[Federal Register Volume 81, Number 83 (Friday, April 29, 2016)]
[Notices]
[Pages 25742-25748]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-10020]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 32095; 813-00384]


AllianceBernstein L.P. and AllianceBernstein U.S. Real Estate 
(Employee) Fund II, L.P.; Notice of Application

April 25, 2016.
AGENCY:  Securities and Exchange Commission (``Commission'').

ACTION:  Notice of application for an order under sections 6(b) and 
6(e) of the Investment Company Act of 1940 (the ``Act'') granting an 
exemption from all provisions of the Act and the rules and regulations 
thereunder, except sections 9, 17, 30, and 36 through 53 of the Act, 
and the rules and regulations thereunder (the ``Rules and 
Regulations''). With respect to sections 17(a), (d), (f), (g) and (j) 
and 30(a), (b), (e), and (h) of the Act, and the Rules and Regulations, 
and rule 38a-1 under the Act, the exemption is limited as set forth in 
the application.

-----------------------------------------------------------------------

SUMMARY OF APPLICATION:  Applicants request an order to exempt certain 
limited partnerships, limited liability companies, business trusts or 
other entities (``Funds'') formed for the benefit of eligible employees 
of AllianceBernstein L.P. (the ``Company'') and its affiliates from 
certain provisions of the Act. Each series of a Fund will be an 
``employees' securities company'' within the meaning of section 
2(a)(13) of the Act.

APPLICANTS: The Company and AllianceBernstein U.S. Real Estate 
(Employee) Fund II, L.P.

FILING DATES:  The application was filed on April 20, 2015 and was 
amended on January 28, 2016.

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 May 20, 2016, and should be accompanied by proof of service on 
applicants, in the form of an affidavit or, for lawyers, a certificate 
of service. Hearing requests should state the nature of the writer's 
interest, 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: 1345 Avenue of the 
Americas, New York, New York 10105.

FOR FURTHER INFORMATION CONTACT:  Kyle R. Ahlgren, Senior Counsel, at 
(202) 551-6857, or Holly L. Hunter-Ceci, 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 Web site by searching for the file number, or for 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 Company is a Delaware limited partnership, and together with 
its ``affiliates,'' as defined in rule 12b-2 under the Securities 
Exchange Act of 1934 (the ``Exchange Act'') (collectively, ``AB,'' and 
each, an ``AB Entity''), have organized AllianceBernstein U.S. Real 
Estate (Employee) Fund II, L.P., a Delaware limited partnership (the 
``Initial Partnership'') and will in the future organize limited 
partnerships, limited liability companies, business trusts or other 
entities (each a ``Future Fund'' and, collectively with the Initial 
Partnership, the ``Funds'') as ``employees' securities companies,'' as 
defined in section 2(a)(13) of the Act. The Funds are intended to 
provide investment opportunities that are competitive with those at 
other investment management and financial services firms and to 
facilitate the recruitment and retention of high caliber professionals.
    2. The Initial Partnership was formed on April 4, 2014 as a 
Delaware limited partnership. AllianceBernstein U.S. Real Estate 
Partners II G.P. L.P. acts as general partner to the Initial 
Partnership. AB serves as investment adviser to the Initial 
Partnership. The Initial Partnership invests all or substantially all 
of its assets in AllianceBernstein U.S. Real Estate Partners II L.P. 
(``AB REP II''). ABREP II's investment objective is to provide 
attractive risk-adjusted returns by making and managing investments in 
real estate and real estate securities and businesses.
    3. A Future Fund may be structured as a domestic or offshore 
limited or general partnership, limited liability company, corporation, 
business trust or other entity. AB may also form parallel funds 
organized under the laws of various jurisdictions in order to create 
the same investment opportunities for Eligible Employees (defined 
below) in other jurisdictions. Interests in a Fund may be issued in one 
or more series, each of which corresponds to particular Fund 
investments (each, a ``Series''). Each Series will be an ``employees' 
securities company'' within the meaning of section 2(a)(13) of the Act. 
Each Fund will operate as a closed-end or open-end management 
investment company, and a particular Fund may operate as a 
``diversified'' or ``non-diversified'' vehicle within the meaning of 
the Act.
    4. AB will control each Fund within the meaning of section 2(a)(9) 
of the Act. Each Fund has, or will have, a general partner, managing 
member or other such similar entity that manages, operates

