
[Federal Register Volume 80, Number 29 (Thursday, February 12, 2015)]
[Notices]
[Pages 7884-7886]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-02916]



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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 31449; 812-14235]


AB Cap Fund, Inc., et al.; Notice of Application

February 6, 2015.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application under section 6(c) of the Investment 
Company Act of 1940 (``Act'') for an exemption from section 15(a) of 
the Act and rule 18f-2 under the Act, as well as from certain 
disclosure requirements.

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Summary of Application: Applicants request an order that would permit 
them to enter into and materially amend subadvisory agreements without 
shareholder approval and would grant relief from certain disclosure 
requirements.

Applicants: AP Cap Fund, Inc. (the ``Corporation'') and 
AllianceBernstein L.P. (``Adviser'' and together with the Corporation, 
``Applicants'').

Filing Dates: The application was filed November 14, 2013, and amended 
on March 31, 2014 and January 7, 2015.

Hearing or Notification of Hearing: An order granting the application 
will be issued unless the Commission orders a hearing. Interested 
persons may request a hearing by writing to the Commission's Secretary 
and serving applicants with a copy of the request, personally or by 
mail. Hearing requests should be received by the Commission by 5:30 
p.m. on March 2, 2015 and should be accompanied by proof of service on 
the applicants, in the form of an affidavit or, for lawyers, a 
certificate of service. Pursuant to rule 0-5 under the Act, hearing 
requests should state the nature of the writer's interest, any facts 
bearing upon the desirability of a hearing on the matter, the reason 
for the request, and the issues contested. Persons who wish to be 
notified of a hearing may request notification by writing to the 
Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street NE., Washington, DC 20549-1090. Applicants: Emilie D. Wrapp, 
Esq., AllianceBernstein L.P., 1345 Avenue of the Americas, New York, NY 
10105.

FOR FURTHER INFORMATION CONTACT: Emerson S. Davis, Senior Counsel, at 
(202) 551-6868, or Daniele Marchesani, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number, or an applicant 
using the Company name box, at http://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.

