ab flexfeetm large cap growth portfolio - AllianceBernstein

DEC 12.31.18

ANNUAL REPORT

AB FLEXFEETM LARGE CAPGROWTH PORTFOLIO

Beginning January 1, 2021, as permitted by new regulations adopted by the Securities and ExchangeCommission, the Fund’s annual and semi-annual shareholder reports will no longer be sent by mail, unlessyou 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 accessthe report.

If you already elected to receive shareholder reports electronically, you will not be affected by this changeand you need not take any action. You may elect to receive shareholder reports and other communicationsfrom the Fund electronically at any time by contacting your financial intermediary (such as a broker-dealer orbank) 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 financialintermediary, you can contact your financial intermediary to request that you continue to receive paper copies ofyour shareholder reports; if you invest directly with the Fund, you can call the Fund at (800) 221 5672. Yourelection to receive reports in paper form will apply to all funds held in your account with your financialintermediary 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 Fundcarefully before investing. For copies of our prospectus or summary prospectus, which containthis and other information, visit us online at www.abfunds.com or contact your ABrepresentative. Please read the prospectus and/or summary prospectus carefully beforeinvesting.

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

You may obtain a description of the Fund’s proxy voting policies and procedures, and informationregarding how the Fund voted proxies relating to portfolio securities during the most recent 12-monthperiod ended June 30, without charge. Simply visit AB’s website at www.abfunds.com, or go to theSecurities 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 thirdquarters of each fiscal year. The Fund’s portfolio holdings reports are available on the Commission’swebsite at www.sec.gov. The Fund’s portfolio holdings reports may also be reviewed and copied at theCommission’s Public Reference Room in Washington, DC; information on the operation of the PublicReference Room may be obtained by calling (800) SEC 0330. AB publishes full portfolio holdings forthe Fund monthly at www.abfunds.com.

AllianceBernstein Investments, Inc. (ABI) is the distributor of the AB family of mutual funds. ABI is amember 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 registeredservice mark used by permission of the owner, AllianceBernstein L.P.

FROM THE PRESIDENT

Dear Shareholder,

We are pleased to provide this report for AB FlexFee Large Cap GrowthPortfolio (the “Fund”). Please review the discussion of Fund performance,the market conditions during the reporting period and the Fund’s invest-ment strategy.

As always, AB strives to keep clients ahead of what’s next by:

+ Transforming uncommon insights into uncommon knowledge with aglobal research scope

+ Navigating markets with seasoned investment experience and sophisti-cated solutions

+ Providing thoughtful investment insights and actionable ideas

Whether you’re an individual investor or a multi-billion-dollar institution, weput knowledge and experience to work for you.

AB’s global research organization connects and collaborates across plat-forms 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 shareholderresources, please log on to www.abfunds.com.

Thank you for your investment in the AB Mutual Funds.

Sincerely,

Robert M. KeithPresident and Chief Executive Officer, AB Mutual Funds

abfunds.com AB FLEXFEE LARGE CAP GROWTH PORTFOLIO | 1

ANNUAL REPORT

February 07, 2019

This report provides management’s discussion of fund performance for ABFlexFee Large Cap Growth Portfolio for the annual reporting period endedDecember 31, 2018.

The Fund’s investment objective is long-term growth of capital.

NAV RETURNS AS OF DECEMBER 31, 2018 (unaudited)

6 Months 12 Months

AB FLEXFEE LARGE CAP GROWTH PORTFOLIO

Advisor Class Shares -5.66% 2.87%

Russell 1000 Growth Index -8.17% -1.51%

INVESTMENT RESULTSThe table above shows the Fund’s performance compared to its bench-mark, the Russell 1000 Growth Index, for the six- and 12-month periodsended December 31, 2018.

The Fund outperformed the benchmark for both periods. The Fund’sperformance-based advisory fee for the performance period from June 28,2017 through December 31, 2018 was accrued at its maximum rate. Forboth periods, stock selection within the health care and technology sec-tors contributed, relative to the benchmark, while selection in consumerstaples detracted.

During the 12-month period, an underweight to the industrials sector con-tributed, while stock selection and an underweight in consumer discretionarydetracted.

During the six-month period, an overweight to health care contributed.Stock section in communication services and an underweight to realestate detracted.

The Fund did not utilize derivatives during either period.

MARKET REVIEW AND INVESTMENT STRATEGYGlobal equities ended 2018 in negative territory, marking one of the worstyears for the stock market in a decade. Despite a relatively strong start tothe year and US stock indices reaching record highs, volatility spikedtoward the end of the 12-month period ended December 31, 2018.Investors worried about the outlook for corporate earnings growth amid amore challenging global growth environment and as the benefits of taxreform roll off. The US Federal Reserve raised rates four times during 2018as expected, but softened its tone in December, and signaled that it might

2 | AB FLEXFEE LARGE CAP GROWTH PORTFOLIO abfunds.com

slow its pace of rate hikes in 2019. An upsurge in geopolitical uncertaintyregarding Brexit and budget discussions between Italy and its EuropeanUnion partners sparked a flight to quality in the region. Slowing Chinesegrowth and continuing US-China trade tensions dampened investorsentiment in China toward the end of the period. In the US, growth stocksoutperformed value stocks, in terms of style, and large-cap stocks out-performed their small-cap peers.

The Fund’s Senior Investment Management Team (the “Team”) believesthat over time, fundamentals and earnings growth can be the most sig-nificant catalysts for stock performance, which heightens the importanceof active stock selection. The Team selects companies that exhibit attrac-tive growth potential, high or improving return on capital and competitiveadvantages against their peers. The Team believes that this philosophycan deliver strong investment returns over time.

INVESTMENT POLICIESThe Fund invests primarily in equity securities of a limited number oflarge, carefully selected, high-quality US companies. The Fund investsprimarily in the domestic equity securities of companies selected by theFund’s Adviser for their growth potential within various market sectors.The Fund emphasizes investments in large, seasoned companies.Under normal circumstances, the Fund will invest at least 80% of itsnet assets in common stocks of large-capitalization companies.

The Adviser expects that normally the Fund’s portfolio will tend toemphasize investments in securities issued by US companies,although it may invest in foreign securities.

The investment team allocates the Fund’s investments among broadsector groups based on the fundamental company research con-ducted by the Adviser’s internal research staff, assessing the currentand forecasted investment opportunities and conditions, as well asdiversification and risk considerations. The investment team may varythe percentage allocations among market sectors and may changethe market sectors in which the Fund invests as companies’ potentialfor growth within a sector matures and new trends for growth emerge.

The Adviser’s research focus is in companies with high sustainablegrowth prospects, high or improving return on invested capital, trans-parent business models, and strong and lasting competitive advantages.

The Fund may enter into derivatives transactions, such as options,futures contracts, forwards and swaps. The Fund may use optionsstrategies involving the purchase and/or writing of various combina-tions of call and/or put options, including on individual securities and

(continued on next page)


stock indices, futures contracts (including futures contracts onindividual securities and stock indices) or shares of exchange-tradedfunds. These transactions may be used, for example, in an effort toearn extra income, to adjust exposure to individual securities or mar-kets, or to protect all or a portion of the Fund’s portfolio from a declinein value, sometimes within certain ranges.


DISCLOSURES AND RISKS

Benchmark DisclosureThe Russell 1000® Growth Index is unmanaged and does not reflectfees and expenses associated with the active management of amutual fund portfolio. The Russell 1000 Growth Index represents theperformance of large-cap growth companies within the US. An investorcannot invest directly in an index, and its results are not indicative of theperformance for any specific investment, including the Fund.

A Word About RiskMarket Risk: The value of the Fund’s assets will fluctuate as the stock orbond market fluctuates. The value of its investments may decline, some-times rapidly and unpredictably, simply because of economic changes orother events that affect large portions of the market. It includes the riskthat a particular style of investing, such as the Fund’s growth approach,may underperform the market generally.

Foreign (Non-US) Risk: Investments in securities of non-US issuers mayinvolve more risk than those of US issuers. These securities may fluctuatemore widely in price and may be less liquid due to adverse market, eco-nomic, political, regulatory or other factors.

Derivatives Risk: Derivatives may be illiquid, difficult to price, and lever-aged so that small changes may produce disproportionate losses for theFund, and may be subject to counterparty risk to a greater degree thanmore traditional investments.

Management Risk: The Fund is subject to management risk because it isan actively managed investment fund. The Adviser will apply its investmenttechniques and risk analyses in making investment decisions for the Fund,but there is no guarantee that its techniques will produce the intendedresults.

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

An Important Note About Historical PerformanceThe investment return and principal value of an investment in the Fundwill fluctuate, so that shares, when redeemed, may be worth more orless than their original cost. Performance shown in this report repre-sents past performance and does not guarantee future results. Cur-rent performance may be lower or higher than the performanceinformation shown. You may obtain performance information currentto the most recent month-end by visiting www.abfunds.com. TheFund has been in operation only for a short period of time, and there-fore has a very limited historical performance period. This limitedperformance period is unlikely to be representative of the perform-ance the Fund will achieve over a longer period.


DISCLOSURES AND RISKS (continued)

All fees and expenses related to the operation of the Fund havebeen deducted. Net asset value (“NAV”) returns do not reflect salescharges; if sales charges were reflected, the Fund’s quotedperformance would be lower. SEC returns reflect the applicablesales charges for each share class. Returns for the different shareclasses will vary due to different expenses associated with eachclass. Performance assumes reinvestment of distributions and doesnot account for taxes.


HISTORICAL PERFORMANCE

GROWTH OF A $10,000 INVESTMENT IN THE FUND (unaudited)6/28/20171 TO 12/31/2018

AB FlexFee Large Cap Growth Portfolio Advisor Class

6/171 12/17 12/18$0

$5,000

$10,000

$15,000

$20,000

Russell 1000 Growth Index

AB FlexFee Large Cap GrowthPortfolio Advisor Class: $11,556

Russell 1000 GrowthIndex: $11,123

This chart illustrates the total value of an assumed $10,000 investment in AB FlexFee Large Cap GrowthPortfolio Advisor Class shares (from 6/28/20171 to 12/31/2018) as compared to the performance of theFund’s benchmark.

1 Inception date: 6/28/2017.


HISTORICAL PERFORMANCE (continued)

AVERAGE ANNUAL RETURNS AS OF DECEMBER 31, 2018 (unaudited)

NAV Returns

SEC Returns(reflects applicable

sales charges)

ADVISOR CLASS SHARES1

1 Year 2.87% 2.87%

Since Inception2 10.05% 10.05%

SEC AVERAGE ANNUAL RETURNSAS OF THE MOST RECENT CALENDAR QUARTER-ENDDECEMBER 31, 2018 (unaudited)

SEC Returns(reflects applicable

sales charges)

ADVISOR CLASS SHARES1 Year 2.87%

Since Inception2 10.05%

The Fund’s current prospectus fee table shows the Fund’s total annual operating expenseratio as 33.94% for Advisor Class shares, gross of any fee waivers or expense reimburse-ments. Contractual fee waivers and/or expense reimbursements limit the Fund’s annualoperating expense ratio exclusive of the Fund’s advisory fees, acquired fund fees andexpenses other than the advisory fees of any AB mutual funds in which the Fund may invest,interest expense, taxes, extraordinary expenses, and brokerage commissions and othertransaction costs to 0.05% for Advisor Class shares. These waivers/reimbursements maynot be terminated before April 30, 2019. Any fees waived and expenses borne by the Adviserthrough December 31, 2018 may be reimbursed by the Fund until the end of the third fiscalyear after the fiscal period in which the fee was waived or the expense was borne, providedthat no reimbursement payment will be made that would cause the Fund’s total annualoperating expenses to exceed these expense limitations. Absent reimbursements or waivers,performance would have been lower. The Financial Highlights section of this report setsforth expense ratio data for the current reporting period; the expense ratio shown abovemay differ from the expense ratio in the Financial Highlights section since they are based ondifferent time periods.