[[Page 25743]]

and controls such Fund (a ``General Partner''). The General Partner 
will be responsible for the overall management of each Fund, and may 
appoint an AB Entity to serve as investment adviser (``Investment 
Adviser'') to a Fund and delegate to the Investment Adviser the 
authority to make all decisions regarding the acquisition, management 
and disposition of Fund investments.
    5. Each of the General Partner and the Investment Adviser is an 
investment adviser within the meaning of section 9 and 36 of the Act 
and is subject to those sections. The General Partner or Investment 
Adviser may receive a performance-based fee or allocation (a ``Carried 
Interest'') based on the net gains of the Fund's investments in 
addition to any amount allocable to the General Partner's or Investment 
Adviser's capital contribution.\1\
---------------------------------------------------------------------------

    \1\ If a General Partner or Investment Adviser is registered 
under the Investment Advisers Act of 1940 (``Advisers Act''), the 
Carried Interest payable to it by a Fund will be pursuant to an 
arrangement that complies with rule 205-3 under the Advisers Act. 
All or a portion of the Carried Interest may be paid to individuals 
who are officers, employees or stockholders of the Investment 
Adviser or its affiliates. If the General Partner or Investment 
Adviser is not required to register under the Advisers Act, the 
Carried Interest payable to it will comply with section 205(b)(3) of 
the Advisers Act (with such Fund treated as though it were a 
business development company solely for the purpose of that 
section).
---------------------------------------------------------------------------

    6. If the General Partner elects to recommend that a Fund enter 
into any side-by-side investment with an unaffiliated entity, the 
General Partner will be permitted to engage as sub-investment adviser 
the unaffiliated entity (an ``Unaffiliated Subadviser''), which will be 
responsible for the management of such side-by-side investment.
    7. Interests in the Funds will be offered in a transaction exempt 
from registration under section 4(a)(2) of the Securities Act of 1933, 
as amended (the ``1933 Act''), or Regulation D or Regulation S 
promulgated thereunder, and will be sold only to Qualified 
Participants, which term refers to: (i) Eligible Employees (as defined 
below); (ii) Eligible Family Members (as defined below); (iii) Eligible 
Investment Vehicles (as defined below); and (iv) AB. Prior to offering 
interests in a Fund to a Qualified Participant, AB must reasonably 
believe that the Eligible Employee or Eligible Family Member will be 
capable of understanding and evaluating the merits and risks of 
participation in a Fund and that each such individual is able to bear 
the economic risk of such participation and afford a complete loss of 
his or her investments in the Fund.
    8. The term ``Eligible Employees'' is defined as current or former 
employees, officers and directors of AB (including people in 
administration, marketing and operations) and current consultants 
engaged on retainer to provide services and professional expertise on 
an ongoing basis as regular consultants or business or legal advisors 
to AB and who share a community of interest with AB and AB's employees 
(``Consultants'').\2\ The term ``Eligible Family Members'' is defined 
as spouses, parents, children, spouses of children, brothers, sisters 
and grandchildren of Eligible Employees, including step and adoptive 
relationships.\3\ The term ``Eligible Investment Vehicles'' is defined 
as: (i) A trust of which a trustee, grantor and/or beneficiary is an 
Eligible Employee; \4\ (ii) a partnership, corporation, or other entity 
controlled by an Eligible Employee; or (iii) a trust or other entity 
established solely for the benefit of Eligible Employees and/or 
Eligible Family Members. Each Eligible Employee and Eligible Family 
Member will be an Accredited Investor under rule 501(a)(5) or rule 
501(a)(6) of Regulation D under the 1933 Act, except that a minimum of 
35 Eligible Employees who are sophisticated investors but who are not 
Accredited Investors may become investors in a Fund if each of them 
falls into one of the following categories: (i) An Eligible Employee 
who (a) has a graduate degree in business, law or accounting, (b) has a 
minimum of five years of consulting, investment management, investment 
banking, legal or similar business experience, and (c) had reportable 
income from all sources (including any profit shares or bonus) of 
$100,000 in each of the two most recent years immediately preceding the 
Eligible Employee's admission as an investor of the Fund and has a 
reasonable expectation of income from all sources of at least $140,000 
in each year in which the Eligible Employee will be committed to make 
investments in the Fund; \5\ or (ii) Eligible Employees who are 
``knowledgeable employees'' as defined in rule 3c-5 under the Act, of 
the Fund (with the Fund treated as though it were a ``covered company'' 
for purpose of the rule).
---------------------------------------------------------------------------