Applicants' Representations

    1. The Corporation, a Maryland corporation, is registered under the 
Act as an open-end management investment company that consists of 
several series (``Series''), each with its own investment objectives, 
policies and restrictions.\1\
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    \1\ The Corporation's Series include the AB Multi-Manager 
Alternative Strategies Fund series, the AB Multi-Manager Select 
Retirement Allocation Fund series, the AB Multi-Manager Select 2010 
Fund series, the AB Multi-Manager Select 2015 Fund series, the AB 
Multi-Manager Select 2020 Fund series, the AB Multi-Manager Select 
2025 Fund series, the AB Multi-Manager Select 2030 Fund series, the 
AB Multi-Manager Select 2035 Fund series, the AB Multi-Manager 
Select 2040 Fund series, the AB Multi-Manager Select 2045 Fund 
series, the AB Multi-Manager Select 2050 Fund series, the AB Multi-
Manager Select 2055 Fund series and the AB Long/Short Multi-Manager 
Fund (the ``Initial Funds''). Applicants request that the relief 
sought herein apply to Applicants, as well as to any existing or 
future Series of the Corporation and to any other existing or future 
registered open-end investment company or series thereof that: (a) 
Is advised by the Adviser (any such series or investment company, 
including without limitation the Corporation, the Initial Funds and 
any Series of the Corporation, a ``Fund''); (b) uses the manager of 
managers structure described in this application (``Manager of 
Managers Structure''); and (c) complies with the terms and 
conditions of this application (the ``Subadvised Funds,'' and each a 
``Subadvised Fund''). The only existing registered open-end 
management investment company that currently intends to rely on the 
requested order is named as an Applicant, and the Series that 
currently intend to rely on the requested order are identified in 
this application as Initial Funds. Any entity that relies on the 
requested order will do so only in accordance with the terms and 
conditions of this application. If the name of any Subadvised Fund 
contains the name of a subadviser, the name of the Adviser that 
serves as the primary adviser to that Subadvised Fund or a trademark 
or trade name that is owned by or publicly used to identify that 
Adviser will precede the name of the subadviser.
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    2. AllianceBernstein L.P., a Delaware limited partnership, is and 
any future Adviser (as defined below) will be registered as an 
investment adviser under the Investment Advisers Act of 1940 
(``Advisers Act''). AllianceBernstein L.P currently serves as the 
investment adviser to the Initial Funds. An Adviser will serve as an 
investment adviser to each Subadvised Fund pursuant to an investment 
advisory agreement with the Corporation (each an ``Investment Advisory 
Agreement''). Each Investment Advisory Agreement has been, or will be, 
approved by the board of directors of the Corporation (the ``Board''), 
including a majority of the directors who are not ``interested 
persons,'' as defined in section 2(a)(19) of the Act, of the 
Corporation or the Adviser (``Independent Directors'') and by the 
shareholders of the relevant Subadvised Fund in the manner required by 
sections 15(a) and 15(c) of the Act and rule 18f-2 under the Act.\2\ 
Applicants are not seeking any exemption from the provisions of the Act 
with respect to the Advisory Agreement.
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    \2\ The term ``Board'' also includes the board of trustees or 
directors of an existing or future Subadvised Fund.
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    3. Each Investment Advisory Agreement will permit the Adviser to 
manage the investment and reinvestment of the assets of each Subadvised 
Fund and to provide management services with respect to a Subadvised 
Fund. For the investment management services it provides to a 
Subadvised Fund, the Adviser will receive from that Subadvised Fund the 
fee specified in its Investment Advisory Agreement, payable monthly at 
an annual rate based on the average daily net assets of the Subadvised 
Fund.
    4. The Investment Advisory Agreement will permit the Adviser to 
enter into subadvisory agreements (``Subadvisory Agreements'') with 
certain investment subadvisers (``Subadvisers''). Each Subadviser will 
be an investment adviser as defined in section 2(a)(20) of the Act, and 
either will be registered with the Commission as an investment adviser 
under the Advisers Act or not subject to such registration. The Adviser 
will evaluate, allocate assets to and oversee the Subadvisers, and make 
recommendations about their hiring, termination and replacement to the 
Board, at all times subject to the authority of the Board.
    5. For the services provided under each Subadvisory Agreement, it 
is currently intended that the applicable Subadviser will receive from 
the Adviser a fee based on a percentage of the Subadvised Fund's 
average daily total or net assets or allocated portion thereof. Where 
the Adviser is responsible for paying Subadvisory fees to the 
Subadviser, the Adviser will compensate each Subadviser out of its 
assets. Subadvised Funds may directly pay advisory fees to Subadvisers 
in the future.
    6. Applicants request an order to permit the Adviser, subject to 
Board approval, to select certain Subadvisers to manage all or a 
portion of the assets of a Subadvised Fund pursuant to a Sub-Advisory 
Agreement and materially amend Sub-Advisory Agreements without 
obtaining shareholder approval. The requested relief will not extend to 
any Subadviser that is an affiliated

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person, as defined in section 2(a)(3) of the Act, of the Corporation, a 
Subadvised Fund or the Adviser, other than by reason of serving as a 
Subadviser to a Subadvised Fund (``Affiliated Subadviser'').
    7. Applicants also request an order exempting the Subadvised Funds 
from certain disclosure provisions described below that may require the 
Applicants to disclose fees paid to each Subadviser by the Adviser or a 
Subadvised Fund. Applicants seek an order to permit each Subadvised 
Fund to disclose (as a dollar amount and a percentage of a Subadvised 
Fund's total or net assets) only: (a) The aggregate fees paid to the 
Subadvised Fund's Adviser and any Affiliated Subadvisers; and (b) the 
aggregate fees paid to Subadvisers other than Affiliated Subadvisers 
(collectively, the ``Aggregate Fee Disclosure''). All other items 
required by sections 6-07(2)(a), (b) and (c) of Regulation S-X will be 
disclosed. A Subadvised Fund that employs an Affiliated Subadviser will 
provide separate disclosure of any fees paid to the Affiliated 
Subadviser.
    8. The Subadvised Funds will inform shareholders of the hiring of a 
new Subadviser pursuant to the following procedures (``Modified Notice 
and Access Procedures''): (a) Within 90 days after a new Subadviser is 
hired for any Subadvised Fund, that Subadvised Fund will send its 
shareholders either a Multi-manager Notice or a Multi-manager Notice 
and Multi-manager Information Statement; \3\ and (b) the Subadvised 
Fund will make the Multi-manager Information Statement available on the 
Web site identified in the Multi-manager Notice no later than when the 
Multi-manager Notice (or Multi-manager Notice and Multi-manager 
Information Statement) is first sent to shareholders, and will maintain 
it on that Web site for at least 90 days.
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    \3\ A ``Multi-manager Notice'' will be modeled on a Notice of 
Internet Availability as defined in rule 14a-16 under the Exchange 
Act, and specifically will, among other things: (a) Summarize the 
relevant information regarding the new Subadviser; (b) inform 
shareholders that the Multi-manager Information Statement is 
available on a Web site; (c) provide the Web site address; (d) state 
the time period during which the Multi-manager Information Statement 
will remain available on that Web site; (e) provide instructions for 
accessing and printing the Multi-manager Information Statement; and 
(f) instruct the shareholder that a paper or email copy of the 
Multi-manager Information Statement may be obtained, without charge, 
by contacting the Subadvised Funds. A ``Multi-manager Information 
Statement'' will meet the requirements of Regulation 14C, Schedule 
14C and Item 22 of Schedule 14A under the Exchange Act for an 
information statement, except as modified by the requested order to 
permit Aggregate Fee Disclosure. Multi-manager Information 
Statements will be filed electronically with the Commission via the 
EDGAR system.
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Applicants' Legal Analysis