1 This share class is offered at NAV to eligible investors and the SEC returns are the same as the NAVreturns.

2 Inception date: 6/28/2017.


EXPENSE EXAMPLE(unaudited)

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

This Example is based on an investment of $1,000 invested at the begin-ning of the period and held for the entire period as indicated below.

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

Hypothetical Example for Comparison PurposesThe table below also provides information about hypothetical accountvalues and hypothetical expenses based on the Fund’s actual expenseratio and an assumed annual rate of return of 5% before expenses, whichis not the Fund’s actual return. The hypothetical account values andexpenses may not be used to estimate the actual ending account balanceor expenses you paid for the period. You may use this information tocompare the ongoing costs of investing in the Fund and other funds bycomparing this 5% hypothetical example with the 5% hypothetical exam-ples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlightyour ongoing costs only and do not reflect any transactional costs, suchas sales charges (loads), or contingent deferred sales charges onredemptions. Therefore, the hypothetical example is useful in comparingongoing costs only, and will not help you determine the relative total costsof owning different funds. In addition, if these transactional costs wereincluded, your costs would have been higher.

BeginningAccount

Value7/1/2018

EndingAccount

Value12/31/2018

ExpensesPaid

DuringPeriod*

AnnualizedExpense

Ratio*

TotalExpenses

PaidDuringPeriod+

TotalAnnualized

ExpenseRatio+

Advisor ClassActual $ 1,000 $ 943.40 $ 6.27 1.28% $ 6.32 1.29%Hypothetical** $ 1,000 $ 1,018.75 $ 6.51 1.28% $ 6.56 1.29%


EXPENSE EXAMPLE (continued)

* Expenses are equal to the classes’ annualized expense ratios multiplied by the average account valueover the period, multiplied by 184/365 (to reflect the one-half year period).

+ In connection with the Fund’s investments in affiliated/unaffiliated underlying portfolios, the Fund incursno 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 Adviserhas contractually agreed to waive its fees from the Fund in an amount equal to the Fund’s pro rata shareof certain acquired fund fees and expenses of the affiliated underlying portfolios. The Fund’s totalexpenses are equal to the classes’ annualized expense ratio plus the Fund’s pro rata share of theweighted average expense ratio of the affiliated/unaffiliated underlying portfolios in which it invests,multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-halfyear period).

** Assumes 5% annual return before expenses.


PORTFOLIO SUMMARYDecember 31, 2018 (unaudited)

PORTFOLIO STATISTICSNet Assets ($mil): $136.7

SECTOR BREAKDOWN1

24.8% Information Technology22.3% Health Care14.9% Consumer Discretionary12.6% Communication Services8.6% Consumer Staples7.6% Industrials2.3% Materials1.3% Financials

5.6% Short-Term

TEN LARGEST HOLDINGS2

Company U.S. $ ValuePercent ofNet Assets

Alphabet, Inc. – Class C $ 10,776,558 7.9%

Visa, Inc. – Class A 6,472,977 4.7

Microsoft Corp. 6,227,866 4.6

UnitedHealth Group, Inc. 5,760,651 4.2

Home Depot, Inc. (The) 5,485,182 4.0

Monster Beverage Corp. 5,457,267 4.0

NIKE, Inc. – Class B 4,700,773 3.4

Intuitive Surgical, Inc. 4,624,930 3.4

PayPal Holdings, Inc. 4,160,016 3.0

Costco Wholesale Corp. 4,059,940 3.0

$ 57,726,160 42.2%

1 All data are as of December 31, 2018. The Fund’s sector breakdown is expressed as a percentage oftotal investments and may vary over time.

2 Long-term investments.Please note: The sector classifications presented herein are based on the Global Industry ClassificationStandard (GICS) which was developed by Morgan Stanley Capital International and Standard & Poor’s. Thecomponents are divided into sector, industry group, and industry sub-indices as classified by the GICS foreach 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 isconsistent with the investment restrictions discussed in the Fund’s prospectus.


PORTFOLIO OF INVESTMENTSDecember 31, 2018

Company Shares U.S. $ Value

COMMON STOCKS – 94.9%Information Technology – 24.9%Communications Equipment – 1.9%Arista Networks, Inc.(a) ................................... 12,681 $ 2,671,887

Electronic Equipment, Instruments &Components – 1.6%

Amphenol Corp. – Class A.............................. 8,433 683,242Cognex Corp. .............................................. 21,701 839,178IPG Photonics Corp.(a) ................................... 5,801 657,195

2,179,615IT Services – 8.2%Fiserv, Inc.(a) ................................................ 7,245 532,435PayPal Holdings, Inc.(a) ................................... 49,471 4,160,016Visa, Inc. – Class A ....................................... 49,060 6,472,977

11,165,428Semiconductors & Semiconductor

Equipment – 3.9%ASML Holding NV (ADR) ................................ 5,960 927,495Texas Instruments, Inc. .................................. 5,744 542,808Xilinx, Inc. ................................................... 44,830 3,818,171

5,288,474Software – 6.9%Adobe Systems, Inc.(a) ................................... 9,533 2,156,746ANSYS, Inc.(a) .............................................. 389 55,604Microsoft Corp. ............................................ 61,316 6,227,866Paycom Software, Inc.(a) ................................. 6,610 809,394salesforce.com, Inc.(a) .................................... 1,453 199,017

9,448,627Technology Hardware, Storage &

Peripherals – 2.4%Apple, Inc. .................................................. 20,946 3,304,022

34,058,053Health Care – 22.4%Biotechnology – 6.4%Biogen, Inc.(a) ............................................... 12,097 3,640,229Regeneron Pharmaceuticals, Inc.(a) ................... 7,683 2,869,601Vertex Pharmaceuticals, Inc.(a) ......................... 13,573 2,249,182

8,759,012Health Care Equipment & Supplies – 8.0%Edwards Lifesciences Corp.(a) .......................... 26,257 4,021,785Intuitive Surgical, Inc.(a) ................................... 9,657 4,624,930Stryker Corp. ............................................... 14,694 2,303,285

10,950,000Health Care Providers & Services – 4.2%UnitedHealth Group, Inc. ................................ 23,124 5,760,651


PORTFOLIO OF INVESTMENTS (continued)


Health Care Technology – 0.2%Veeva Systems, Inc. – Class A(a) ....................... 3,094 $ 276,356

Life Sciences Tools & Services – 0.7%Mettler-Toledo International, Inc.(a) .................... 1,661 939,428

Pharmaceuticals – 2.9%Zoetis, Inc. .................................................. 46,752 3,999,166

30,684,613Consumer Discretionary – 14.9%Internet & Direct Marketing Retail – 2.9%Booking Holdings, Inc.(a) ................................. 2,332 4,016,683

Multiline Retail – 0.4%Dollar Tree, Inc.(a) .......................................... 6,523 589,157

Specialty Retail – 8.1%Burlington Stores, Inc.(a) ................................. 7,074 1,150,728Home Depot, Inc. (The) .................................. 31,924 5,485,182TJX Cos., Inc. (The) ....................................... 41,868 1,873,174Ulta Salon Cosmetics & Fragrance, Inc.(a) ........... 10,659 2,609,749

11,118,833Textiles, Apparel & Luxury Goods – 3.5%NIKE, Inc. – Class B ...................................... 63,404 4,700,773

20,425,446Communication Services – 12.7%Entertainment – 2.0%Activision Blizzard, Inc.................................... 26,108 1,215,850Electronic Arts, Inc.(a) ..................................... 19,230 1,517,439

2,733,289Interactive Media & Services – 10.7%Alphabet, Inc. – Class C(a) ............................... 10,406 10,776,558Facebook, Inc. – Class A(a) .............................. 29,213 3,829,532

14,606,09017,339,379

Consumer Staples – 8.6%Beverages – 5.6%Constellation Brands, Inc. – Class A.................. 13,997 2,250,998Monster Beverage Corp.(a) .............................. 110,875 5,457,267

7,708,265Food & Staples Retailing – 3.0%Costco Wholesale Corp. ................................ 19,930 4,059,940

11,768,205Industrials – 7.7%Building Products – 3.1%Allegion PLC................................................ 29,504 2,351,764AO Smith Corp. ........................................... 24,890 1,062,803


PORTFOLIO OF INVESTMENTS (continued)


Lennox International, Inc................................. 3,814 $ 834,7324,249,299

Commercial Services & Supplies – 1.5%Copart, Inc.(a) ............................................... 42,880 2,048,806

Electrical Equipment – 0.5%AMETEK, Inc. .............................................. 9,590 649,243

Industrial Conglomerates – 1.5%Roper Technologies, Inc................................. 7,689 2,049,272

Machinery – 0.6%IDEX Corp. .................................................. 6,322 798,216

Trading Companies & Distributors – 0.5%Fastenal Co. ................................................ 13,805 721,864

10,516,700Materials – 2.4%Chemicals – 2.4%Sherwin-Williams Co. (The) ............................. 8,164 3,212,207

Financials – 1.3%Capital Markets – 1.3%MarketAxess Holdings, Inc. ............................ 3,830 809,317S&P Global, Inc. ........................................... 5,578 947,926

1,757,243Total Common Stocks

(cost $135,263,757)................................... 129,761,846

SHORT-TERM INVESTMENTS – 5.6%Investment Companies – 5.6%AB Fixed Income Shares, Inc. – Government

Money Market Portfolio – Class AB, 2.31%(b)(c)(d)

(cost $7,716,554) ...................................... 7,716,554 7,716,554

Total Investments – 100.5%(cost $142,980,311)................................... 137,478,400

Other assets less liabilities – (0.5)%................... (732,458)

Net Assets – 100.0% .................................. $ 136,745,942

(a) Non-income producing security.

(b) To obtain a copy of the fund’s shareholder report, please go to the Securities and ExchangeCommission’s website at www.sec.gov, or call AB at (800) 227-4618.

(c) The rate shown represents the 7-day yield as of period end.

(d)Affiliated investments.

Glossary:

ADR – American Depositary Receipt

See notes to financial statements.


