
[Federal Register Volume 84, Number 49 (Wednesday, March 13, 2019)]
[Notices]
[Pages 9172-9175]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-04640]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 33393; 812-14959]


American Beacon Sound Point Enhanced Income Fund, et al.

March 8, 2019.
AGENCY:  Securities and Exchange Commission (``Commission'').

ACTION:  Notice.

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    Notice of an application under section 6(c) of the Investment 
Company Act of 1940 (the ``Act'') for an exemption from sections 
18(a)(2), 18(c) and 18(i) of the Act, under sections 6(c) and 23(c) of 
the Act for an exemption from rule 23c-3 under the Act, and for an 
order pursuant to section 17(d) of the Act and rule 17d-1 under the 
Act.

SUMMARY OF APPLICATION:  Applicants request an order to permit certain 
registered closed-end management investment companies to issue multiple 
classes of shares and to impose asset-based distribution and/or service 
fees and early withdrawal charges (``EWCs'').

APPLICANTS:  American Beacon Sound Point Enhanced Income Fund (the 
``Sound Point Fund'') and American Beacon Apollo Total Return Fund (the 
``Apollo Total Return Fund,'' and together, the ``Applicant Funds''), 
American Beacon Advisors, Inc. (the ``Manager''), and Resolute 
Investment Distributors, Inc. (the ``Distributor'').

FILING DATES:  The application was filed on October 1, 2018, and 
amended on March 7, 2019.

HEARING OR NOTIFICATION OF HEARING:  An order granting the requested 
relief 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 April 2, 2019, 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

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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: Kathy K. Ingber, 
Esq., K&L Gates LLP, 1601 K Street NW, Washington, DC 20006, and 
Rosemary Behan, Esq., American Beacon Advisers, Inc., 220 East Las 
Colinas Blvd., Suite 1200, Irving, TX 75039.

FOR FURTHER INFORMATION CONTACT:  Matthew Archer-Beck, Senior Counsel, 
at (202) 551-5044, or Kaitlin C. Bottock, Branch Chief, at (202) 551-
6825 (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 website by searching for the file number, or for an 
applicant using the Company name box, or by calling (202) 551-8090.

