but bears proportionate shares of the fees and expenses (i.e., operating, administrative and investment advisory fees) of the affiliated underlying portfolios. The Adviser has contractually agreed to waive its fees from the Fund in an amount equal to the Fund’s pro rata share of certain acquired fund fees and expenses, and for the six months ended April 30, 2019 and years ended October 31, 2018, October 31, 2017 and October 31, 2016, such waiver amounted to .01%, .02%, .02% and .01%, respectively. |
| † | For the year ended October 31, 2017, the amount includes a refund for overbilling of prior years’ custody out of pocket fees as follows: |
| Net Investment Income Per Share |
Net Investment Income Ratio |
Total Return | ||
| $.001 | .01% | .01% |
| †† | Due to timing of sales and repurchase of capital shares, the net realized and unrealized gain (loss) per share is not in accordance with the Fund’s change in net realized and unrealized gain (loss) on investment transactions for the period. |
| * | Includes the impact of proceeds received and credited to the Fund resulting from class action settlements, which enhanced the Fund’s performance for the six months ended April 30, 2019 and years ended October 31, 2018, October 31, 2017, October 31, 2016, October 31, 2015 and October 31, 2014 by .13%, .03%, .64%, .01%, .08% and .08%, respectively. |
| Includes the impact of proceeds recorded and credited to the Fund resulting from regulatory settlements, which enhanced the Fund’s performance for the years ended October 31, 2018 and October 31, 2016 by .12% and .18%, respectively. |
| ^ | Annualized. |
See notes to financial statements.
| 42 | AB RELATIVE VALUE FUND | abfunds.com | |
RESULTS OF STOCKHOLDER MEETING
(unaudited)
A Special Meeting of Stockholders of the AB Relative Value Fund, Inc. (the “Company”) was held on October 11, 2018 and adjourned until December 11, 2018. A description of the proposals and number of shares voted at the Meeting are as follows (the proposal number shown below corresponds to the proposal number in the Fund’s proxy statement):
| 1. | To approve and vote upon the election of Directors for the Company, each such Director to serve for a term of indefinite duration and until his or her successor is duly elected and qualifies. |
| Director: |
Voted For: |
Authority Withheld: |
||||||
| Michael J. Downey |
150,562,442 | 5,001,885 | ||||||
| William H. Foulk, Jr.* |
149,971,000 | 5,593,326 | ||||||
| Nancy P. Jacklin |
150,640,810 | 4,923,516 | ||||||
| Robert M. Keith |
150,677,389 | 4,886,937 | ||||||
| Carol C. McMullin |
150,688,826 | 4,875,500 | ||||||
| Gary L. Moody |
150,700,031 | 4,864,295 | ||||||
| Marshall C. Turner, Jr. |
150,556,589 | 5,007,737 | ||||||
| Earl D. Weiner |
150,096,543 | 5,467,783 | ||||||
| 2. | To vote upon the approval of new advisory agreements for the Company with AllianceBernstein L.P. |
| Voted For: |
Voted Against: |
Abstain: | Broker Non-Votes: |
|||||||||||
| 109,923,437 | 3,976,492 | 4,923,308 | 36,741,089 | |||||||||||
| * | Mr. Foulk retired December 31, 2018. |
| abfunds.com | AB RELATIVE VALUE FUND | 43 | |
BOARD OF DIRECTORS
| Marshall C. Turner, Jr.,(1) Chairman Michael J. Downey(1) Nancy P. Jacklin(1) Robert M. Keith,
President and |
Carol C. McMullen(1) Garry L. Moody(1) Earl D. Weiner(1) |
OFFICERS
| Frank V. Caruso(2), Senior Vice President Vinay Thapar(2), Vice President John H. Fogarty(2), Vice President Emilie D. Wrapp, Secretary |
Michael B. Reyes, Senior Analyst Joseph J. Mantineo, Treasurer and Chief Financial Officer Stephen M. Woetzel, 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
Legal Counsel Seward & Kissel LLP One Battery Park Plaza New York, NY 10004 |
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 |
| 1 | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
| 2 | The day-to-day management of, and investment decisions for, the Fund’s portfolio are made by the Adviser’s Relative Value Investment Team. Messrs. Caruso, Thapar and Fogarty are the investment professionals with the most significant responsibility for the day-to-day management of the Fund’s portfolio. |