    \2\ In order to participate in the Funds, Consultants must be 
currently engaged by AB and will be required to be sophisticated 
investors who qualify as accredited investors (``Accredited 
Investors'') under rule 501(a) of Regulation D. If a Consultant is 
an entity (such as, for example, a law firm or consulting firm), and 
the Consultant proposes to invest in the Fund through a partnership, 
corporation or other entity that is controlled by the Consultant, 
the individual participants in such partnership, corporation or 
other entity will be limited to senior level employees, members or 
partners of the Consultant who are responsible for the activities of 
the Consultant or the activities of the Consultant in relation to AB 
and will be required to qualify as Accredited Investors. In 
addition, such entities will be limited to businesses controlled by 
individuals who have levels of expertise and sophistication in the 
area of investments in securities that are comparable to other 
Eligible Employees who are employees, officers or directors of AB 
and who have an interest in maintaining an ongoing relationship with 
AB. The individuals participating through such entities will belong 
to that class of persons who will have access to the directors and 
officers of the General Partner and its affiliates and/or the 
officers of AB responsible for making investments for the Funds 
similar to the access afforded other Eligible Employees who are 
employees, officers or directors of AB.
    \3\ In order to ensure that a close nexus between the Qualified 
Participants and AB is maintained, the terms of each governing 
document for a Fund will provide that any Eligible Family Member 
participating in such Fund (either through direct beneficial 
ownership of an interest or as an indirect beneficial owner through 
an Eligible Investment Vehicle) cannot, in any event, be more than 
two generations removed from an Eligible Employee.
    \4\ The inclusion of partnerships, corporations, or other 
entities controlled by an Eligible Employee in the definition of 
``Eligible Investment Vehicle'' is intended to enable Eligible 
Employees to make investments in the Funds through personal 
investment vehicles for the purpose of personal and family 
investment and estate planning objectives.
    \5\ An Eligible Employee described in this category (i) will 
only be permitted to invest in a Fund if such individual represents 
and warrants that he or she will not commit in any year more than 
10% of his or her income from all sources for the immediately 
preceding year, in the aggregate, in a Fund and in all other Funds 
in which that investor has previously invested.
---------------------------------------------------------------------------

    9. A Qualified Participant may purchase an interest through an 
Eligible Investment Vehicle only if either (i) the investment vehicle 
is an accredited investor, as defined in rule 501(a) of Regulation D 
under the 1933 Act or (ii) the Eligible Employee is a settlor \6\ and 
principal investment decision-maker with respect to the investment 
vehicle. Eligible Investment Vehicles that are not Accredited Investors 
will be counted in accordance with Regulation D toward the 35 non-
Accredited Investor limit discussed above.
---------------------------------------------------------------------------

    \6\ If such investment vehicle is an entity other than a trust, 
the term ``settlor'' will be read to mean a person who created such 
vehicle, alone or together with other eligible individuals, and 
contributed funds to such vehicle.
---------------------------------------------------------------------------