Applicants' Representations

    1. The Applicant Funds are Delaware statutory trusts that are 
registered under the Act as non-diversified, closed-end management 
investment companies. The Sound Point Fund's investment objectives are 
to provide a high level of current income and, secondarily, capital 
appreciation. The Apollo Total Return Fund's investment objective is to 
generate attractive risk-adjusted returns using a multi-sector approach 
to fixed income value investing.
    2. The Manager, a Delaware corporation, is registered as an 
investment adviser under the Investment Advisers Act of 1940, as 
amended. The Manager acts as investment manager and administrator of 
the Applicant Funds.
    3. The Distributor, a Delaware corporation, is a registered broker-
dealer under the Securities Exchange Act of 1934 (``Exchange Act'') and 
acts as the principal underwriter of the Applicant Funds.
    4. The applicants seek an order to permit the Applicant Funds to 
issue multiple classes of shares and to impose asset-based distribution 
and/or service fees and EWCs.
    5. Applicants request that the order also apply to any continuously 
offered registered closed-end management investment company that has 
been previously organized or that may be organized in the future for 
which the Manager, Distributor, or any entity controlling, controlled 
by, or under common control with the Manager or Distributor, or any 
successor in interest to any such entity,\1\ acts as investment adviser 
or principal underwriter, and which operates as an interval fund 
pursuant to rule 23c-3 under the Act and/or provides periodic liquidity 
with respect to its shares pursuant to rule 13e-4 under the Exchange 
Act (each, a ``New Fund'' and together with the Applicant Funds, the 
``Funds'').\2\
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    \1\ A successor in interest is limited to an entity that results 
from a reorganization into another jurisdiction or a change in the 
type of business organization.
    \2\ Any Fund relying on this relief in the future will do so in 
a manner consistent with the terms and conditions of the 
application. Applicants represent that each entity presently 
intending to rely on the requested relief is listed as an applicant.
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    6. Each Applicant Fund currently offers Y Class shares on a 
continuous basis at a public offering price equal to their net asset 
value (NAV) per share. Applicant Funds' Y Class shares are not listed 
on any securities exchange or trade over-the-counter. Applicants do not 
expect that any secondary market will develop for the Applicant Funds' 
Y Class shares.
    7. If the requested relief is granted, the Applicant Funds propose 
to issue multiple classes of shares which would be offered on a 
continuous basis at public offering prices equal to their NAVs per 
share and may be subject to different minimum purchase amounts and 
different combinations and varying rates of upfront sales loads, asset-
based shareholder service and/or distribution fees, repurchase fees 
and/or withdrawal charges.
    8. Applicants state that such classes of shares may also vary in 
other respects, such as (i) voting rights with respect to a 
distribution and servicing plan of a class; (ii) different class 
designations; (iii) the impact of any class expense directly 
attributable to a particular class of shares allocated on a class 
basis; (iv) differences in any dividends and net asset value resulting 
from differences in fees under a distribution or service fee 
arrangement or in class expenses; and (v) any exchange or conversion 
features as permitted under the Act.
    9. Because of the different distribution fees, services and any 
other class expenses that may be attributable to each class of shares, 
the net income attributable to, and the dividends payable on, each 
class of shares may differ from each other. Applicants state that each 
Fund would comply with rule 18f-3 under the Act, as it were an open-end 
fund.
    10. Applicants state that the Applicant Funds have adopted a 
fundamental policy to repurchase a specified percentage (no less than 
5%) of its shares at net asset value on a regular basis. Such 
repurchase offers will be conducted pursuant to rule 23c-3 under the 
Act. Any New Funds will likewise adopt fundamental investment policies 
and make periodic repurchase offers to its shareholders in compliance 
with rule 23c-3 or will provide periodic liquidity with respect to its 
shares pursuant to rule 13e-4 under the Exchange Act. Any repurchase 
offers made by the Funds will be made to all holders of shares of each 
such Fund.
    11. Applicants represent that any asset-based distribution and/or 
service fees for each class of shares of the Funds will comply with the 
provisions of FINRA Rule 2341(d) (``FINRA Sales Charge Rule'').\3\ 
Applicants also represent that each Fund will disclose in its 
prospectus the fees, expenses and other characteristics of each class 
of shares offered for sale by the prospectus, as is required for open-
end multiple class funds under Form N-1A. As is required for open-end 
funds, each Fund will disclose its expenses in shareholder reports, and 
describe any arrangements that result in breakpoints in or elimination 
of sales loads in its prospectus.\4\ In addition, applicants will 
comply with applicable enhanced fee disclosure requirements for fund of 
funds, including registered funds of hedge funds.\5\
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    \3\ Any reference to the FINRA Sales Charge Rule includes any 
successor or replacement to the FINRA Sales Charge Rule.
    \4\ See Shareholder Reports and Quarterly Portfolio Disclosure 
of Registered Management Investment Companies, Investment Company 
Act Release No. 26372 (Feb. 27, 2004) (adopting release) (requiring 
open-end investment companies to disclose fund expenses in 
shareholder reports); and Disclosure of Breakpoint Discounts by 
Mutual Funds, Investment Company Act Release No. 26464 (June 7, 
2004) (adopting release) (requiring open-end investment companies to 
provide prospectus disclosure of certain sales load information).
    \5\ Fund of Funds Investments, Investment Company Act Rel. Nos. 
26198 (Oct. 1, 2003) (proposing release) and 27399 (Jun. 20, 2006) 
(adopting release). See also Rules 12d1-1, et seq. of the Act.
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    12. Each Applicant Fund and the Distributor will comply with any 
requirements that the Commission or FINRA may adopt regarding 
disclosure at the point of sale and in transaction confirmations about 
the costs and conflicts of interest arising out of the distribution of 
open-end investment company shares, and regarding prospectus disclosure 
of sales loads and revenue sharing arrangements, as if those 
requirements applied to the Applicant Funds and the Distributor. In 
addition, each Applicant Fund or the Distributor will contractually 
require that any other distributor of the Applicant Fund's shares 
comply with