| 44 | AB RELATIVE VALUE FUND | abfunds.com | |
Information Regarding the Review and Approval of the Fund’s Proposed New Advisory Agreements and Interim Advisory Agreement in the Context of Potential Assignments
As described in more detail in the Proxy Statement for the AB Funds dated August 20, 2018, the Boards of the AB Funds, at a meeting held on July 31-August 2, 2018, approved new advisory agreements with the Adviser (the “Proposed Agreements”) for the AB Funds, including AB Relative Value Fund, Inc. (formerly AB Growth and Income Fund, Inc.) (the “Fund”), in connection with the planned disposition by AXA S.A. of its remaining shares of AXA Equitable Holdings, Inc. (the indirect holder of a majority of the partnership interests in the Adviser and the indirect parent of AllianceBernstein Corporation, the general partner of the Adviser) in one or more transactions and the related potential for one or more “assignments” (within the meaning of section 2(a)(4) of the Investment Company Act) of the advisory agreements for the AB Funds, including the Fund’s Advisory Agreement, resulting in the automatic termination of such advisory agreements.
At the same meeting, the AB Boards also considered and approved interim advisory agreements with the Adviser (the “Interim Advisory Agreements”) for the AB Funds, including the Fund, to be effective only in the event that stockholder approval of a Proposed Agreement had not been obtained as of the date of one or more transactions resulting in an “assignment” of the Adviser’s advisory agreements, resulting in the automatic termination of such advisory agreements.
The shareholders of the Fund subsequently approved the Proposed Agreements at an annual meeting of shareholders called for the purpose of electing Directors and voting on the Proposed Agreements.
A discussion regarding the basis for the Boards’ approvals at the meeting held on July 31-August 2, 2018 is set forth below.
At a meeting of the AB Boards held on July 31-August 2, 2018, the Adviser presented its recommendation that the Boards consider and approve the Proposed Agreements. Section 15(c) of the 1940 Act provides that, after an initial period, a Fund’s Current Agreement and current sub-advisory agreement, as applicable, will remain in effect only if the Board, including a majority of the Independent Directors, annually reviews and approves them. Each of the Current Agreements had been approved by a Board within the one-year period prior to approval of its related Proposed Agreement, except that the Current Agreements for certain FlexFee funds were approved in February 2017. In connection with their approval of the Proposed Agreements, the Boards considered their conclusions in connection with their most recent approvals of the Current Agreements, in particular in cases where the last approval of a Current Agreement was relatively recent, including the Boards’ general satisfaction with the nature and quality of services being provided and, as applicable, in the case of
| abfunds.com | AB RELATIVE VALUE FUND | 45 | |
certain Funds, actions taken or to be taken in an effort to improve investment performance or reduce expense ratios. The Directors also reviewed updated information provided by the Adviser in respect of each Fund. Also in connection with their approval of the Proposed Agreements, the Boards considered a representation made to them at that time by the Adviser that there were no additional developments not already disclosed to the Boards since their most recent approvals of the Current Agreements that would be a material consideration to the Boards in connection with their consideration of the Proposed Agreements, except for matters disclosed to the Boards by the Adviser. The Directors considered the fact that each Proposed Agreement would have corresponding terms and conditions identical to those of the corresponding Current Agreement with the exception of the effective date and initial term under the Proposed Agreement.