    1. Section 15(a) of the Act provides, in relevant part, that it is 
unlawful for any person to act as an investment adviser to a registered 
investment company except pursuant to a written contract that has been 
approved by the vote of a majority of the company's outstanding voting 
securities. Rule 18f-2 under the Act provides that each series or class 
of stock in a series investment company affected by a matter must 
approve that matter if the Act requires shareholder approval.
    2. Form N-1A is the registration statement used by open-end 
investment companies. Item 19(a)(3) of Form N-1A requires disclosure of 
the method and amount of the investment adviser's compensation.
    3. Rule 20a-1 under the Act requires proxies solicited with respect 
to an investment company to comply with Schedule 14A under the 
Securities Exchange Act of 1934 (``Exchange Act''). Items 22(c)(1)(ii), 
22(c)(1)(iii), 22(c)(8) and 22(c)(9) of Schedule 14A, taken together, 
require a proxy statement for a shareholder meeting at which the 
advisory contract will be voted upon to include the ``rate of 
compensation of the investment adviser,'' the ``aggregate amount of the 
investment adviser's fees,'' a description of the ``terms of the 
contract to be acted upon,'' and, if a change in the advisory fee is 
proposed, the existing and proposed fees and the difference between the 
two fees. Regulation S-X sets forth the requirements for financial 
statements required to be included as part of a registered investment 
company's registration statement and shareholder reports filed with the 
Commission. Sections 6-07(2)(a), (b) and (c) of Regulation S-X require 
a registered investment company to include in its financial statement 
information about the investment advisory fees.
    4. Section 6(c) of the Act provides that the Commission may exempt 
any person, security, or transaction or any class or classes of 
persons, securities, or transactions from any provisions of the Act, or 
from any rule thereunder, if such exemption is necessary or appropriate 
in the public interest and consistent with the protection of investors 
and the purposes fairly intended by the policy and provisions of the 
Act. Applicants state that the requested relief meets this standard for 
the reasons discussed below.
    5. Applicants assert that the shareholders expect the Adviser, 
subject to the review and approval of the Board, to select one or more 
Subadvisers who are well suited to achieve the Subadvised Fund's 
investment objective. Applicants assert that, from the perspective of 
the shareholder, the role of the Subadviser is substantially equivalent 
to the role of the individual portfolio managers employed by an 
investment adviser to a traditional investment company. Applicants 
believe that without the requested relief, the Subadvised Funds may be 
(i) precluded from promptly and timely hiring Subadvisers or materially 
amending Subadvisory Agreements, or (ii) subject to delays and 
additional expense of proxy solicitation when hiring Subadvisers or 
materially amending Subadvisory Agreements considered appropriate by 
the Adviser and the Board. Applicants note that the Investment Advisory 
Agreement for each Subadvised Fund and subadvisory agreements with 
Affiliated Subadvisers (if any) will continue to be subject to the 
shareholder approval requirements of section 15(a) of the Act and rule 
18f-2 under the Act.
    6. Applicants assert that the requested disclosure relief would 
benefit shareholders of the Subadvised Funds because it would improve 
the Adviser's ability to negotiate the fees paid to Subadvisers. 
Applicants state that the Adviser may be able to negotiate rates that 
are below a Subadvisers ``posted'' amounts, if the Adviser is not 
required to disclose the Subadvisers' fees to the public. Applicants 
submit that the requested relief will also encourage Subadvisers to 
negotiate lower subadvisory fees with the Adviser if the lower fees are 
not required to be made public.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Before a Subadvised Fund may rely on the order requested herein, 
the operation of the Subadvised Fund in the manner described in the 
application will be approved by a majority of the Subadvised Fund's 
outstanding voting securities as defined in the Act, or, in the case of 
a Subadvised Fund whose public shareholders purchase shares on the 
basis of a prospectus containing the disclosure contemplated by 
condition 2 below, by the initial shareholder before such Subadvised 
Fund's shares are offered to the public.
    2. The prospectus for each Subadvised Fund will disclose the 
existence, substance, and effect of any order granted pursuant to the 
application. In addition, each Subadvised Fund will hold itself out to