STATEMENT OF ASSETS & LIABILITIESDecember 31, 2018

AssetsInvestments in securities, at value

Unaffiliated issuers (cost $135,263,757) .............................. $ 129,761,846Affiliated issuers (cost $7,716,554) ..................................... 7,716,554

Receivable for capital stock sold ........................................... 5,273,335Unaffiliated dividends receivable ........................................... 23,627Affiliated dividends receivable ............................................... 20,756Total assets ..................................................................... 142,796,118LiabilitiesPayable for investment securities purchased ........................... 4,334,377Payable for capital stock redeemed ....................................... 1,147,066Advisory fee payable .......................................................... 458,265Transfer Agent fee payable .................................................. 3,000Dividends payable ............................................................. 1,305Accrued expenses and other liabilities .................................... 106,163Total liabilities ................................................................... 6,050,176Net Assets ....................................................................... $ 136,745,942Composition of Net AssetsCapital stock, at par ........................................................... $ 1,190Additional paid-in capital ..................................................... 143,270,826Accumulated loss .............................................................. (6,526,074)

$ 136,745,942

Net Asset Value Per Share—11 billion shares of capital stock authorized,$.0001 par value

Class Net AssetsShares

OutstandingNet Asset

Value

Advisor $ 136,745,942 11,895,996 $ 11.50



STATEMENT OF OPERATIONSYear Ended December 31, 2018

Investment IncomeDividends

Unaffiliated issuers ...................................... $ 447,904Affiliated issuers ......................................... 132,038 $ 579,942

ExpensesAdvisory fee (see Note B)................................. 765,264Transfer agency—Advisor Class........................ 59,320Administrative ............................................... 71,040Registration fees............................................ 53,185Audit and tax ................................................ 51,952Legal .......................................................... 40,709Amortization of offering expenses ...................... 33,390Custodian .................................................... 33,371Directors’ fees............................................... 25,326Printing........................................................ 23,573Miscellaneous ............................................... 36,578Total expenses.............................................. 1,193,708Less: expenses waived and reimbursed by the

Adviser (see Note B) .................................... (401,511)Net expenses ............................................... 792,197Net investment loss ........................................ (212,255)Realized and Unrealized Loss on Investmentand Foreign Currency TransactionsNet realized loss on:

Investment transactions ............................... (1,022,788)Net change in unrealized appreciation/

depreciation on:Investments............................................... (5,621,244)

Net loss on investments .................................. (6,644,032)Net Decrease in Net Assets from

Operations .............................................. $ (6,856,287)



STATEMENT OF CHANGES IN NET ASSETS

Year EndedDecember 31,

2018

June 28, 2017(a)

toDecember 31, 2017

Increase (Decrease) in Net Assetsfrom OperationsNet investment income (loss)................ $ (212,255) $ 3,686Net realized gain (loss) on investment

transactions .................................. (1,022,788) 6,844Net change in unrealized appreciation/

depreciation on investments ............. (5,621,244) 119,333Net increase (decrease) in net assets

from operations ............................. (6,856,287) 129,863Distributions to Shareholders*

Advisor Class ................................ (7,127) (6,163)Capital Stock TransactionsNet increase ..................................... 142,334,900 1,150,756Total increase ................................... 135,471,486 1,274,456Net AssetsBeginning of period............................ 1,274,456 – 0 –End of period ................................... $ 136,745,942 $ 1,274,456

(a) Commencement of operations.

* The prior year’s amounts have been reclassified to conform with the current year’s presentation. SeeNote G, Recent Accounting Pronouncements, in the Notes to Financial Statements for more information.



NOTES TO FINANCIAL STATEMENTSDecember 31, 2018

NOTE ASignificant Accounting PoliciesAB Cap Fund, Inc. (the “Company”), which is a Maryland corporation, isregistered under the Investment Company Act of 1940 as an open-endmanagement investment company. The Company operates as a seriescompany comprised of 29 portfolios currently in operation. Each portfoliois considered to be a separate entity for financial reporting and tax pur-poses. This report relates only to the AB FlexFee Large Cap GrowthPortfolio (the “Fund”), a diversified portfolio. The Fund commenced oper-ations on June 28, 2017. The Fund has authorized issuance of Class A,Class B, Class C, Advisor Class, Class R, Class K, Class I, Class Z,Class T, Class 1, and Class 2 shares. Class A, Class B, Class C, Class R,Class K, Class I, Class Z, Class T, Class 1, and Class 2 shares have notbeen issued. Advisor Class shares are sold without an initial or contingentdeferred sales charge and are not subject to ongoing distributionexpenses. All eleven classes of shares have identical voting, dividend,liquidation and other rights, except that the classes bear different dis-tribution and transfer agency expenses. Each class has exclusive votingrights with respect to its distribution plan. The financial statements havebeen prepared in conformity with U.S. generally accepted accountingprinciples (“U.S. GAAP”), which require management to make certainestimates and assumptions that affect the reported amounts of assets andliabilities in the financial statements and amounts of income and expensesduring the reporting period. Actual results could differ from those esti-mates. The Fund is an investment company under U.S. GAAP and followsthe accounting and reporting guidance applicable to investment compa-nies. The following is a summary of significant accounting policies followedby the Fund.

1. Security ValuationPortfolio securities are valued at their current market value determined onthe basis of market quotations or, if market quotations are not readilyavailable or are deemed unreliable, at “fair value” as determined in accord-ance with procedures established by and under the general supervision ofthe Fund’s Board of Directors (the “Board”).

In general, the market values of securities which are readily available anddeemed reliable are determined as follows: securities listed on a nationalsecurities exchange (other than securities listed on the NASDAQ StockMarket, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued atthe last sale price at the close of the exchange or foreign securitiesexchange. If there has been no sale on such day, the securities are valuedat the last traded price from the previous day. Securities listed on morethan one exchange are valued by reference to the principal exchange on


NOTES TO FINANCIAL STATEMENTS (continued)

which the securities are traded; securities listed only on NASDAQ arevalued in accordance with the NASDAQ Official Closing Price; listed orover the counter (“OTC”) market put or call options are valued at the midlevel between the current bid and ask prices. If either a current bid or cur-rent ask price is unavailable, the Adviser will have discretion to determinethe best valuation (e.g., last trade price in the case of listed options); openfutures are valued using the closing settlement price or, in the absence ofsuch a price, the most recent quoted bid price. If there are no quotationsavailable for the day of valuation, the last available closing settlement priceis used; U.S. Government securities and any other debt instruments hav-ing 60 days or less remaining until maturity are generally valued at marketby an independent pricing vendor, if a market price is available. If a marketprice is not available, the securities are valued at amortized cost. Thismethodology is commonly used for short term securities that have anoriginal maturity of 60 days or less, as well as short term securities thathad an original term to maturity that exceeded 60 days. In instances whenamortized cost is utilized, the Valuation Committee (the “Committee”) mustreasonably conclude that the utilization of amortized cost is approximatelythe same as the fair value of the security. Such factors the Committee willconsider include, but are not limited to, an impairment of the creditworthi-ness of the issuer or material changes in interest rates. Fixed-incomesecurities, including mortgage-backed and asset-backed securities, maybe valued on the basis of prices provided by a pricing service or at a priceobtained from one or more of the major broker-dealers. In cases wherebroker-dealer quotes are obtained, the Adviser may establish procedureswhereby changes in market yields or spreads are used to adjust, on a dailybasis, a recently obtained quoted price on a security. Swaps and otherderivatives are valued daily, primarily using independent pricing services,independent pricing models using market inputs, as well as third partybroker-dealers or counterparties. Open end mutual funds are valued at theclosing net asset value per share, while exchange traded funds are valuedat the closing market price per share.

Securities for which market quotations are not readily available (includingrestricted securities) or are deemed unreliable are valued at fair value asdeemed appropriate by the Adviser. Factors considered in making thisdetermination may include, but are not limited to, information obtained bycontacting the issuer, analysts, analysis of the issuer’s financial state-ments or other available documents. In addition, the Fund may use fairvalue pricing for securities primarily traded in non-U.S. markets becausemost foreign markets close well before the Fund values its securities at4:00 p.m., Eastern Time. The earlier close of these foreign markets givesrise to the possibility that significant events, including broad marketmoves, may have occurred in the interim and may materially affect thevalue of those securities. To account for this, the Fund generally values



many of its foreign equity securities using fair value prices based on thirdparty vendor modeling tools to the extent available.

2. Fair Value MeasurementsIn accordance with U.S. GAAP regarding fair value measurements, fairvalue is defined as the price that the Fund would receive to sell an asset orpay to transfer a liability in an orderly transaction between market partic-ipants at the measurement date. U.S. GAAP establishes a framework formeasuring fair value, and a three-level hierarchy for fair value measure-ments based upon the transparency of inputs to the valuation of an assetor liability (including those valued based on their market values asdescribed in Note A.1 above). Inputs may be observable or unobservableand refer broadly to the assumptions that market participants would use inpricing the asset or liability. Observable inputs reflect the assumptionsmarket participants would use in pricing the asset or liability based onmarket data obtained from sources independent of the Fund.Unobservable inputs reflect the Fund’s own assumptions about theassumptions that market participants would use in pricing the asset orliability based on the best information available in the circumstances. Eachinvestment is assigned a level based upon the observability of the inputswhich are significant to the overall valuation. The three-tier hierarchy ofinputs 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 ownassumptions in determining the fair value of investments)

Where readily available market prices or relevant bid prices are not avail-able for certain equity investments, such investments may be valued basedon similar publicly traded investments, movements in relevant indices sincelast available prices or based upon underlying company fundamentals andcomparable company data (such as multiples to earnings or other multi-ples to equity). Where an investment is valued using an observable input,such as another publicly traded security, the investment will be classifiedas Level 2. If management determines that an adjustment is appropriatebased on restrictions on resale, illiquidity or uncertainty, and such adjust-ment is a significant component of the valuation, the investment will beclassified as Level 3. An investment will also be classified as Level 3 wheremanagement uses company fundamentals and other significant inputs todetermine the valuation.



The following table summarizes the valuation of the Fund’s investments bythe above fair value hierarchy levels as of December 31, 2018:

Investments inSecurities Level 1 Level 2 Level 3 Total

Assets:Common Stocks^ ......... $ 129,761,846 $ – 0 – $ – 0 – $ 129,761,846

Short-Term Investments:Investment

Companies .............. 7,716,554 – 0 – – 0 – 7,716,554Total Investments in

Securities .................... 137,478,400 – 0 – – 0 – 137,478,400Other Financial

Instruments*.............. – 0 – – 0 – – 0 – – 0 –Total**.......................... $ 137,478,400 $ – 0 – $ – 0 – $ 137,478,400

^ See Portfolio of Investments for sector classifications.

* Other financial instruments are derivative instruments, such as futures, forwards and swaps, which arevalued at the unrealized appreciation/(depreciation) on the instrument. Other financial instruments mayalso include swaps with upfront premiums, options written and swaptions written which are valued atmarket value.

** There were no transfers between any levels during the reporting period.

The Fund recognizes all transfers between levels of the fair value hierarchyassuming the financial instrument was transferred at the beginning of thereporting period.

The Adviser established the Committee to oversee the pricing and valu-ation of all securities held in the Fund. The Committee operates under pric-ing and valuation policies and procedures established by the Adviser andapproved by the Board, including pricing policies which set forth themechanisms and processes to be employed on a daily basis to implementthese policies and procedures. In particular, the pricing policies describehow to determine market quotations for securities and other instruments.The Committee’s responsibilities include: 1) fair value and liquidity determi-nations (and oversight of any third parties to whom any responsibility forfair value and liquidity determinations is delegated), and 2) regular monitor-ing of the Adviser’s pricing and valuation policies and procedures andmodification or enhancement of these policies and procedures (or recom-mendation of the modification of these policies and procedures) as theCommittee believes appropriate.