The Directors considered their knowledge of the nature and quality of the services provided by the Adviser to each Fund gained from their experience as directors or trustees of registered investment companies advised by the Adviser, their overall confidence in the Adviser’s integrity and competence they have gained from that experience, the Adviser’s initiative in identifying and raising potential issues with the Directors and its responsiveness, frankness and attention to concerns raised by the Directors in the past, including the Adviser’s willingness to consider and implement organizational and operational changes designed to improve investment results and the services provided to the Funds. The Directors noted that they have four regular meetings each year, at each of which they review extensive materials and information from the Adviser, including information on the investment performance of each Fund.
The Directors also considered all factors they believed relevant, including the specific matters discussed below. During the course of their deliberations, the Directors evaluated, among other things, the reasonableness of the management fees of the Funds they oversee. The Directors did not identify any particular information that was all-important or controlling, and different Directors may have attributed different weights to the various factors. The Directors determined that the selection of the Adviser to manage the Funds, and the overall arrangements between the Funds and the Adviser, as provided in the Proposed Agreements, including the management fees, were fair and reasonable in light of the services performed under the Current Agreements and to be performed under the Proposed Agreements, expenses incurred and to be incurred and such other matters as the Directors considered relevant in the exercise of their business judgment. The material factors and conclusions that formed the basis for the Directors’ determinations included the following:
Nature, Extent and Quality of Services Provided
The Directors considered the scope and quality of services to be provided by the Adviser under the Proposed Agreements, including the quality of
| 46 | AB RELATIVE VALUE FUND | abfunds.com | |
the investment research capabilities of the Adviser and the other resources it has dedicated to performing services for the Funds. They also considered the information that had been provided to them by the Adviser concerning the anticipated implementation of the Plan and the Adviser’s representation that it did not anticipate that such implementation would affect the management or structure of the Adviser, have a material adverse effect on the Adviser, or adversely affect the quality of the services provided to the Funds by the Adviser and its affiliates. The Directors noted that the Adviser from time to time reviews each Fund’s investment strategies and from time to time proposes changes intended to improve the Fund’s relative or absolute performance for the Directors’ consideration. They also noted the professional experience and qualifications of each Fund’s portfolio management team and other senior personnel of the Adviser. The Directors also considered that certain Proposed Agreements, similar to the corresponding Current Agreements, provide that the Funds will reimburse the Adviser for the cost to it of providing certain clerical, accounting, administrative and other services to the Funds by employees of the Adviser or its affiliates. Requests for these reimbursements are made on a quarterly basis and subject to approval by the Directors. The Directors noted that the Adviser did not request any reimbursements from certain Funds in the Fund’s latest fiscal year reviewed. The Directors noted that the methodology to be used to determine the reimbursement amounts had been reviewed by an independent consultant retained by the Funds’ former Senior Officer/Independent Compliance Officer. The quality of administrative and other services, including the Adviser’s role in coordinating the activities of the Funds’ other service providers, also was considered. The Directors of each Fund concluded that, overall, they were satisfied with the nature, extent and quality of services to be provided to the Funds under the Proposed Agreement for the Fund.
Costs of Services to be Provided and Profitability
The Directors reviewed a schedule of the revenues and expenses and related notes indicating the profitability of each Fund to the Adviser for calendar years 2016 and 2017, as applicable, that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant retained by the Funds’ former Senior Officer/Independent Compliance Officer. The Directors noted the assumptions and methods of allocation used by the Adviser in preparing fund-specific profitability data and understood that there are a number of potentially acceptable allocation methodologies for information of this type. The Directors noted that the profitability information reflected all revenues and expenses of the Adviser’s relationship with a Fund, including those relating to its subsidiaries that provide transfer agency, distribution and brokerage services to the Fund, as applicable. The Directors recognized that it is difficult to make comparisons of the profitability of the Proposed Agreements with the profitability of fund advisory contracts for unaffiliated funds because comparative information is not generally publicly available and is
| abfunds.com | AB RELATIVE VALUE FUND | 47 | |
affected by numerous factors. The Directors focused on the profitability of the Adviser’s relationship with each Fund before taxes and distribution expenses, as applicable. The Directors noted that certain Funds were not profitable to the Adviser in one or more periods reviewed. The Directors concluded that the Adviser’s level of profitability from its relationship with the other Funds was not unreasonable. The Directors were unable to consider historical information about the profitability of certain Funds that had recently commenced operations and for which historical profitability information was not available. The Adviser agreed to provide the Directors with profitability information in connection with future proposed continuances of the Proposed Agreements.