[[Page 9174]]

such requirements in connection with the distribution of shares of the 
Fund.
    13. Each Fund will allocate all expenses incurred by it among the 
various classes of shares based on the net assets of that Fund 
attributable to each class, except that the net asset value and 
expenses of each class will reflect the expenses associated with the 
distribution plan of that class (if any), service fees attributable to 
that class (if any), including transfer agency fees, and any other 
incremental expenses of that class. Expenses of a Fund allocated to a 
particular class of shares will be borne on a pro rata basis by each 
outstanding share of that class.
    14. Applicants state that each Fund may impose an EWC on shares 
submitted for repurchase that have been held less than a specified 
period and may waive the EWC for certain categories of shareholders or 
transactions to be established from time to time. Applicants state that 
each Fund will apply the EWC (and any waivers or scheduled variations, 
or elimination of the EWC) uniformly to all shareholders in a given 
class and consistently with the requirements of rule 22d-1 under the 
Act as if the Funds were open-end investment companies.
    15. Each Fund operating as an interval fund pursuant to rule 23c-3 
under the Act may offer its shareholders an exchange feature under 
which the shareholders of the Fund may, in connection with such Fund's 
periodic repurchase offers, exchange their shares of the Fund for 
shares of the same class of (i) registered open-end investment 
companies or (ii) other registered closed-end investment companies that 
comply with rule 23c-3 under the Act and continuously offer their 
shares at net asset value, that are in the Fund's group of investment 
companies (collectively, ``Family Funds''). Shares of a Fund operating 
pursuant to rule 23c-3 that are exchanged for shares of Family Funds 
will be included as part of the amount of the repurchase offer amount 
for such Fund as specified in rule 23c-3 under the Act. Any exchange 
option will comply with rule 11a-3 under the Act, as if the Fund were 
an open-end investment company subject to rule 11a-3. In complying with 
rule 11a-3, each Fund will treat an EWC as if it were a contingent 
deferred sales load (``CDSL'').

Applicants' Legal Analysis

Multiple Classes of Shares

    1. Section 18(a)(2) of the Act provides that a closed-end 
investment company may not issue or sell a senior security that is a 
stock unless certain requirements are met. Applicants state that the 
creation of multiple classes of shares of the Funds may violate section 
18(a)(2) because the Funds may not meet such requirements with respect 
to a class of shares that may be a senior security.
    2. Section 18(c) of the Act provides, in relevant part, that a 
closed-end investment company may not issue or sell any senior security 
if, immediately thereafter, the company has outstanding more than one 
class of senior security. Applicants state that the creation of 
multiple classes of shares of the Funds may be prohibited by section 
18(c), as a class may have priority over another class as to payment of 
dividends because shareholders of different classes would pay different 
fees and expenses.
    3. Section 18(i) of the Act provides that each share of stock 
issued by a registered management investment company will be a voting 
stock and have equal voting rights with every other outstanding voting 
stock. Applicants state that multiple classes of shares of the Funds 
may violate section 18(i) of the Act because each class would be 
entitled to exclusive voting rights with respect to matters solely 
related to that class.
    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 provision of the Act, or from any 
rule or regulation under the Act, if and to the extent 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 request an exemption under 
section 6(c) from sections 18(a)(2), 18(c) and 18(i) to permit the 
Funds to issue multiple classes of shares.
    5. Applicants submit that the proposed allocation of expenses 
relating to distribution and voting rights among multiple classes is 
equitable and will not discriminate against any group or class of 
shareholders. Applicants submit that the proposed arrangements would 
permit a Fund to facilitate the distribution of its securities and 
provide investors with a broader choice of shareholder services. 
Applicants assert that the proposed closed-end investment company 
multiple class structure does not raise the concerns underlying section 
18 of the Act to any greater degree than open-end investment companies' 
multiple class structures that are permitted by rule 18f-3 under the 
Act. Applicants state that each Fund will comply with the provisions of 
rule 18f-3 as if it were an open-end investment company.