    10. The terms of each Fund will be fully disclosed to each 
Qualified Participant (or person making the investment on behalf of the 
Qualified Participant) at the time the Qualified Participant is invited 
to participate in the Fund. The Fund will send its investors an annual 
financial statement with respect to those investments in which the 
investor had an interest within 120 days after the end of each fiscal 
year of the Fund, or as soon as practicable after the end of the Fund's 
fiscal year. The financial statement will

[[Page 25744]]

be audited \7\ by independent certified public accountants. In 
addition, as soon as practicable after the end of each calendar year, a 
report will be sent to each investor setting forth the information with 
respect such investor's share of income, gains, losses, credits, and 
other items for U.S. federal and state income tax purposes resulting 
from the operation of the Fund during that year.
---------------------------------------------------------------------------

    \7\ ``Audit'' has the meaning defined in rule 1-02(d) of 
Regulation S-X.
---------------------------------------------------------------------------

    11. Interests in a Fund will not be transferable except with the 
express consent of the General Partner, and then only to a Qualified 
Participant. No sales load or similar fee of any kind will be charged 
in connection with the sale of interests in a Future Fund.
    12. A General Partner may have the right, but not the obligation, 
to repurchase, cancel or transfer to another Qualified Participant the 
interest of (i) an Eligible Employee who ceases to be an employee, 
officer, director or current consultant of any AB Entity for any reason 
or (ii) any Eligible Family Member of any person described in clause 
(i). The governing documents for each Fund will describe, if 
applicable, the amount that an investor would receive upon repurchase, 
cancellation or forfeiture of its interest. The investor will, at a 
minimum, be paid the lesser of (i) the amount actually paid by or on 
behalf of the investor to acquire the interest (plus interest, as 
reasonably determined by the General Partner) less any amounts paid to 
the investor in distributions, and (ii) the fair value, determined at 
the time of repurchase in good faith by the General Partner, of such 
interest.
    13. A Future Fund may invest in one or more pooled investment 
vehicles (including private funds relying on sections 3(c)(1) and 
3(c)(7) under the Act and funds relying on section 3(c)(5) under the 
Act) and investments in registered investment companies sponsored by AB 
or by third parties (each, an ``Underlying Fund'').\8\ One Fund may 
also invest in another Fund in a ``master-feeder'' or similar 
structure. A Fund may also be operated as a parallel fund making 
investments on a side-by-side basis with AB entities.
---------------------------------------------------------------------------

    \8\ Applicants are not requesting any exemption from any 
provision of the Act or any rule thereunder that may govern a Fund's 
eligibility to invest in an Underlying Fund relying on section 
3(c)(1) or 3(c)(7) of the Act or an Underlying Fund's status under 
the Act.
---------------------------------------------------------------------------

    14. A Fund may co-invest in a portfolio company (or a pooled 
investment vehicle) with an AB Entity or with an investment fund or 
separate account organized primarily for the benefit of investors who 
are not affiliated with AB (``Third Party Investors'') over which an AB 
Entity exercises investment discretion or which is sponsored by an AB 
Entity (an ``AB Third Party Fund''). Co-investments with an AB Entity 
or with an AB Third Party Fund in a transaction in which AB's 
investment was made pursuant to a contractual obligation to an AB Third 
Party Fund will not be subject to Condition 3 below. All other side-by-
side investments held by AB entities will be subject to Condition 3.
    15. If AB makes loans to a Fund, the lender will be entitled to 
receive interest, provided that the interest rate will be no less 
favorable to the borrower than the rate obtainable on an arm's length 
basis. The possibility of any such borrowings, as well as the terms 
thereof, would be disclosed to Qualified Participants prior to their 
investment in a Fund. Any indebtedness of the Fund will be the debt of 
the Fund and without recourse to the the investors. A Fund will not 
borrow from any person if the borrowing would cause any person not 
named in section 2(a)(13) of the Act to own securities of the Fund 
(other than short-term paper). A Fund will not lend any funds to an AB 
Entity.
    16. A Fund will not acquire any security issued by a registered 
investment company if immediately after such acquisition such Fund will 
own more than 3% of the outstanding voting stock of the registered 
investment company.