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the public as employing the Manager of Managers Structure. The 
prospectus will prominently disclose that the Adviser has the ultimate 
responsibility, subject to oversight by the Board, to oversee the 
Subadvisers and recommend their hiring, termination, and replacement.
    3. Subadvised Funds will inform shareholders of the hiring of a new 
Subadviser within 90 days after the hiring of the new Subadviser 
pursuant to the Modified Notice and Access Procedures.
    4. The Adviser will not enter into a Subadvisory Agreement with any 
Affiliated Subadviser unless such agreement, including the compensation 
to be paid thereunder, has been approved by the shareholders of the 
applicable Subadvised Fund.
    5. At all times, at least a majority of the Board will be 
Independent Directors, and the selection and nomination of new or 
additional Independent Directors will be placed within the discretion 
of the then-existing Independent Directors.
    6. Independent Legal Counsel, as defined in rule 0-1(a)(6) under 
the Act, will be engaged to represent the Independent Directors. The 
selection of such counsel will be within the discretion of the then-
existing Independent Directors.
    7. Whenever a subadviser change is proposed for a Subadvised Fund 
with an Affiliated Subadviser, the Board, including a majority of the 
Independent Directors, will make a separate finding, reflected in the 
Board minutes, that the change is in the best interests of the 
Subadvised Fund and its shareholders, and does not involve a conflict 
of interest from which the Adviser or the Affiliated Subadviser derives 
an inappropriate advantage.
    8. Whenever a subadviser is hired or terminated, the Adviser will 
provide the Board with information showing the expected impact on the 
profitability of the Adviser.
    9. The Adviser will provide the Board, no less frequently than 
quarterly, with information about the profitability of the Adviser on a 
per Subadvised Fund basis. The information will reflect the impact on 
profitability of the hiring or termination of any subadviser during the 
applicable quarter.
    10. The Adviser will provide general management services to each 
Subadvised Fund, including overall supervisory responsibility for the 
general management and investment of the Subadvised Fund's assets and, 
subject to review and approval of the Board, will: (i) Set the 
Subadvised Fund's overall investment strategies; (ii) evaluate, select, 
and recommend Subadvisers to manage all or a portion of the Subadvised 
Fund's assets; (iii) allocate and, when appropriate, reallocate the 
Subadvised Fund's assets among Subadvisers; (iv) monitor and evaluate 
the Subadvisers' performance; and (v) implement procedures reasonably 
designed to ensure that Subadvisers comply with the Subadvised Fund's 
investment objective, policies and restrictions.
    11. No Director or officer of a Subadvised Fund or director, 
manager or officer of the Adviser will own directly or indirectly 
(other than through a pooled investment vehicle that is not controlled 
by such person) any interest in a Subadviser except for (i) ownership 
of interests in the Adviser or any entity that controls, is controlled 
by or is under common control with the Adviser; or (ii) ownership of 
less than 1% of the outstanding securities of any class of equity or 
debt of any publicly traded company that is either a Subadviser or an 
entity that controls, is controlled by or is under common control with 
a Subadviser.
    12. Each Subadvised Fund will disclose in its registration 
statement the Aggregate Fee Disclosure.
    13. In the event the Commission adopts a rule under the Act 
providing substantially similar relief to that in the order requested 
in the application, the requested order will expire on the effective 
date of that rule.
    14. Any new Subadvisory Agreement or any changes to an Investment 
Advisory Agreement or to a Subadvisory Agreement that directly or 
indirectly results in an increase in the aggregate advisory rate 
charged to a Subadvised Fund will be required to be approved by the 
shareholders of the Subadvised Fund.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Brent J. Fields,
Secretary.
[FR Doc. 2015-02916 Filed 2-11-15; 8:45 am]
BILLING CODE 8011-01-P