Early Withdrawal Charges

    1. Section 23(c) of the Act provides, in relevant part, that no 
registered closed-end investment company shall purchase securities of 
which it is the issuer, except: (a) On a securities exchange or other 
open market; (b) pursuant to tenders, after reasonable opportunity to 
submit tenders given to all holders of securities of the class to be 
purchased; or (c) under other circumstances as the Commission may 
permit by rules and regulations or orders for the protection of 
investors.
    2. Rule 23c-3 under the Act permits an ``interval fund'' to make 
repurchase offers of between five and twenty-five percent of its 
outstanding shares at net asset value at periodic intervals pursuant to 
a fundamental policy of the interval fund. Rule 23c-3(b)(1) under the 
Act permits an interval fund to deduct from repurchase proceeds only a 
repurchase fee, not to exceed two percent of the proceeds, that is paid 
to the interval fund and is reasonably intended to compensate the fund 
for expenses directly related to the repurchase.
    3. Section 23(c)(3) provides that the Commission may issue an order 
that would permit a closed-end investment company to repurchase its 
shares in circumstances in which the repurchase is made in a manner or 
on a basis that does not unfairly discriminate against any holders of 
the class or classes of securities to be purchased.
    4. Applicants request relief under section 6(c), discussed above, 
and section 23(c)(3) from rule 23c-3 to the extent necessary for the 
Funds to impose EWCs on shares of the Funds submitted for repurchase 
that have been held for less than a specified period.
    5. Applicants state that the EWCs they intend to impose are 
functionally similar to CDSLs imposed by open-end investment companies 
under rule 6c-10 under the Act. Rule 6c-10 permits open-end investment 
companies to impose CDSLs, subject to certain conditions. Applicants 
note that rule 6c-10 is grounded in policy considerations supporting 
the employment of CDSLs where there are adequate safeguards for the 
investor and state that the same policy considerations support 
imposition of EWCs in the interval fund context. In addition, 
applicants state that EWCs may be necessary for the distributor to 
recover distribution costs. Applicants represent that any EWC imposed 
by the Funds will comply with rule 6c-10 under the Act as if the rule 
were applicable to closed-end

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investment companies. The Funds will disclose EWCs in accordance with 
the requirements of Form N-1A concerning CDSLs.

Asset-Based Distribution and/or Service Fees

    1. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
an affiliated person of a registered investment company, or an 
affiliated person of such person, acting as principal, from 
participating in or effecting any transaction in connection with any 
joint enterprise or joint arrangement in which the investment company 
participates unless the Commission issues an order permitting the 
transaction. In reviewing applications submitted under section 17(d) 
and rule 17d-1, the Commission considers whether the participation of 
the investment company in a joint enterprise or joint arrangement is 
consistent with the provisions, policies and purposes of the Act, and 
the extent to which the participation is on a basis different from or 
less advantageous than that of other participants.
    2. Rule 17d-3 under the Act provides an exemption from section 
17(d) and rule 17d-1 to permit open-end investment companies to enter 
into distribution arrangements pursuant to rule 12b-1 under the Act. 
Applicants request an order under section 17(d) and rule 17d-1 under 
the Act to the extent necessary to permit a Fund to impose asset-based 
distribution and/or service fees. Applicants have agreed to comply with 
rules 12b-1 and 17d-3 as if those rules applied to closed-end 
investment companies, which they believe will resolve any concerns that 
might arise in connection with a Fund financing the distribution of its 
shares through asset-based distribution fees.
    3. For the reasons stated above, applicants submit that the 
exemptions requested under section 6(c) are necessary and appropriate 
in the public interest and are consistent with the protection of 
investors and the purposes fairly intended by the policy and provisions 
of the Act. Applicants further submit that the relief requested 
pursuant to section 23(c)(3) will be consistent with the protection of 
investors and will insure that applicants do not unfairly discriminate 
against any holders of the class of securities to be purchased. 
Finally, applicants state that the Funds' imposition of asset-based 
distribution and/or service fees is consistent with the provisions, 
policies and purposes of the Act and does not involve participation on 
a basis different from or less advantageous than that of other 
participants.

Applicants' Condition

    Applicants agree that any order granting the requested relief will 
be subject to the following condition:
    Each Fund relying on the Order will comply with the provisions of 
rules 6c-10, 12b-1, 17d-3, 18f-3, 22d-1, and, where applicable, 11a-3 
under the Act, as amended from time to time, as if those rules applied 
to closed-end funds, and will comply with the FINRA Sales Charge Rule, 
as amended from time to time, as if that rule applied to all closed-end 
funds.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-04640 Filed 3-12-19; 8:45 am]
 BILLING CODE 8011-01-P