Applicants' Legal Analysis

    1. Section 6(b) of the Act provides that the Commission shall 
exempt employees' securities companies from the provisions of the Act 
if and to the extent that such exemption is consistent with the 
protection of investors. Section 6(b) provides that the Commission will 
consider, in determining the provisions of the Act from which the 
company should be exempt, the company's form of organization and 
capital structure, the persons owning and controlling its securities, 
the price of the company's securities and the amount of any sales load, 
how the company's funds are invested, and the relationship between the 
company and the issuers of the securities in which it invests. Section 
2(a)(13) defines an employees' securities company, in relevant part, as 
any investment company all of whose securities (other than short-term 
paper) are beneficially owned (a) by current or former employees, or 
persons on retainer, of one or more affiliated employers, (b) by 
immediate family members of such persons, or (c) by such employer or 
employers together with any of the persons in (a) or (b).
    2. Section 7 of the Act generally prohibits investment companies 
that are not registered under section 8 of the Act from selling or 
redeeming their securities. Section 6(e) of the Act provides that in 
connection with any order exempting an investment company from any 
provision of section 7, certain specified provisions of the Act shall 
be applicable to such company, and to other persons in their 
transactions and relations with such company, as though such company 
were registered under the Act, if the Commission deems it necessary and 
appropriate in the public interest or for the protection of investors. 
Applicants submit that it would be appropriate in the public interest 
and consistent with the protection of investors and the purposes fairly 
intended by the policies and provisions of the Act for the Commission 
to issue an order under sections 6(b) and 6(e) of the Act exempting the 
Funds from all provisions of the Act and the rules and regulations 
thereunder, except sections 9, 17, 30, and 36 through 53 of the Act, 
and the Rules and Regulations. With respect to sections 17(a), (d), 
(f), (g) and (j) and 30(a), (b), (e), and (h) of the Act, and the Rules 
and Regulations, and rule 38a-1 under the Act, Applicants request a 
limited exemption as set forth in the application.
    3. Section 17(a) of the Act generally prohibits any affiliated 
person of a registered investment company, or any affiliated person of 
such a person, acting as principal, from knowingly selling or 
purchasing any security or other property to or from the investment 
company. Applicants request an exemption from section 17(a) to the 
extent necessary to (a) permit an AB Entity or an AB Third Party Fund 
(or any affiliated person of such AB Entity or AB Third Party Fund), or 
any affiliated person of a Fund (or affiliated persons of such 
persons), acting as principal, to engage in any transaction directly or 
indirectly with any Fund or any company controlled by such Fund; and 
(b) to permit a Fund to invest or engage in any transaction with any AB 
Entity, acting as principal, (i) in which such Fund, any company 
controlled by such Fund or any AB Entity or any AB Third Party Fund has 
invested or will invest, or (ii) with which such Fund, any company 
controlled by such Fund or any AB Entity or AB Third Party Fund is or 
will become otherwise affiliated; and (c) permit a Third Party 
Investor, acting as a principal, to engage in any transaction directly 
or indirectly with a Fund or any company controlled

[[Page 25745]]