Fall-Out Benefits
The Directors considered the other benefits to the Adviser and its affiliates from their relationships with the Funds, including, but not limited to, as applicable, benefits relating to soft dollar arrangements (whereby investment advisers receive brokerage and research services from brokers that execute agency transactions for their clients) in the case of certain Funds; 12b-1 fees and sales charges received by the principal underwriter (which is a wholly owned subsidiary of the Adviser) in respect of certain classes of the shares of most of the Funds; brokerage commissions paid by certain Funds to brokers affiliated with the Adviser; and transfer agency fees paid by most of the Funds to a wholly owned subsidiary of the Adviser. The Directors recognized that the Adviser’s profitability would be somewhat lower, and that a Fund’s unprofitability to the Adviser would be exacerbated, without these benefits. The Directors understood that the Adviser also might derive reputational and other benefits from its association with the Funds.
Investment Results
In addition to the information reviewed by the Directors in connection with the Board meeting at which the Proposed Agreements were approved, the Directors receive detailed performance information for the Funds at each regular Board meeting during the year.
The Boards’ consideration of each Proposed Agreement was informed by their most recent approval of the related Current Agreement, and, in the case of certain Funds, their discussion with the Adviser of the reasons for those Funds’ underperformance in certain periods. The Directors also reviewed updated performance information and, in some cases, discussed with the Adviser the reasons for changes in performance or continued underperformance. On the basis of this review, the Directors concluded that each Fund’s investment performance was acceptable.
Management Fees and Other Expenses
The Directors considered the management fee rate payable by each Fund to the Adviser and information prepared by an independent service provider
| 48 | AB RELATIVE VALUE FUND | abfunds.com | |
(the “15(c) provider”) concerning management fee rates payable by other funds in the same category as the Fund. The Directors recognized that it is difficult to make comparisons of management fees because there are variations in the services that are included in the fees paid by other funds. The Directors compared each Fund’s contractual management fee rate with a peer group median, and where applicable, took into account the impact on the management fee rate of the administrative expense reimbursement paid to the Adviser in the latest fiscal year. In the case of the ACS Funds, the Directors noted that the management fee rate is zero but also were cognizant that the Adviser is indirectly compensated by the wrap fee program sponsors that use the ACS Funds as an investment vehicle for their clients.
The Directors also considered the Adviser’s fee schedule for other clients pursuing a similar investment style to each Fund. For this purpose, they reviewed the relevant advisory fee information from the Adviser’s Form ADV and in a report from the Funds’ Senior Analyst and noted the differences between a Fund’s fee schedule, on the one hand, and the Adviser’s institutional fee schedule and the schedule of fees charged by the Adviser to any offshore funds and for services to any sub-advised funds pursuing a similar investment strategy as the Fund, on the other, as applicable. The Directors noted that the Adviser may, in some cases, agree to fee rates with large institutional clients that are lower than those reviewed by the Directors and that they had previously discussed with the Adviser its policies in respect of such arrangements. The Adviser also informed the Directors that, in the case of certain Funds, there were no institutional products managed by the Adviser that have a substantially similar investment style. The Directors also discussed these matters with their independent fee consultant.