The Committee is also responsible for monitoring the implementation ofthe pricing policies by the Adviser’s Pricing Group (the “Pricing Group”)and any third party which performs certain pricing functions in accordancewith the pricing policies. The Pricing Group is responsible for the oversightof the third party on a day-to-day basis. The Committee and the PricingGroup perform a series of activities to provide reasonable assurance of the



accuracy of prices including: 1) periodic vendor due diligence meetings,review of methodologies, new developments and process at vendors, 2)daily comparison of security valuation versus prior day for all securities thatexceeded established thresholds, and 3) daily review of unpriced, stale,and variance reports with exceptions reviewed by senior management andthe Committee.

In addition, several processes outside of the pricing process are used tomonitor valuation issues including: 1) performance and performanceattribution reports are monitored for anomalous impacts based uponbenchmark performance, and 2) portfolio managers review all portfolios forperformance and analytics (which are generated using the Adviser’sprices).

3. Currency TranslationAssets and liabilities denominated in foreign currencies and commitmentsunder forward currency exchange contracts are translated into U.S. dollarsat the mean of the quoted bid and ask prices of such currencies againstthe U.S. dollar. Purchases and sales of portfolio securities are translatedinto U.S. dollars at the rates of exchange prevailing when such securitieswere acquired or sold. Income and expenses are translated into U.S. dol-lars at the rates of exchange prevailing when accrued.

Net realized gain or loss on foreign currency transactions represents for-eign exchange gains and losses from sales and maturities of foreign fixedincome investments, holding of foreign currencies, currency gains orlosses realized between the trade and settlement dates on foreign invest-ment transactions, and the difference between the amounts of dividends,interest and foreign withholding taxes recorded on the Fund’s books andthe U.S. dollar equivalent amounts actually received or paid. Net unrealizedcurrency gains and losses from valuing foreign currency denominatedassets and liabilities at period end exchange rates are reflected as acomponent of net unrealized appreciation and depreciation of foreign cur-rency denominated assets and liabilities.

4. TaxesIt is the Fund’s policy to meet the requirements of the Internal RevenueCode applicable to regulated investment companies and to distribute all ofits investment company taxable income and net realized gains, if any, toshareholders. Therefore, no provisions for federal income or excise taxesare required. The Fund may be subject to taxes imposed by countries inwhich it invests. Such taxes are generally based on income and/or capitalgains earned or repatriated. Taxes are accrued and applied to net invest-ment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned.



In accordance with U.S. GAAP requirements regarding accounting foruncertainties in income taxes, management has analyzed the Fund’s taxpositions taken or expected to be taken on federal and state income taxreturns for all open tax years (all years since inception of the Fund), andhas concluded that no provision for income tax is required in the Fund’sfinancial statements.

5. Investment Income and Investment TransactionsDividend income is recorded on the ex-dividend date or as soon as theFund is informed of the dividend. Interest income is accrued daily. Invest-ment transactions are accounted for on the date securities are purchasedor sold. Investment gains or losses are determined on the identified costbasis. The Fund amortizes premiums and accretes discounts as adjust-ments to interest income.

6. Expense AllocationsExpenses of the Company are charged proportionately to each portfolio orbased on other appropriate methods.

7. Dividends and DistributionsDividends and distributions to shareholders, if any, are recorded on theex-dividend date. Income dividends and capital gains distributions aredetermined in accordance with federal tax regulations and may differ fromthose determined in accordance with U.S. GAAP. To the extent these dif-ferences are permanent, such amounts are reclassified within the capitalaccounts based on their federal tax basis treatment; temporary differencesdo not require such reclassification.

8. Offering ExpensesOffering expenses of $68,085 were deferred and amortized on a straightline basis over a one year period starting from June 28, 2017(commencement of operations).

NOTE BAdvisory Fee and Other Transactions with AffiliatesUnder the terms of the investment advisory agreement, the Fund pays theAdviser an advisory fee at an annual rate of .55% of the Fund’s averagedaily net assets (“Base Fee”). The advisory fee is increased or decreasedfrom the Base Fee by a performance adjustment (“PerformanceAdjustment”) that depends on whether, and to what extent, the investmentperformance of the Advisor Class shares of the Fund (“Measuring Class”)exceeds, or is exceeded by, the performance of the Russell 1000 GrowthIndex (“Index”) plus 1.40% (“Index Hurdle”) over the Performance Period(as defined below). The Performance Adjustment is calculated andaccrued daily, according to a schedule that adds or subtracts .00357% ofthe Fund’s average daily net assets for each .01% of absolute perform-ance by which the performance of the Measuring Class exceeds or lags



the Index Hurdle for the period from the beginning of the Performance Periodthrough the current business day. The maximum Performance Adjustment(positive or negative) will not exceed an annualized rate of +/-.50%(“Maximum Performance Adjustment”) of the Fund’s average daily net assets,which would occur when the performance of the Measuring Class exceeds,or is exceeded by, the Index Hurdle by 1.40% or more for the PerformancePeriod. On a monthly basis, the Fund will pay the Adviser the minimum feerate of .05% on an annualized basis (Base Fee minus the MaximumPerformance Adjustment) applied to the average daily net assets for themonth. At the end of the Performance Period, the Fund will pay to the Adviserthe total advisory fee, less the amount of any minimum fees paid during thePerformance Period and any waivers described below. The period over whichperformance is measured (“Performance Period”) was initially from thecommencement of operations to December 31, 2018 and thereafter is each12-month period beginning on the first day in the month of January throughDecember 31 of the same year. In addition, the Adviser has agreed to waiveits advisory fee by limiting the Fund’s accrual of the advisory fee (Base Feeplus Performance Adjustment) on any day to the amount corresponding tothe maximum fee rate multiplied by the Fund’s current net assets if suchamount is less than the amount that would have been accrued based on theFund’s average daily net assets for the Performance Period. For the yearended December 31, 2018, the Fund accrued advisory fees of $765,264, asreflected in the statement of operations, at an annual effective rate (excludingthe impact from any expense waivers in effect) of 1.06% of the Fund’s aver-age net assets, which reflected a .51% Performance Adjustment of$367,394. For the Performance Period from June 28, 2017 to December 31,2018, the Fund accrued advisory fees of $765,548 at an annual effective rate(excluding the impact from any expense waivers in effect) of 1.05% of theFund’s average net assets, which reflected a .50% Performance Adjustmentof $364,547. The advisory fee accrued during the financial reporting periodmay be higher than the Base Fee plus the Maximum Performance Adjust-ment (or lower than the Base Fee minus the Maximum Performance Adjust-ment) because the actual fee is calculated based on performance over alonger time period for the initial Performance Period.

The Adviser has agreed to waive its fees and bear certain expensesthrough April 30, 2019 to the extent necessary to limit total expenses(other than the advisory fee, acquired fund fees and expenses other thanthe advisory fees of any AB mutual funds in which the Fund may invest,interest expense, taxes, extraordinary expenses, and brokerage commis-sions and other transaction costs) on an annual basis from exceeding.05% of average daily net assets. For the year ended December 31, 2018,the reimbursements/waivers amounted to $321,117. Any fees waived andexpenses borne by the Adviser through December 31, 2018 are subject torepayment by the Fund until the end of the third fiscal year after the fiscal



period in which the fees were waived or the expenses were borne; suchwaivers/expenses borne that are subject to repayment amount to$173,083 for the fiscal period ended December 31, 2017 and $321,117for the year ended December 31, 2018. In any case, no repayment will bemade that would cause the Fund’s total annual expenses (subject to theexclusions set forth above) to exceed .05%.

During 2017, AXA S.A. (“AXA”), a French holding company for the AXAGroup, a worldwide leader in life, property and casualty and healthinsurance and asset management, announced its intention to pursue thesale of a minority stake in its subsidiary, AXA Equitable Holdings, Inc.(“AXA Equitable”), the holding company for a diversified financial servicesorganization, through an initial public offering (“IPO”). AXA Equitable is theholding company for a diverse group of financial services companies,including AllianceBernstein L.P., the investment adviser to the Funds (“theAdviser”). During the second quarter of 2018, AXA Equitable completedthe IPO, and, as a result, AXA held approximately 72.2% of the out-standing common stock of AXA Equitable as of September 30, 2018.Contemporaneously with the IPO, AXA sold $862.5 million aggregate prin-cipal amount of its 7.25% mandatorily exchangeable notes (the “MxBNotes”) due May 15, 2021 and exchangeable into up to 43,125,000shares of common stock (or approximately 7% of the outstanding sharesof common stock of AXA Equitable). AXA retains ownership (including vot-ing rights) of such shares of common stock until the MxB Notes areexchanged, which may be on a date that is earlier than the maturity date atAXA’s option upon the occurrence of certain events.

In March 2018, AXA announced its intention to sell its entire interest in AXAEquitable over time, subject to market conditions and other factors (the“Plan”). It is anticipated that one or more of the transactions contemplatedby the Plan may ultimately result in the indirect transfer of a “controllingblock” of voting securities of the Adviser (a “Change of Control Event”) andtherefore may be deemed an “assignment” causing a termination of eachFund’s current investment advisory agreement. In order to ensure that theexisting investment advisory services could continue uninterrupted, atmeetings held in late July through early August 2018, the Boards of Direc-tors/Trustees (each a “Board” and collectively, the “Boards”) approvednew investment advisory agreements with the Adviser, in connection withthe Plan. The Boards also agreed to call and hold a joint meeting of share-holders on October 11, 2018 for shareholders of each Fund to (1) approvethe new investment advisory agreement with the Adviser that would beeffective after the first Change of Control Event and (2) approve any futureadvisory agreement approved by the Board and that has terms notmaterially different from the current agreement, in the event there aresubsequent Change of Control Events arising from completion of the Plan



that terminate the advisory agreement after the first Change of ControlEvent. Approval of a future advisory agreement means that shareholdersmay not have another opportunity to vote on a new agreement with theAdviser even upon a change of control, as long as no single person orgroup of persons acting together gains “control” (as defined in the 1940Act) of AXA Equitable.

At the October 11, 2018 meeting, shareholders approved the new andfuture investment advisory agreements.

On November 20, 2018, AXA completed a public offering of 60,000,000shares of AXA Equitable’s common stock and simultaneously sold30,000,000 of such shares to AXA Equitable pursuant to a separateagreement with it. As a result AXA currently owns approximately 59.2% ofthe shares of common stock of AXA Equitable.

Pursuant to the investment advisory agreement, the Fund may reimbursethe Adviser for certain legal and accounting services provided to the Fundby the Adviser. For the year ended December 31, 2018, the Adviser volun-tarily agreed to waive such fees in the amount of $71,040.

The Fund compensates AllianceBernstein Investor Services, Inc. (“ABIS”),a wholly-owned subsidiary of the Adviser, under a Transfer AgencyAgreement for providing personnel and facilities to perform transfer agencyservices for the Fund. ABIS may make payments to intermediaries thatprovide omnibus account services, sub-accounting services and/or net-working services. The compensation retained by ABIS amounted to$23,149 for the year ended December 31, 2018.