by such Fund. The transactions to which any Fund is a party will be 
effected only after a determination by the General Partner that the 
requirements of Conditions 1, 2 and 6 (set forth below) have been 
satisfied. Applicants, on behalf of the Funds, represent that any 
transactions otherwise subject to section 17(a) of the Act, for which 
exemptive relief has not been requested, would require approval of the 
Commission.
    4. Applicants submit that an exemption from section 17(a) is 
consistent with the policy of each Fund and the protection of 
investors. Applicants state that the investors in each Fund will have 
been fully informed of the possible extent of such Fund's dealings with 
AB and of the potential conflicts of interest that may exist. 
Applicants also state that, as professionals employed in the investment 
management and securities businesses, or in administrative, financial, 
accounting, legal, sales, marketing, risk management or operational 
activities related thereto, the investors will be able to understand 
and evaluate the attendant risks. Applicants assert that the community 
of interest among the investors in each Fund, on the one hand, and AB, 
on the other hand, is the best insurance against any risk of abuse. 
Applicants acknowledge that the requested relief will not extend to any 
transactions between a Fund and an Unaffiliated Subadviser or an 
affiliated person of the Unaffiliated Subadviser, or between a Fund and 
any person who is not an employee, officer or director of AB or is an 
entity outside of AB and is an affiliated person of the Fund as defined 
in section 2(a)(3)(E) of the Act (``Advisory Person'') or any 
affiliated person of such person.
    5. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
any affiliated person or principal underwriter of a registered 
investment company, or any affiliated person of such a person or 
principal underwriter, acting as principal, from participating in any 
joint arrangement with the company unless authorized by the Commission. 
Applicants request an exemption from section 17(d) and rule 17d-1 to 
the extent necessary to permit affiliated persons of each Fund, or 
affiliated persons of any of such persons, to participate in, or effect 
any transaction in connection with, any joint enterprise or other joint 
arrangement or profit-sharing plan in which such Fund or a company 
controlled by such Fund is a participant. The exemption would permit, 
among other things, co-investments by each Fund, AB Third Party Fund 
and individual members or employees, officers, directors or consultants 
of AB making their own individual investment decisions apart from AB. 
Applicants acknowledge that the requested relief will not extend to any 
transaction in which an Unaffiliated Subadviser or an Advisory Person 
or an affiliated person of either has an interest.
    6. Applicants assert that compliance with section 17(d) would 
prevent each Fund from achieving a principal purpose, which is to 
provide a vehicle for Eligible Employees (and other permitted 
investors) to co-invest with AB or, to the extent permitted by the 
terms of the Fund, with other employees, officers, directors or 
consultants of AB or AB entities or with an AB Third Party Fund. 
Applicants further contend that compliance with section 17(d) would 
cause a Fund to forego investment opportunities simply because an 
investor is such Fund or other affiliated person of such Fund also had, 
or contemplated making, a similar investment. Applicants submit that it 
is likely that suitable investments will be brought to the attention of 
a Fund because of its affiliation with AB's large capital resources and 
investment management experience, and that attractive investment 
opportunities of the types considered by a Fund often require each 
participant in the transaction to make funds available in an amount 
that may be substantially greater than those the Fund would 
independently be able to provide. Applicants contend that, as a result, 
a Fund's access to such opportunities may have to be through co-
investment with other persons, including its affiliates. Applicants 
assert that the flexibility to structure co-investments and joint 
investments will not involve abuses of the type section 17(d) and rule 
17d-1 were designed to prevent. In addition, Applicants represent that 
any transactions otherwise subject to section 17(d) of the Act and rule 
17d-1 thereunder, for which exemptive relief has not been requested, 
would require approval by the Commission.
    7. Co-investments with an AB Entity or with an AB Third Party Fund 
in a transaction in which AB's investment was made pursuant to a 
contractual obligation to an AB Third Party Fund will not be subject to 
Condition 3 below. Applicants believe that the interests of the 
Eligible Employees participating in a Fund will be adequately protected 
in such situations because AB is likely to invest a portion of its own 
capital in AB Third Party Fund investments, either through such AB 
Third Party Fund or on a side-by-side basis (which AB investments will 
be subject to substantially the same terms as those applicable to such 
AB Third Party Fund, except as otherwise disclosed in the governing 
documents of the relevant Fund). Applicants assert that if Condition 3 
were to apply to AB's investment in these situations, the AB Third 
Party Fund would be indirectly burdened. Applicants further assert that 
the relationship of a Fund to an AB Third Party Fund is fundamentally 
different from such Fund's relationship to AB. Applicants contend that 
the focus of, and the rationale for, the protections contained in the 
requested relief are to protect the Funds from any overreaching by AB 
in the employer/employee context, whereas the same concerns are not 
present with respect to the Funds vis-[agrave]-vis the investors in an 
AB Third Party Fund.
    8. Section 17(e) of the Act and rule 17e-1 thereunder limit the 
compensation an affiliated person may receive when acting as agent or 
broker for a registered investment company. Applicants request an 
exemption from section 17(e) to permit an AB Entity (including the 
General Partner) that acts as an agent or broker to receive placement 
fees, advisory fees, or other compensation from a Fund in connection 
with the purchase or sale by the Fund of securities, provided that the 
fees or other compensation are deemed ``usual and customary.'' 
Applicants state that for purposes of the application, fees or other 
compensation that are charged or received by an AB Entity will be 
deemed to be ``usual and customary'' only if (i) the Fund is purchasing 
or selling securities alongside other unaffiliated third parties, AB 
Third Party Funds or Third Party Investors who are also similarly 
purchasing or selling securities, (ii) the fees or other compensation 
being charged to the Fund are also being charged to the unaffiliated 
third parties, AB Third Party Funds or Third Party Investors, and (iii) 
the amount of securities being purchased or sold by the Fund does not 
exceed 50% of the total amount of securities being purchased or sold by 
the Fund and the unaffiliated third parties, AB Third Party Funds or 
Third Party Investors. Applicants state that compliance with section 
17(e) would prevent a Fund from participating in a transaction in which 
AB, for other business reasons, does not wish to appear as if the Fund 
is being treated in a more favorable manner (by being charged lower 
fees) than other third parties also participating in the transaction. 
Applicants assert that the concerns of overreaching and abuse that 
section 17(e) and rule 17e-1 were