The Adviser reviewed with the Directors the significantly greater scope of the services it provides to each Fund relative to institutional, offshore fund and sub-advised fund clients, as applicable. In this regard, the Adviser noted, among other things, that, compared to institutional and offshore or sub-advisory accounts, each Fund, as applicable, (i) demands considerably more portfolio management, research and trading resources due to significantly higher daily cash flows (in the case of open-end Funds); (ii) has more tax and regulatory restrictions and compliance obligations; (iii) must prepare and file or distribute regulatory and other communications about fund operations; and (iv) must provide shareholder servicing to retail investors. The Adviser also reviewed the greater legal risks presented by the large and changing population of Fund shareholders who may assert claims against the Adviser in individual or class actions, and the greater entrepreneurial risk in offering new fund products, which require substantial investment to launch, may not succeed, and generally must be priced to compete with larger, more established funds resulting in lack of profitability to the Adviser until a new fund achieves scale. In light of the substantial differences in services rendered by the Adviser to institutional, offshore fund and sub-advised fund clients as compared to the Funds, and
| abfunds.com | AB RELATIVE VALUE FUND | 49 | |
the different risk profile, the Directors considered these fee comparisons inapt and did not place significant weight on them in their deliberations.
The Directors noted that many of the Funds may invest in shares of exchange-traded funds (“ETFs”), subject to the restrictions and limitations of the 1940 Act as these may be varied as a result of exemptive orders issued by the SEC. The Directors also noted that ETFs pay advisory fees pursuant to their advisory contracts. The Directors concluded, based on the Adviser’s explanation of how it uses ETFs when they are the most cost-effective way to obtain desired exposures, in some cases pending purchases of underlying securities, that each Fund’s management fee would be for services that would be in addition to, rather than duplicative of, the services provided under the advisory contracts of the ETFs.
With respect to each Fund’s management fee, the Directors considered the total expense ratio of the Fund in comparison to a peer group and peer universe selected by the 15(c) service provider. The Directors also considered the Adviser’s expense caps for certain Funds. The Directors view expense ratio information as relevant to their evaluation of the Adviser’s services because the Adviser is responsible for coordinating services provided to a Fund by others.
The Boards’ consideration of each Proposed Agreement was informed by their most recent approval of the related Current Agreement, and, in the case of certain Funds, their discussion with the Adviser of the reasons for those Funds’ expense ratios in certain periods. The Directors also reviewed updated expense ratio information and, in some cases, discussed with the Adviser the reasons for the expense ratios of certain Funds. On the basis of this review, the Directors concluded that each Fund’s expense ratio was acceptable.
The Directors did not consider comparative expense information for the ACS Funds because those Funds do not bear ordinary expenses.
Economies of Scale
The Directors noted that the management fee schedules for certain Funds do not contain breakpoints and that they had discussed their strong preference for breakpoints in advisory contracts with the Adviser. The Directors took into consideration prior presentations by an independent consultant on economies of scale in the mutual fund industry and for the Funds, and by the Adviser concerning certain of its views on economies of scale. The Directors also had requested and received from the Adviser certain updates on economies of scale in advance of the Board meeting. The Directors believe that economies of scale may be realized (if at all) by the Adviser across a variety of products and services, and not only in respect of a single fund. The Directors noted that there is no established methodology for setting breakpoints that give effect to the fund-specific
| 50 | AB RELATIVE VALUE FUND | abfunds.com | |
services provided by a fund’s adviser and to the economies of scale that an adviser may realize in its overall mutual fund business or those components of it which directly or indirectly affect a fund’s operations. The Directors observed that in the mutual fund industry as a whole, as well as among funds similar to each Fund, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. The Directors also noted that the advisory agreements for many funds do not have breakpoints at all. The Directors informed the Adviser that they would monitor the asset levels of the Funds without breakpoints and their profitability to the Adviser and anticipated revisiting the question of breakpoints in the future if circumstances warrant doing so.
The Directors did not consider the extent to which fee levels in the Advisory Agreement for the ACS Funds reflect economies of scale because that Advisory Agreement does not provide for any compensation to be paid to the Adviser by the ACS Funds and the expense ratio of each of those Funds is zero.