The Fund may invest in AB Government Money Market Portfolio (the“Government Money Market Portfolio”) which has a contractual annualadvisory fee rate of .20% of the portfolio’s average daily net assets andbears its own expenses. Effective August 1, 2018, the Adviser has con-tractually agreed to waive .10% of the advisory fee of Government MoneyMarket Portfolio until August 31, 2019. In connection with the investmentby the Fund in Government Money Market Portfolio, the Adviser has con-tractually agreed to waive its advisory fee from the Fund in an amountequal to the Fund’s pro rata share of the effective advisory fee of Govern-ment Money Market Portfolio, as borne indirectly by the Fund as anacquired fund fee and expense. For year ended December 31, 2018, suchwaiver amounted to $9,354.



A summary of the Fund’s transactions in AB mutual funds for the yearended December 31, 2018 is as follows:

Fund

Market Value12/31/17

(000)

Purchasesat Cost

(000)

SalesProceeds

(000)

Market Value12/31/18

(000)

DividendIncome

(000)

GovernmentMoneyMarketPortfolio .... $ 117 $ 101,106 $ 93,506 $ 7,717 $ 132

Brokerage commissions paid on investment transactions for the yearended December 31, 2018 amounted to $17,128, of which $96 and $0,respectively, was paid to Sanford C. Bernstein & Co. LLC and Sanford C.Bernstein Limited, affiliates of the Adviser.

NOTE CInvestment TransactionsPurchases and sales of investment securities (excluding short-term invest-ments) for the year ended December 31, 2018, were as follows:

Purchases Sales

Investment securities (excludingU.S. government securities) ...................... $ 160,388,967 $ 25,147,320

U.S. government securities .......................... – 0 – – 0 –

The cost of investments for federal income tax purposes, gross unrealizedappreciation and unrealized depreciation are as follows:

Cost ............................................................................... $ 143,659,653Gross unrealized appreciation .............................................. $ 2,005,284Gross unrealized depreciation .............................................. (8,186,537)Net unrealized depreciation.................................................. $ (6,181,253)

1. Derivative Financial InstrumentsThe Fund may use derivatives in an effort to earn income and enhancereturns, to replace more traditional direct investments, to obtain exposureto otherwise inaccessible markets (collectively, “investment purposes”), orto hedge or adjust the risk profile of its portfolio.

The Fund did not engage in derivative transactions for the year endedDecember 31, 2018.

2. Currency TransactionsThe Fund may invest in non-U.S. Dollar-denominated securities on a cur-rency hedged or unhedged basis. The Fund may seek investment oppor-tunities by taking long or short positions in currencies through the use of



currency-related derivatives, including forward currency exchange con-tracts, futures and options on futures, swaps, and other options. The Fundmay enter into transactions for investment opportunities when it anticipatesthat a foreign currency will appreciate or depreciate in value but securitiesdenominated in that currency are not held by the Fund and do not presentattractive investment opportunities. Such transactions may also be usedwhen the Adviser believes that it may be more efficient than a directinvestment in a foreign currency-denominated security. The Fund may alsoconduct currency exchange contracts on a spot basis (i.e., for cash at thespot rate prevailing in the currency exchange market for buying or sellingcurrencies).

NOTE DCapital StockEach class consists of 1,000,000,000 authorized shares. Transactions incapital shares for each class were as follows:

Shares AmountYear Ended

December 31,2018

June 28, 2017* toDecember 31,

2017


2018

June 28, 2017* toDecember 31,

2017

Advisor ClassShares sold 14,410,203 113,928 $ 173,478,632 $ 1,150,003Shares issued in

reinvestment ofdividends anddistributions 463 67 5,327 753

Shares redeemed (2,628,665) – 0 – (31,149,059) – 0 –Net increase 11,782,001 113,995 $ 142,334,900 $ 1,150,756

* Commencement of operations.

NOTE ERisks Involved in Investing in the FundForeign (Non-U.S.) Risk—Investments in securities of non-U.S. issuersmay involve more risk than those of U.S. issuers. These securities mayfluctuate more widely in price and may be less liquid due to adverse mar-ket, economic, political, regulatory or other factors.

Derivatives Risk—The Fund may enter into derivative transactions suchas forwards, options, futures and swaps. Derivatives may be illiquid, diffi-cult to price, and leveraged so that small changes may produce dispropor-tionate losses for the Fund, and subject to counterparty risk to a greaterdegree than more traditional investments. Derivatives may result in sig-nificant losses, including losses that are far greater than the value of thederivatives reflected on the statement of assets and liabilities.



Indemnification Risk—In the ordinary course of business, the Fundenters into contracts that contain a variety of indemnifications. The Fund’smaximum exposure under these arrangements is unknown. However, theFund has not had prior claims or losses pursuant to these indemnificationprovisions and expects the risk of loss thereunder to be remote. Therefore,the Fund has not accrued any liability in connection with theseindemnification provisions.

NOTE FDistributions to ShareholdersThe tax character of distributions paid during the fiscal year endedDecember 31, 2018 and fiscal period ended December 31, 2017 were asfollows:

2018 2017

Distributions paid from:Ordinary income ...................................................... $ 7,127 $ 6,163

Total taxable distributions paid....................................... $ 7,127 $ 6,163

As of December 31, 2018, the components of accumulated earnings/(deficit) on a tax basis were as follows:

Accumulated capital and other losses ....................................... $ (344,821)(a)

Unrealized appreciation/(depreciation)....................................... (6,181,253)(b)

Total accumulated earnings/(deficit).......................................... $ (6,526,074)

(a) As of December 31, 2018, the Fund had a net capital loss carryforward of $344,821.(b) 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 offsetfuture capital gains, if any. Funds are permitted to carry forward capitallosses for an indefinite period, and such losses will retain their character aseither short-term or long-term capital losses. As of December 31, 2018,the Fund had a net short-term capital loss carryforward of $342,049 and anet long-term capital loss carryforward of $2,772, which may be carriedforward for an indefinite period.

During the current fiscal year, permanent differences primarily due to thetax treatment of offering costs and the disallowance of a net operating lossresulted in a net decrease in accumulated loss and a net decrease in addi-tional paid-in capital. These reclassifications had no effect on net assets.

NOTE GRecent Accounting PronouncementsIn August 2018, the Financial Accounting Standards Board issued anAccounting Standards Update, ASU 2018-13, Fair Value Measurement



(Topic 820), Disclosure Framework-Changes to the Disclosure Require-ments for Fair Value Measurement which removes, modifies and adds dis-closures to Topic 820. The amendments in this ASU 2018-13 apply to allentities that are required, under existing U.S. GAAP, to make disclosuresabout recurring or nonrecurring fair value measurements. The amend-ments in this ASU 2018-13 are effective for all entities for fiscal years, andinterim periods within those fiscal years, beginning after December 15,2019. At this time, management is evaluating the implications of thesechanges on the financial statements.

In October 2018, the U.S. Securities and Exchange Commission adoptedamendments to certain disclosure requirements included in Regulation S-Xthat had become “redundant, duplicative, overlapping, outdated or super-seded, in light of the other Commission disclosure requirements, GAAP orchanges in the information environment.” The compliance date for theamendments to Regulation S-X was November 5, 2018 (for reportingperiod end dates of September 30, 2018 or after). Management hasadopted the amendments which simplified certain disclosure requirementson the financial statements.

NOTE HSubsequent EventsManagement has evaluated subsequent events for possible recognition ordisclosure in the financial statements through the date the financial state-ments are issued. Management has determined that there are no materialevents that would require disclosure in the Fund’s financial statementsthrough this date.


FINANCIAL HIGHLIGHTSSelected Data For A Share Of Capital Stock Outstanding Throughout Each Period

Advisor Class


2018

June 28,2017(a) to

December 31,2017

Net asset value, beginning of period .................................. $ 11.18 $ 10.00Income From Investment OperationsNet investment income (loss)(b)(c) ....................................... (.04) .04Net realized and unrealized gain on investment and foreign

currency transactions ................................................. .36 1.19Net increase in net asset value from operations .................... .32 1.23Less: Dividends and DistributionsDividends from net investment income ............................... (.00)(d) (.02)Distributions from net realized gain on investment ................. (.00)(d) (.03)Total dividends and distributions ....................................... (.00)(d) (.05)Net asset value, end of period .......................................... $ 11.50 $ 11.18

Total ReturnTotal investment return based on net asset value(e) ................ 2.87 % 12.34 %Ratios/Supplemental DataNet assets, end of period (000’s omitted) ............................ $136,746 $1,274Ratio to average net assets of:

Expenses, net of waivers/reimbursements(f)† ..................... 1.10 %(g) .08 %(h)

Expenses, before waivers/reimbursements(f)† .................... 1.65 %(g) 37.04 %(h)

Net investment income (loss)(c) ...................................... (.29)% .65 %(h)

Portfolio turnover rate .................................................... 38 % 25 %

† Expense ratios exclude the estimated acquired fund fees of affiliated/unaffiliated underlyingportfolios ................................................................. .01 % .02 %

(a) Commencement of operations.

(b)Based on average shares outstanding.

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

(d)Amount is less than $0.005.

(e) Total investment return is calculated assuming an initial investment made at the net asset value at thebeginning of the period, reinvestment of all dividends and distributions at net asset value during theperiod, and redemption on the last day of the period. Total investment return does not reflect thededuction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.Total investment return for a period of less than one year is not annualized.

(f) In connection with the Fund’s investments in affiliated underlying portfolios, the Fund incurs no directexpenses but bears proportionate shares of the acquired fund fees and expenses (i.e. operating,administrative and investment advisory fees) of the affiliated underlying portfolios. The Adviser hascontractually agreed to waive its fees from the Fund in an amount equal to the Fund’s pro rata share ofcertain acquired fund fees and expenses, and for the year ended December 31, 2018 and the periodended December 31, 2017, such waiver amounted to .01% and .02% (annualized), respectively.

(g) The advisory fee reflected in the Fund’s expense ratio may be higher or lower than the Base Fee plusPerformance Adjustment due to the different time periods over which the fee is calculated (i.e., thefinancial reporting period vs. the Performance Period).

(h)Annualized.



REPORT OF INDEPENDENT REGISTEREDPUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors ofAB FlexFee Large Cap Growth Portfolio:

Opinion on the Financial StatementsWe have audited the accompanying statement of assets and liabilities ofAB FlexFee Large Cap Growth Portfolio (the “Fund”) (one of the portfoliosconstituting AB Cap Fund, Inc. (the “Company”)), including the portfolio ofinvestments, as of December 31, 2018, and the related statement ofoperations for the year then ended and the statements of changes in netassets and the financial highlights for the year then ended and the periodJune 28, 2017 (commencement of operations) to December 31, 2017 andthe related notes (collectively referred to as the “financial statements”). Inour opinion, the financial statements present fairly, in all material respects,the financial position of the Fund (one of the portfolios constituting AB CapFund, Inc.) at December 31, 2018, the results of its operations for the yearthen ended and the changes in its net assets and its financial highlights forthe year then ended and the period June 28, 2017 (commencement ofoperations) to December 31, 2017, in conformity with U.S. generallyaccepted accounting principles.