[[Page 25746]]

designed to prevent are alleviated by the conditions that ensure that 
(i) the fees or other compensation paid by a Fund to an AB Entity are 
those negotiated at arm's length with unaffiliated third parties and 
(ii) the unaffiliated third parties have as great or greater interest 
as the Fund in the transactions as a whole.
    9. Rule 17e-1(b) under the Act requires that a majority of 
directors who are not ``interested persons'' (as defined in section 
2(a)(19) of the Act) take actions and make approvals regarding 
commissions, fees, or other remuneration. Rule 17e-1(c) under the Act 
requires each Fund to comply with the fund governance standards defined 
in rule 0-1(a)(7) under the Act. Applicants request an exemption from 
rule 17e-1(b) to the extent necessary to permit each Fund to comply 
with rule 17e-1(b) without the necessity of having a majority of the 
directors of the Fund who are not ``interested persons'' take such 
actions and make such approvals as are set forth in rule 17(e)-1(b). 
Applicants note that in the event that all the directors of the General 
Partner or other governing body of the General Partner will be 
affiliated persons, a Fund could not comply with rule 17(e)-1(b) 
without the relief requested. Applicants represent that in such an 
event, the Fund will comply with rule 17e-1(b) by having a majority of 
the directors (or members of a comparable body) of the Fund or its 
General Partner take such actions and make such approvals as are set 
forth in rule 17e-1(b), and that each Fund will otherwise comply with 
all other requirements of rule 17e-1(b). Applicants further request an 
exemption from rule 17(e)-1(c) to the extent necessary to permit each 
Fund to comply with rule 17e-1 without the necessity of having a 
majority of the directors of the Fund be ``disinterested persons'' as 
set forth in rule 17e-1(c). Applicants note that in the event that all 
the directors of the General Partner or other governing body of the 
General Partner will be affiliated persons, a Fund could not comply 
with rule 17e-1 without the relief requested. Applicants represent that 
each Fund will otherwise comply with all other requirements of rule 
17e-1(c).
    10. Section 17(f) of the Act provides that the securities and 
similar investments of a registered management investment company must 
be placed in the custody of a bank, a member of a national securities 
exchange or the company itself in accordance with Commission rules. 
Rule 17f-2 under the Act specifies the requirements that must be 
satisfied for a registered management investment company to act as a 
custodian of its own investments. Applicants request relief from 
section 17(f) and rule 17f-2 to permit the following exceptions from 
the requirements of rule 17f-2: (a) A Fund's investments may be kept in 
the locked files of the General Partner or the Investment Adviser for 
purposes of paragraph (b) of the rule; (b) for purposes of paragraph 
(d) of the rule, (i) employees of AB or its affiliates (including the 
General Partner) will be deemed to be employees of the Funds, (ii) 
officers or managers of the General Partner or a Fund will be deemed to 
be officers of the Fund and (iii) the General Partner of a Fund or its 
board of directors will be deemed to be the board of directors of the 
Fund; and (c) in place of the verification procedure under rule 17f-
2(f), verification will be effected quarterly by two employees of the 
General Partner who are also employees of AB responsible for the 
administrative, legal and/or compliance functions for funds managed or 
sponsored by AB and who have specific knowledge of custody 
requirements, policies and procedures of the Funds. Applicants expect 
that, with respect to certain Funds, many of their investments will be 
evidenced only by partnership agreements, participation agreements or 