Interim Advisory Agreements
In approving the Interim Advisory Agreements, the Boards, with the assistance of independent counsel, considered similar factors to those considered in approving the Proposed Agreements. The Interim Advisory Agreements approved by the Boards are identical to the Proposed Agreements, as well as the Current Agreements, in all material respects except for their proposed effective and termination dates and provisions intended to comply with the requirements of the relevant SEC rule, such as provisions requiring escrow of advisory fees. Under the Interim Advisory Agreements, the Adviser would continue to manage a Fund pursuant to an Interim Advisory Agreement until a new advisory agreement was approved by stockholders or until the end of the 150-day period, whichever would occur earlier. All fees earned by the Adviser under an Interim Advisory Agreement would be held in escrow pending shareholder approval of the Proposed Agreement. Upon approval of a new advisory agreement by stockholders, the escrowed management fees would be paid to the Adviser, and the Interim Advisory Agreement would terminate.
Information Regarding the Review and Approval of the Fund’s Current Advisory Agreement
The disinterested directors (the “directors”) of AB Relative Value Fund, Inc. (formerly AB Growth and Income Fund, Inc.) (the “Fund”) unanimously approved the continuance of the Fund’s Advisory Agreement with the Adviser at a meeting held on May 1-3, 2018 (the “Meeting”).
Prior to approval of the continuance of the Advisory Agreement, the directors had requested from the Adviser, and received and evaluated, extensive materials. They reviewed the proposed continuance of the Advisory Agreement with the Adviser and with experienced counsel who are
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independent of the Adviser, who advised on the relevant legal standards. The directors also reviewed additional materials, including materials from an outside consultant, who acted as their independent fee consultant, and comparative analytical data prepared by the Senior Analyst for the Fund. The directors also discussed the proposed continuance in private sessions with counsel.
The directors considered their knowledge of the nature and quality of the services provided by the Adviser to the Fund gained from their experience as directors or trustees of most of the registered investment companies advised by the Adviser, their overall confidence in the Adviser’s integrity and competence they have gained from that experience, the Adviser’s initiative in identifying and raising potential issues with the directors and its responsiveness, frankness and attention to concerns raised by the directors in the past, including the Adviser’s willingness to consider and implement organizational and operational changes designed to improve investment results and the services provided to the AB Funds. The directors noted that they have four regular meetings each year, at each of which they review extensive materials and information from the Adviser, including information on the investment performance of the Fund.
The directors also considered all factors they believed relevant, including the specific matters discussed below. During the course of their deliberations, the directors evaluated, among other things, the reasonableness of the advisory fee. The directors did not identify any particular information that was all-important or controlling, and different directors may have attributed different weights to the various factors. The directors determined that the selection of the Adviser to manage the Fund and the overall arrangements between the Fund and the Adviser, as provided in the Advisory Agreement, including the advisory fee, were fair and reasonable in light of the services performed, expenses incurred and such other matters as the directors considered relevant in the exercise of their business judgment. The material factors and conclusions that formed the basis for the directors’ determinations included the following:
Nature, Extent and Quality of Services Provided
The directors considered the scope and quality of services provided by the Adviser under the Advisory Agreement, including the quality of the investment research capabilities of the Adviser and the other resources it has dedicated to performing services for the Fund. The directors noted that the Adviser from time to time reviews the Fund’s investment strategies and from time to time proposes changes intended to improve the Fund’s relative or absolute performance for the directors’ consideration. They also noted the professional experience and qualifications of the Fund’s portfolio management team and other senior personnel of the Adviser. The directors also considered that the Advisory Agreement provides that the Fund will reimburse the Adviser for the cost to it of providing certain clerical, accounting, administrative and other services to the Fund by employees of the Adviser or its affiliates. Requests for these reimbursements are made
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on a quarterly basis and subject to approval by the directors. Reimbursements, to the extent requested and paid, result in a higher rate of total compensation from the Fund to the Adviser than the fee rate stated in the Advisory Agreement. The directors noted that the methodology used to determine the reimbursement amounts had been reviewed by an independent consultant retained by the Fund’s former Independent Compliance Officer. The quality of administrative and other services, including the Adviser’s role in coordinating the activities of the Fund’s other service providers, also was considered. The directors concluded that, overall, they were satisfied with the nature, extent and quality of services provided to the Fund under the Advisory Agreement.