Basis for OpinionThese financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on the Fund’sfinancial statements based on our audits. We are a public accounting firmregistered with the Public Company Accounting Oversight Board (UnitedStates) (“PCAOB”) and are required to be independent with respect to theCompany in accordance with the U.S. federal securities laws and theapplicable rules and regulations of the Securities and Exchange Commis-sion and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free ofmaterial misstatement, whether due to error or fraud. The Company is notrequired to have, nor were we engaged to perform, an audit of theCompany’s internal control over financial reporting. As part of our audits,we are required to obtain an understanding of internal control over financialreporting, but not for the purpose of expressing an opinion on theeffectiveness of the Company’s internal control over financial reporting.Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of materialmisstatement of the financial statements, whether due to error or fraud,and performing procedures that respond to those risks. Such proceduresincluded examining, on a test basis, evidence regarding the amounts and


REPORT OF INDEPENDENT REGISTEREDPUBLIC ACCOUNTING FIRM (continued)

disclosures in the financial statements. Our procedures included con-firmation of securities owned as of December 31, 2018, by corre-spondence with the custodian and others or by other appropriate auditingprocedures where replies from others were not received. Our audits alsoincluded evaluating the accounting principles used and significant esti-mates made by management, as well as evaluating the overall pre-sentation of the financial statements. We believe that our audits provide areasonable basis for our opinion.

We have served as the auditor of one or more of the AB investmentcompanies since 1968.

New York, New YorkFebruary 26, 2019


2018 FEDERAL TAX INFORMATION(unaudited)

For Federal income tax purposes, the following information is furnishedwith respect to the distributions paid by the Fund for the taxable periodended December 31, 2018. For corporate shareholders 23.42% of divi-dends paid qualify for the dividends received deduction.

For individual shareholders, the Fund designates 100% of dividends paidas qualified dividend income.


RESULTS OF STOCKHOLDER MEETING(unaudited)

A Special Meeting of Stockholders of the AB Cap Fund, Inc. (the“Company”)—AB FlexFee Large Cap Growth Portfolio (the “Fund”) was heldon October 11, 2018. A description of the proposals and number of sharesvoted at the Meeting are as follows (the proposal number shown belowcorresponds 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 hisor her successor is duly elected and qualifies.

Director:VotedFor:

AuthorityWithheld:

Michael J. Downey ................................................ 153,531,217 1,117,868William H. Foulk, Jr.* .............................................. 153,385,034 1,264,050Nancy P. Jacklin ................................................... 153,607,746 1,041,339Robert M. Keith .................................................... 153,546,025 1,103,060Carol C. McMullen ................................................ 153,649,415 999,670Gary L. Moody ..................................................... 153,545,113 1,103,972Marshall C. Turner, Jr............................................. 153,507,495 1,141,590Earl D. Weiner ...................................................... 153,514,727 1,134,358

2. To vote upon the approval of new advisory agreements for the Fundwith AllianceBernstein L.P.

VotedFor:

VotedAgainst: Abstain:

BrokerNon-Votes:

5,781,720 – 0 – 10,593 1,204,435* Mr. Foulk retired on December 31, 2018.


BOARD OF DIRECTORS

Marshall C. Turner, Jr(1),ChairmanMichael J. Downey(1)

Nancy P. Jacklin(1)

Robert M. Keith, President andChief Executive OfficerCarol C. McMullen(1)

Garry L. Moody(1)

Earl D. Weiner(1)

OFFICERSFrank V. Caruso(2), Vice PresidentJohn H. Fogarty(2), Vice PresidentVinay Thapar(2), Vice PresidentEmilie D. Wrapp, SecretaryMichael B. Reyes, Senior Analyst

Joseph J. Mantineo, Treasurerand Chief Financial OfficerPhyllis J. Clarke, ControllerVincent S. Noto, ChiefCompliance Officer

Custodian and Accounting AgentBrown Brothers Harriman & Co.50 Post Office SquareBoston, MA 02110

Principal UnderwriterAllianceBernstein Investments, Inc.1345 Avenue of the AmericasNew York, NY 10105

Transfer AgentAllianceBernstein Investor Services,Inc.P.O. Box 786003San Antonio, TX 78278-6003Toll-Free (800) 221-6003

Independent Registered PublicAccounting FirmErnst & Young LLP5 Times SquareNew York, NY 10036

Legal CounselSeward & Kissel LLPOne Battery Park PlazaNew York, NY 10004

1 Member of the Audit Committee, the Governance and Nominating Committee and the IndependentDirectors Committee.

2 The day-to-day management of, and investment decisions for, the Fund’s portfolio are made by theAdviser’s U.S. Large Cap Growth Investment Team. Messrs. Caruso, Fogarty and Thapar are theinvestment professionals with the most significant responsibility for the day-to-day management of theFund’s portfolio.


MANAGEMENT OF THE FUND

Board of Directors InformationThe business and affairs of the Fund are managed under the direction ofthe Board of Directors. Certain information concerning the Fund’s Direc-tors is set forth below.

NAME,ADDRESS*, AGE,

(YEAR FIRST ELECTED**)

PRINCIPALOCCUPATION(S)

DURING PAST FIVE YEARSAND OTHER INFORMATION***

PORTFOLIOSIN AB FUNDCOMPLEX

OVERSEEN BYDIRECTOR

OTHER PUBLICCOMPANY

DIRECTORSHIPSCURRENTLY HELD

BY DIRECTOR

INTERESTED DIRECTORRobert M. Keith,#1345 Avenue of the AmericasNew York, NY 1010558(2015)

Senior Vice President ofAllianceBernstein L.P. (the“Adviser”) and the head ofAllianceBernstein Investments,Inc. (“ABI”) since July 2008;Director of ABI and Presidentof the AB Mutual Funds.Previously, he served asExecutive Managing Director ofABI from December 2006 toJune 2008. Prior to joining ABIin 2006, Executive ManagingDirector of Bernstein GlobalWealth Management, and priorthereto, Senior ManagingDirector and Global Head ofClient Service and Sales of theAdviser’s institutionalinvestment managementbusiness since 2004. Priorthereto, he was ManagingDirector and Head of NorthAmerican Client Service andSales in the Adviser’sinstitutional investmentmanagement business, withwhich he had been associatedsince prior to 2004.

95 None


MANAGEMENT OF THE FUND (continued)

NAME,ADDRESS*, AGE,





OVERSEEN BYDIRECTOR

OTHER PUBLICCOMPANY


BY DIRECTOR

DISINTERESTED DIRECTORSMarshall C. Turner, Jr.,##

Chairman of the Board77(2015)

Private Investor since prior to2014. Former Chairman andCEO of Dupont Photomasks,Inc. (components of semi-conductor manufacturing). Hehas extensive operatingleadership, and venture capitalinvesting experience, includingfive interim or full-time CEOroles, and prior service asgeneral partner of institutionalventure capital partnerships.He also has extensive non-profit board leadershipexperience, and currentlyserves on the boards of twoeducation and science-relatednon-profit organizations. Hehas served as a director of oneAB Fund since 1992, anddirector or trustee of multipleAB funds since 2005. He hasbeen Chairman of the ABFunds since January 2014,and the Chairman of theIndependent DirectorsCommittees of such AB Fundssince February 2014.

95 Xilinx, Inc.(programmable logicsemi-conductors)since 2007

Michael J. Downey,##

75(2015)

Private Investor since prior to2014. Formerly, managingpartner of Lexington Capital,LLC (investment advisory firm)from December 1997 untilDecember 2003. He alsoserved as a Director ofProspect Acquisition Corp.(financial services) from 2007until 2009. From 1987 until1993, Chairman and CEO ofPrudential Mutual FundManagement, director of thePrudential mutual funds, andmember of the ExecutiveCommittee of PrudentialSecurities Inc. He has servedas a director or trustee of theAB Funds since 2005 and is adirector and Chairman of oneother registered investmentcompany.

95 The Asia PacificFund, Inc.(registeredinvestmentcompany) sinceprior to 2014



NAME,ADDRESS*, AGE,





OVERSEEN BYDIRECTOR

OTHER PUBLICCOMPANY


BY DIRECTOR

DISINTERESTED DIRECTORS(continued)Nancy P. Jacklin,##

70(2015)

Private Investor since prior to2014. Professorial Lecturer atthe Johns Hopkins School ofAdvanced International Studies(2008-2015). U.S. ExecutiveDirector of the InternationalMonetary Fund (which isresponsible for ensuring thestability of the internationalmonetary system), (December2002-May 2006); Partner,Clifford Chance (1992-2002);Sector Counsel, InternationalBanking and Finance, andAssociate General Counsel,Citicorp (1985-1992); AssistantGeneral Counsel (International),Federal Reserve Board ofGovernors (1982-1985); andAttorney Advisor, U.S.Department of the Treasury(1973-1982). Member of theBar of the District of Columbiaand of New York; and memberof the Council on ForeignRelations. She has served as adirector or trustee of the ABFunds since 2006 and hasbeen Chair of the Governanceand Nominating Committeesof the AB Funds since August2014.

95 None



NAME,ADDRESS*, AGE,





OVERSEEN BYDIRECTOR

OTHER PUBLICCOMPANY


BY DIRECTOR

DISINTERESTED DIRECTORS(continued)Carol C. McMullen,##

63(2016)

Managing Director of SlalomConsulting (consulting) since2014 and private investor andmember of the PartnersHealthcare InvestmentCommittee. Formerly, Directorof Norfolk & Dedham Group(mutual property and casualtyinsurance) from 2011 untilNovember 2016; Director ofPartners CommunityPhysicians Organization(healthcare) from 2014 untilDecember 2016; andManaging Director of TheCrossland Group (consulting)from 2012 until 2013. She hasheld a number of seniorpositions in the asset andwealth managementindustries, including at EasternBank (where her roles includedPresident of Eastern WealthManagement), ThomsonFinancial (Global Head of Salesfor Investment Management),and Putnam Investments(where her roles included Headof Global InvestmentResearch). She has served ona number of private companyand non-profit boards, and asa director or trustee of the ABFunds since June 2016.

95 None



NAME,ADDRESS*, AGE,





OVERSEEN BYDIRECTOR

OTHER PUBLICCOMPANY


BY DIRECTORDISINTERESTED DIRECTORS(continued)Garry L. Moody,##

66(2015)

Independent Consultant.Formerly, Partner, Deloitte &Touche LLP (1995-2008)where he held a number ofsenior positions, including ViceChairman, and U.S. andGlobal InvestmentManagement PracticeManaging Partner; President,Fidelity Accounting andCustody Services Company(1993-1995), where he wasresponsible for the accounting,pricing, custody and reportingfor the Fidelity mutual funds;and Partner, Ernst & YoungLLP (1975-1993), where heserved as the National Directorof Mutual Fund Tax Servicesand Managing Partner of itsChicago Office Taxdepartment. He is a memberof the Trustee Advisory Boardof BoardIQ, a biweeklypublication focused on issuesand news affecting directors ofmutual funds. He has servedas a director or trustee and asChairman of the AuditCommittees of the AB Fundssince 2008.

95 None

Earl D. Weiner,##

79(2015)

Of Counsel, and Partner priorto January 2007, of the lawfirm Sullivan & Cromwell LLPand is a former member of theABA Federal Regulation ofSecurities Committee TaskForce to draft editions of theFund Director’s Guidebook.He also serves as a director ortrustee of various non-profitorganizations and has servedas Chairman or Vice Chairmanof a number of them. He hasserved as a director or trusteeof the AB Funds since 2007and served as Chairman of theGovernance and NominatingCommittees of the AB Fundsfrom 2007 until August 2014.

95 None



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

** There is no stated term of office for the Fund’s Directors.*** The information above includes each Director’s principal occupation during the last five years and other

information relating to the experience, attributes and skills relevant to each Director’s qualifications toserve as a Director, which led to the conclusion that each Director should serve as a Director for theFund.

# Mr. Keith is an “interested person” of the Fund, as defined in the 1940 Act, due to his position as aSenior Vice President of the Adviser.

## Member of the Audit Committee, the Governance and Nominating Committee and the IndependentDirectors Committee.



Officer InformationNAME, ADDRESS*

AND AGEPOSITION(S)

HELD WITH FUNDPRINCIPAL OCCUPATIONDURING PAST 5 YEARS

Robert M. Keith,58

President and ChiefExecutive Officer

See biography above.

Frank V. Caruso,62

Vice President Senior Vice President of the Adviser**,with which he has been associated sinceprior to 2014. He is Chief InvestmentOfficer of US Growth Equities.

John H. Fogarty,49

Vice President Senior Vice President of the Adviser**,with which he has been associated sinceprior to 2014.

Vinay Thapar40

Vice President Senior Vice President of the Adviser**,with which he has been associated sinceprior to 2014.

Emilie D. Wrapp,63

Secretary Senior Vice President, Assistant GeneralCounsel and Assistant Secretary of ABI**,with which she has been associatedsince prior to 2014.

Michael B. Reyes,42

Senior Analyst Vice President of the Adviser**, withwhich he has been associated since priorto 2014.

Joseph J. Mantineo,59

Treasurer and ChiefFinancial Officer

Senior Vice President of AllianceBernsteinInvestor Services (“ABIS”)**, with whichhe has been associated since prior to2014.

Phyllis J. Clarke,58

Controller Vice President of ABIS**, with which shehas been associated since prior to 2014.

Vince S. Noto,54

Chief ComplianceOfficer

Senior Vice President since 2015 andMutual Fund Chief Compliance Officer ofthe Adviser** since 2014. Prior thereto,he was Vice President and Director ofMutual Fund Compliance of the Adviser**since 2012.

* The address for each of the Fund’s Officers is 1345 Avenue of the Americas, New York, NY 10105.

** The Adviser, ABI and ABIS are affiliates of the Fund.

The Fund’s Statement of Additional Information (“SAI”) has additional information about the Fund’s Directorsand Officers and is available without charge upon request. Contact your financial representative or AB at(800) 227-4618, or visit www.abfunds.com, for a free prospectus or SAI.


Information Regarding the Review and Approval of the Fund’sAdvisory AgreementAs described in more detail in the Proxy Statement for the AB Funds datedAugust 20, 2018, the Boards of the AB Funds, at a meeting held onJuly 31-August 2, 2018, approved new advisory agreements with theAdviser (the “Proposed Agreements”) for the AB Funds, including AB CapFund, Inc. in respect of AB FlexFeeTM Large Cap Growth Portfolio (the“Fund”), in connection with the planned disposition by AXA S.A. of itsremaining shares of AXA Equitable Holdings, Inc. (the indirect holder of amajority of the partnership interests in the Adviser and the indirect parentof AllianceBernstein Corporation, the general partner of the Adviser) in oneor more transactions and the related potential for one or more“assignments” (within the meaning of section 2(a)(4) of the InvestmentCompany Act) of the advisory agreements for the AB Funds, including theFund’s Advisory Agreement, resulting in the automatic termination of suchadvisory agreements.

At the same meeting, the AB Boards also considered and approvedinterim advisory agreements with the Adviser (the “Interim AdvisoryAgreements”) for the AB Funds, including the Fund, to be effective only inthe event that stockholder approval of a Proposed Agreement had notbeen obtained as of the date of one or more transactions resulting in an“assignment” of the Adviser’s advisory agreements, resulting in the auto-matic termination of such advisory agreements.

The shareholders of the Fund subsequently approved the ProposedAgreements at an annual meeting of shareholders called for the purpose ofelecting Directors and voting on the Proposed Agreements.

A discussion regarding the basis for the Boards’ approvals at a meetingheld on July 31-August 2, 2018 is set forth below.

Information Regarding the Review and Approval of the Fund’sProposed New Advisory Agreement and Interim AdvisoryAgreement in the Context of Potential AssignmentsAt a meeting of the AB Boards held on July 31-August 2, 2018, the Adviserpresented its recommendation that the Boards consider and approve theProposed Agreements. Section 15(c) of the 1940 Act provides that, after aninitial period, a Fund’s Current Agreement and current sub-advisoryagreement, as applicable, will remain in effect only if the Board, including amajority of the Independent Directors, annually reviews and approves them.Each of the Current Agreements had been approved by a Board within theone-year period prior to approval of its related Proposed Agreement,except that the Current Agreements for certain FlexFee funds wereapproved in February 2017. In connection with their approval of the Pro-posed Agreements, the Boards considered their conclusions in connectionwith their most recent approvals of the Current Agreements, in particular incases where the last approval of a Current Agreement was relatively recent,


including the Boards’ general satisfaction with the nature and quality ofservices being provided and, as applicable, in the case of certain Funds,actions taken or to be taken in an effort to improve investment performanceor reduce expense ratios. The Directors also reviewed updated informationprovided by the Adviser in respect of each Fund. Also in connection withtheir approval of the Proposed Agreements, the Boards considered arepresentation made to them at that time by the Adviser that there were noadditional developments not already disclosed to the Boards since theirmost recent approvals of the Current Agreements that would be a materialconsideration to the Boards in connection with their consideration of theProposed Agreements, except for matters disclosed to the Boards by theAdviser. The Directors considered the fact that each Proposed Agreementwould have corresponding terms and conditions identical to those of thecorresponding Current Agreement with the exception of the effective dateand initial term under the Proposed Agreement.

The Directors considered their knowledge of the nature and quality of theservices provided by the Adviser to each Fund gained from their experi-ence as directors or trustees of registered investment companies advisedby the Adviser, their overall confidence in the Adviser’s integrity andcompetence they have gained from that experience, the Adviser’s initiativein identifying and raising potential issues with the Directors and itsresponsiveness, frankness and attention to concerns raised by the Direc-tors in the past, including the Adviser’s willingness to consider and imple-ment organizational and operational changes designed to improveinvestment results and the services provided to the Funds. The Directorsnoted that they have four regular meetings each year, at each of whichthey review extensive materials and information from the Adviser, includinginformation on the investment performance of each Fund.

The Directors also considered all factors they believed relevant, includingthe specific matters discussed below. During the course of their deliber-ations, the Directors evaluated, among other things, the reasonableness ofthe management fees of the Funds they oversee. The Directors did notidentify any particular information that was all-important or controlling, anddifferent Directors may have attributed different weights to the variousfactors. The Directors determined that the selection of the Adviser tomanage the Funds, and the overall arrangements between the Funds andthe Adviser, as provided in the Proposed Agreements, including themanagement fees, were fair and reasonable in light of the services per-formed under the Current Agreements and to be performed under theProposed Agreements, expenses incurred and to be incurred and suchother matters as the Directors considered relevant in the exercise of theirbusiness judgment. The material factors and conclusions that formed thebasis for the Directors’ determinations included the following:

Nature, Extent and Quality of Services ProvidedThe Directors considered the scope and quality of services to be providedby the Adviser under the Proposed Agreements, including the quality of


the investment research capabilities of the Adviser and the other resourcesit has dedicated to performing services for the Funds. They also consid-ered the information that had been provided to them by the Adviser con-cerning the anticipated implementation of the Plan and the Adviser’srepresentation that it did not anticipate that such implementation wouldaffect the management or structure of the Adviser, have a material adverseeffect on the Adviser, or adversely affect the quality of the services pro-vided to the Funds by the Adviser and its affiliates. The Directors notedthat the Adviser from time to time reviews each Fund’s investment strat-egies and from time to time proposes changes intended to improve theFund’s relative or absolute performance for the Directors’ consideration.They also noted the professional experience and qualifications of eachFund’s portfolio management team and other senior personnel of theAdviser. The Directors also considered that certain Proposed Agreements,similar to the corresponding Current Agreements, provide that the Fundswill reimburse the Adviser for the cost to it of providing certain clerical,accounting, administrative and other services to the Funds by employeesof the Adviser or its affiliates. Requests for these reimbursements aremade on a quarterly basis and subject to approval by the Directors. TheDirectors noted that the Adviser did not request any reimbursements fromcertain Funds in the Fund’s latest fiscal year reviewed. The Directors notedthat the methodology to be used to determine the reimbursement amountshad been reviewed by an independent consultant retained by the Funds’former Senior Officer/Independent Compliance Officer. The quality ofadministrative and other services, including the Adviser’s role in coordinat-ing the activities of the Funds’ other service providers, also was consid-ered. The Directors of each Fund concluded that, overall, they weresatisfied with the nature, extent and quality of services to be provided tothe Funds under the Proposed Agreement for the Fund.

Costs of Services to be Provided and ProfitabilityThe Directors reviewed a schedule of the revenues and expenses andrelated notes indicating the profitability of each Fund to the Adviser forcalendar years 2016 and 2017, as applicable, that had been prepared withan expense allocation methodology arrived at in consultation with anindependent consultant retained by the Funds’ former Senior Officer/Independent Compliance Officer. The Directors noted the assumptionsand methods of allocation used by the Adviser in preparing fund-specificprofitability data and understood that there are a number of potentiallyacceptable allocation methodologies for information of this type. TheDirectors noted that the profitability information reflected all revenues andexpenses of the Adviser’s relationship with a Fund, including those relatingto its subsidiaries that provide transfer agency, distribution and brokerageservices to the Fund, as applicable. The Directors recognized that it isdifficult to make comparisons of the profitability of the Proposed Agree-ments with the profitability of fund advisory contracts for unaffiliated fundsbecause comparative information is not generally publicly available and is


affected by numerous factors. The Directors focused on the profitability ofthe Adviser’s relationship with each Fund before taxes and distributionexpenses, as applicable. The Directors noted that certain Funds were notprofitable to the Adviser in one or more periods reviewed. The Directorsconcluded that the Adviser’s level of profitability from its relationship withthe other Funds was not unreasonable. The Directors were unable to con-sider historical information about the profitability of certain Funds that hadrecently commenced operations and for which historical profitabilityinformation was not available. The Adviser agreed to provide the Directorswith profitability information in connection with future proposed con-tinuances of the Proposed Agreements.

Fall-Out BenefitsThe Directors considered the other benefits to the Adviser and its affiliatesfrom their relationships with the Funds, including, but not limited to, asapplicable, benefits relating to soft dollar arrangements (whereby invest-ment advisers receive brokerage and research services from brokers thatexecute agency transactions for their clients) in the case of certain Funds;12b-1 fees and sales charges received by the principal underwriter (whichis a wholly owned subsidiary of the Adviser) in respect of certain classes ofthe shares of most of the Funds; brokerage commissions paid by certainFunds to brokers affiliated with the Adviser; and transfer agency fees paidby most of the Funds to a wholly owned subsidiary of the Adviser. TheDirectors recognized that the Adviser’s profitability would be somewhatlower, and that a Fund’s unprofitability to the Adviser would beexacerbated, without these benefits. The Directors understood that theAdviser also might derive reputational and other benefits from its associa-tion with the Funds.