Costs of Services Provided and Profitability
The directors reviewed a schedule of the revenues and expenses and related notes indicating the profitability of the Fund to the Adviser for calendar years 2016 and 2017 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant retained by the Fund’s former Independent Compliance Officer. The directors noted the assumptions and methods of allocation used by the Adviser in preparing fund-specific profitability data and understood that there are a number of potentially acceptable allocation methodologies for information of this type. The directors noted that the profitability information reflected all revenues and expenses of the Adviser’s relationship with the Fund, including those relating to its subsidiaries that provide transfer agency, distribution and brokerage services to the Fund. The directors recognized that it is difficult to make comparisons of the profitability of the Advisory Agreement with the profitability of advisory contracts for unaffiliated funds because comparative information is not generally publicly available and is affected by numerous factors. The directors focused on the profitability of the Adviser’s relationship with the Fund before taxes and distribution expenses. The directors concluded that the Adviser’s level of profitability from its relationship with the Fund was not unreasonable.
Fall-Out Benefits
The directors considered the other benefits to the Adviser and its affiliates from their relationships with the Fund, including, but not limited to, benefits relating to soft dollar arrangements (whereby investment advisers receive brokerage and research services from brokers that execute agency transactions for their clients); 12b-1 fees and sales charges received by the Fund’s principal underwriter (which is a wholly owned subsidiary of the Adviser) in respect of certain classes of the Fund’s shares; brokerage commissions paid by the Fund to brokers affiliated with the Adviser; and transfer agency fees paid by the Fund to a wholly owned subsidiary of the Adviser. The directors recognized that the Adviser’s profitability would be somewhat lower without these benefits. The directors understood that the Adviser also might derive reputational and other benefits from its association with the Fund.
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Investment Results
In addition to the information reviewed by the directors in connection with the Meeting, the directors receive detailed performance information for the Fund at each regular Board meeting during the year.
At the Meeting, the directors reviewed performance information prepared by an analytical service that is not affiliated with the Adviser (the “15(c) service provider”), showing the performance of the Class A Shares of the Fund against a group of similar funds (“peer group”) and a larger group of similar funds (“peer universe”), each selected by the 15(c) service provider, and information prepared by the Adviser showing performance of the Class A Shares against a broad-based securities market index, in each case for the 1-, 3-, 5- and 10-year periods ended February 28, 2018. Based on their review, the directors concluded that the Fund’s investment performance was acceptable.
Advisory Fees and Other Expenses
The directors considered the advisory fee rate payable by the Fund to the Adviser and information prepared by the 15(c) service provider concerning advisory fee rates payable by other funds in the same category as the Fund. The directors recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The directors compared the Fund’s contractual effective advisory fee rate with a peer group median and took into account the impact on the advisory fee rate of the administrative expense reimbursement paid to the Adviser in the latest fiscal year.
The directors also considered the Adviser’s fee schedule for other clients pursuing a similar investment style. For this purpose, they reviewed the relevant advisory fee information from the Adviser’s Form ADV and the materials from the Fund’s Senior Analyst and noted the differences between the Fund’s fee schedule, on the one hand, and the Adviser’s institutional fee schedule and the schedule of fees charged to any offshore funds and any sub-advised funds, on the other. The directors noted that the Adviser may, in some cases, agree to fee rates with large institutional clients that are lower than those reviewed by the directors and that they had previously discussed with the Adviser its policies in respect of such arrangements. The directors also compared the advisory fee rate for the Fund with that for another AB Fund with a similar investment style.