Investment ResultsIn addition to the information reviewed by the Directors in connection withthe Board meeting at which the Proposed Agreements were approved, theDirectors receive detailed performance information for the Funds at eachregular Board meeting during the year.

The Boards’ consideration of each Proposed Agreement was informed bytheir most recent approval of the related Current Agreement, and, in thecase of certain Funds, their discussion with the Adviser of the reasons forthose Funds’ underperformance in certain periods. The Directors alsoreviewed updated performance information and, in some cases, discussedwith the Adviser the reasons for changes in performance or continuedunderperformance. On the basis of this review, the Directors concludedthat each Fund’s investment performance was acceptable.

Management Fees and Other ExpensesThe Directors considered the management fee rate payable by each Fundto the Adviser and information prepared by an independent service provider


(the “15(c) provider”) concerning management fee rates payable by otherfunds in the same category as the Fund. The Directors recognized that it isdifficult to make comparisons of management fees because there are varia-tions in the services that are included in the fees paid by other funds. TheDirectors compared each Fund’s contractual management fee rate with apeer group median, and where applicable, took into account the impact onthe management fee rate of the administrative expense reimbursement paidto the Adviser in the latest fiscal year. In the case of the ACS Funds, theDirectors noted that the management fee rate is zero but also were cogni-zant that the Adviser is indirectly compensated by the wrap fee programsponsors that use the ACS Funds as an investment vehicle for their clients.

The Directors also considered the Adviser’s fee schedule for other clientspursuing a similar investment style to each Fund. For this purpose, theyreviewed the relevant advisory fee information from the Adviser’s FormADV and in a report from the Funds’ Senior Analyst and noted the differ-ences between a Fund’s fee schedule, on the one hand, and the Adviser’sinstitutional fee schedule and the schedule of fees charged by the Adviserto any offshore funds and for services to any sub-advised funds pursuing asimilar investment strategy as the Fund, on the other, as applicable. TheDirectors noted that the Adviser may, in some cases, agree to fee rateswith large institutional clients that are lower than those reviewed by theDirectors and that they had previously discussed with the Adviser its poli-cies in respect of such arrangements. The Adviser also informed the Direc-tors that, in the case of certain Funds, there were no institutional productsmanaged by the Adviser that have a substantially similar investment style.The Directors also discussed these matters with their independent feeconsultant.

The Adviser reviewed with the Directors the significantly greater scope ofthe services it provides to each Fund relative to institutional, offshore fundand sub-advised fund clients, as applicable. In this regard, the Advisernoted, among other things, that, compared to institutional and offshore orsub-advisory accounts, each Fund, as applicable, (i) demands consid-erably more portfolio management, research and trading resources due tosignificantly higher daily cash flows (in the case of open-end Funds); (ii) hasmore tax and regulatory restrictions and compliance obligations; (iii) mustprepare and file or distribute regulatory and other communications aboutfund operations; and (iv) must provide shareholder servicing to retailinvestors. The Adviser also reviewed the greater legal risks presented bythe large and changing population of Fund shareholders who may assertclaims against the Adviser in individual or class actions, and the greaterentrepreneurial risk in offering new fund products, which require sub-stantial investment to launch, may not succeed, and generally must bepriced to compete with larger, more established funds resulting in lack ofprofitability to the Adviser until a new fund achieves scale. In light of thesubstantial differences in services rendered by the Adviser to institutional,


offshore fund and sub-advised fund clients as compared to the Funds, andthe different risk profile, the Directors considered these fee comparisonsinapt and did not place significant weight on them in their deliberations.

The Directors noted that many of the Funds may invest in shares ofexchange-traded funds (“ETFs”), subject to the restrictions and limitationsof the 1940 Act as these may be varied as a result of exemptive ordersissued by the SEC. The Directors also noted that ETFs pay advisory feespursuant to their advisory contracts. The Directors concluded, based onthe Adviser’s explanation of how it uses ETFs when they are the mostcost-effective way to obtain desired exposures, in some cases pendingpurchases of underlying securities, that each Fund’s management feewould be for services that would be in addition to, rather than duplicativeof, the services provided under the advisory contracts of the ETFs.

With respect to each Fund’s management fee, the Directors consideredthe total expense ratio of the Fund in comparison to a peer group and peeruniverse selected by the 15(c) service provider. The Directors also consid-ered the Adviser’s expense caps for certain Funds. The Directors viewexpense ratio information as relevant to their evaluation of the Adviser’sservices because the Adviser is responsible for coordinating services pro-vided to a Fund by others.

The Boards’ consideration of each Proposed Agreement was informed bytheir most recent approval of the related Current Agreement, and, in thecase of certain Funds, their discussion with the Adviser of the reasons forthose Funds’ expense ratios in certain periods. The Directors alsoreviewed updated expense ratio information and, in some cases, dis-cussed with the Adviser the reasons for the expense ratios of certainFunds. On the basis of this review, the Directors concluded that eachFund’s expense ratio was acceptable.

The Directors did not consider comparative expense information for theACS Funds because those Funds do not bear ordinary expenses.

Economies of ScaleThe Directors noted that the management fee schedules for certain Fundsdo not contain breakpoints and that they had discussed their strongpreference for breakpoints in advisory contracts with the Adviser. TheDirectors took into consideration prior presentations by an independentconsultant on economies of scale in the mutual fund industry and for theFunds, and by the Adviser concerning certain of its views on economies ofscale. The Directors also had requested and received from the Advisercertain updates on economies of scale in advance of the Board meeting.The Directors believe that economies of scale may be realized (if at all) bythe Adviser across a variety of products and services, and not only inrespect of a single fund. The Directors noted that there is no establishedmethodology for setting breakpoints that give effect to the fund-specific


services provided by a fund’s adviser and to the economies of scale thatan adviser may realize in its overall mutual fund business or those compo-nents of it which directly or indirectly affect a fund’s operations. The Direc-tors observed that in the mutual fund industry as a whole, as well asamong funds similar to each Fund, there is no uniformity or pattern in thefees and asset levels at which breakpoints (if any) apply. The Directors alsonoted that the advisory agreements for many funds do not have break-points at all. The Directors informed the Adviser that they would monitorthe asset levels of the Funds without breakpoints and their profitability tothe Adviser and anticipated revisiting the question of breakpoints in thefuture if circumstances warrant doing so.

The Directors did not consider the extent to which fee levels in the Advi-sory Agreement for the ACS Funds reflect economies of scale becausethat Advisory Agreement does not provide for any compensation to bepaid to the Adviser by the ACS Funds and the expense ratio of each ofthose Funds is zero.

Interim Advisory AgreementsIn approving the Interim Advisory Agreements, the Boards, with the assis-tance of independent counsel, considered similar factors to those consid-ered in approving the Proposed Agreements. The Interim AdvisoryAgreements approved by the Boards are identical to the ProposedAgreements, as well as the Current Agreements, in all material respectsexcept for their proposed effective and termination dates and provisionsintended to comply with the requirements of the relevant SEC rule, such asprovisions requiring escrow of advisory fees. Under the Interim AdvisoryAgreements, the Adviser would continue to manage a Fund pursuant to anInterim Advisory Agreement until a new advisory agreement was approvedby stockholders or until the end of the 150-day period, whichever wouldoccur earlier. All fees earned by the Adviser under an Interim AdvisoryAgreement would be held in escrow pending shareholder approval of theProposed Agreement. Upon approval of a new advisory agreement bystockholders, the escrowed management fees would be paid to theAdviser, and the Interim Advisory Agreement would terminate.


This page is not part of the Shareholder Report or the Financial Statements.

AB FAMILY OF FUNDS

US EQUITYUS CORECore Opportunities FundFlexFee™ US Thematic PortfolioSelect US Equity PortfolioUS GROWTHConcentrated Growth FundDiscovery Growth FundFlexFee™ Large Cap

Growth PortfolioGrowth FundLarge Cap Growth FundSmall Cap Growth PortfolioUS VALUEDiscovery Value FundEquity Income FundRelative Value FundSmall Cap Value PortfolioValue Fund

INTERNATIONAL/GLOBAL EQUITYINTERNATIONAL/GLOBAL COREFlexFee™ International Strategic

Core PortfolioGlobal Core Equity PortfolioInternational PortfolioInternational Strategic

Core PortfolioSustainable Global Thematic FundTax-Managed International

PortfolioTax-Managed Wealth

Appreciation StrategyWealth Appreciation StrategyINTERNATIONAL/GLOBAL GROWTHConcentrated International

Growth PortfolioFlexFee™ Emerging Markets

Growth Portfolio

INTERNATIONAL/GLOBAL EQUITY (continued)

Sustainable InternationalThematic Fund

INTERNATIONAL/GLOBAL VALUEAll China Equity PortfolioInternational Value Fund

FIXED INCOMEMUNICIPALHigh Income Municipal PortfolioIntermediate California

Municipal PortfolioIntermediate Diversified

Municipal PortfolioIntermediate New York

Municipal PortfolioMunicipal Bond Inflation StrategyTax-Aware Fixed Income PortfolioNational PortfolioArizona PortfolioCalifornia PortfolioMassachusetts PortfolioMinnesota PortfolioNew Jersey PortfolioNew York PortfolioOhio PortfolioPennsylvania PortfolioVirginia PortfolioTAXABLEBond Inflation StrategyFlexFee™ High Yield Portfolio1

FlexFee™ InternationalBond Portfolio

Global Bond FundHigh Income FundIncome FundIntermediate Bond PortfolioLimited Duration High

Income PortfolioShort Duration Portfolio

ALTERNATIVESAll Market Real Return PortfolioGlobal Real Estate

Investment FundSelect US Long/Short PortfolioUnconstrained Bond Fund

MULTI-ASSETAll Market Income PortfolioAll Market Total Return PortfolioConservative Wealth StrategyEmerging Markets Multi-

Asset PortfolioGlobal Risk Allocation FundTax-Managed All Market

Income PortfolioTARGET-DATEMulti-Manager Select Retirement

Allocation FundMulti-Manager Select 2010 FundMulti-Manager Select 2015 FundMulti-Manager Select 2020 FundMulti-Manager Select 2025 FundMulti-Manager Select 2030 FundMulti-Manager Select 2035 FundMulti-Manager Select 2040 FundMulti-Manager Select 2045 FundMulti-Manager Select 2050 FundMulti-Manager Select 2055 FundMulti-Manager Select 2060 Fund

CLOSED-END FUNDSAlliance California Municipal

Income FundAllianceBernstein Global High

Income FundAllianceBernstein National

Municipal Income Fund

We also offer Government Money Market Portfolio, which serves as the money market fundexchange 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 cannotguarantee it will do so. The Fund may impose a fee upon sale of your shares or may tempora-rily suspend your ability to sell shares if the Fund’s liquidity falls below required minimumsbecause of market conditions or other factors. An investment in the Fund is not insured orguaranteed by the Federal Deposit Insurance Corporation or any other government agency. TheFund’s sponsor has no legal obligation to provide financial support to the Fund, and you shouldnot 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 Fundcarefully before investing. For copies of our prospectus or summary prospectus, which containthis and other information, visit us online at www.abfunds.com or contact your AB representa-tive. Please read the prospectus and/or summary prospectus carefully before investing.1 Prior to February 23, 2018, FlexFee High Yield Portfolio was named High Yield Portfolio.


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ab flexfeetm large cap growth portfolio - AllianceBernstein

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