The Adviser reviewed with the directors the significantly greater scope of the services it provides to the Fund relative to institutional, offshore fund and sub-advised fund clients. In this regard, the Adviser noted, among other things, that, compared to institutional and offshore accounts, the Fund (i) demands considerably more portfolio management, research and trading resources due to significantly higher daily cash flows; (ii) has more tax and regulatory restrictions; (iii) must prepare and distribute regulatory and other communications about fund operations; and (iv) must provide
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shareholder servicing to retail investors. The Adviser also reviewed the greater legal risks presented by the large and changing population of Fund shareholders who may assert claims against the Adviser in individual or class actions, and the greater entrepreneurial risk in offering new fund products, which require substantial investment to launch, may not succeed, and generally must be priced to compete with larger, more established funds resulting in lack of profitability to the Adviser until a new fund achieves scale. In light of the substantial differences in services rendered by the Adviser to institutional, offshore fund and sub-advised fund clients as compared to funds such as the Fund, and the different risk profile, the directors considered these fee comparisons inapt and did not place significant weight on them in their deliberations.
The directors also considered the total expense ratio of the Class A shares of the Fund in comparison to a peer group and a peer universe selected by the 15(c) service provider. The Class A expense ratio of the Fund was based on the Fund’s latest fiscal year and the directors considered the effects of any fee waivers and/or expense reimbursements as a result of the Adviser’s expense cap. The directors noted that it was likely that the expense ratios of some of the other funds in the Fund’s category were lowered by waivers or reimbursements by those funds’ investment advisers, which in some cases might be voluntary or temporary. The directors view expense ratio information as relevant to their evaluation of the Adviser’s services because the Adviser is responsible for coordinating services provided to the Fund by others. Based on their review, the directors concluded that the Fund’s expense ratio was acceptable.
Economies of Scale
The directors noted that the advisory fee schedule for the Fund contains breakpoints that reduce the fee rates on assets above specified levels. The directors took into consideration prior presentations by an independent consultant on economies of scale in the mutual fund industry and for the AB Funds, and by the Adviser concerning certain of its views on economies of scale. The directors also had requested and received from the Adviser certain updates on economies of scale in advance of the Meeting. The directors believe that economies of scale may be realized (if at all) by the Adviser across a variety of products and services, and not only in respect of a single fund. The directors noted that there is no established methodology for setting breakpoints that give effect to the fund-specific services provided by a fund’s adviser and to the economies of scale that an adviser may realize in its overall mutual fund business or those components of it which directly or indirectly affect a fund’s operations. The directors observed that in the mutual fund industry as a whole, as well as among funds similar to the Fund, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. The directors also noted that the advisory agreements for many funds do not have breakpoints at all. Having taken these factors into account, the directors concluded that the Fund’s shareholders would benefit from a sharing of economies of scale in the event the Fund’s net assets exceed a breakpoint in the future.
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This page is not part of the Shareholder Report or the Financial Statements.
AB FAMILY OF FUNDS
We also offer Government Money Market Portfolio, which serves as the money market fund exchange vehicle for the AB mutual funds. You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The Fund may impose a fee upon sale of your shares or may temporarily suspend your ability to sell shares if the Fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.abfunds.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.
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NOTES
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NOTES
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AB RELATIVE VALUE FUND
1345 Avenue of the Americas
New York, NY 10105
800 221 5672
RV-0152-0419
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 Relative Value Fund, Inc. | ||
| By: | /s/ Robert M. Keith | |
| Robert M. Keith President | ||
Date: June 26, 2019
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: June 26, 2019
| By: | /s/ Joseph J. Mantineo | |
| Joseph J. Mantineo | ||
| Treasurer and Chief Financial Officer |
Date: June 26, 2019