similar documents, rather than by negotiable certificates that could be 
misappropriated. Applicants assert that for such a Fund, these 
instruments are most suitably kept in the files of the General Partner 
or its Investment Adviser, where they can be referred to as necessary. 
Applicants represent that they will comply with all other provisions of 
rule 17f-2, including the recordkeeping requirements of paragraph (e).
    11. Section 17(g) of the Act and rule 17g-1 thereunder generally 
require the bonding of officers and employees of a registered 
investment company who have access to its securities or funds. Rule 
17g-1 requires that a majority of directors who are not ``interested 
persons'' of a registered investment company take certain actions and 
give certain approvals relating to fidelity bonding. Among other 
things, the rule also requires that the board of directors of an 
investment company relying on the rule satisfy the fund governance 
standards defined in rule 0-1(a)(7). Applicants request an exemption 
from rule 17g-1 to the extent necessary to permit a Fund to comply with 
rule 17g-1 by having the General Partner of the Fund take such actions 
and make such approvals as are set forth in rule 17g-1. Applicants 
state that in the event all the directors of the General Partner or 
other governing body of the General Partner will be affiliated persons, 
a Fund could not comply with rule 17g-1 without the requested relief. 
Applicants also request an exemption from the requirements of rule 17g-
1(g) and (h) relating to the filing of copies of fidelity bonds and 
related information with the Commission and the provision of notices to 
the board of directors and from the requirements of rule 17g-1(j)(3). 
Applicants contend that the filing requirements are burdensome and 
unnecessary as applied to the Funds and represent that the General 
Partner of each Fund will designate a person to maintain the records 
otherwise required to be filed with the Commission under rule 17g-1(g). 
Applicants further contend that the notices otherwise required to be 
given to the board of directors will be unnecessary as the Funds will 
not have boards of directors. Applicants represent that each Fund will 
comply with all other requirements of rule 17g-1.
    12. Section 17(j) of the Act and paragraph (b) of rule 17j-1 under 
the Act make it unlawful for certain enumerated persons to engage in 
fraudulent or deceptive practices in connection with the purchase or 
sale of a security held or to be acquired by a registered investment 
company. Rule 17j-1 also requires that every registered investment 
company adopt a written code of ethics and that every access person of 
a registered investment company report personal securities 
transactions. Applicants request an exemption from section 17(j) and 
the provisions of rule 17j-1 (except for the anti-fraud provisions of 
rule 17j-1(b)) because they assert that these requirements are 
burdensome and unnecessary as applied to the Funds. The relief 
requested will extend only to entities within AB and is not requested 
with respect to any Unaffiliated Subadviser or Advisory Person.
    13. Sections 30(a), (b) and (e) of the Act and the rules thereunder 
generally require that registered investment companies prepare and file 
with the Commission and mail to their shareholders certain periodic 
reports and financial statements. Applicants contend that the forms 
prescribed by the Commission for periodic reports have little relevance 
to a Fund and would entail administrative and legal costs that outweigh 
any benefit to the investors in such Fund. Applicants request relief 
under sections 30(a), (b) and (e) to the extent necessary to permit 
each Fund to report annually to its investors in the manner described 
in the application. Section 30(h) of the Act requires that every 
officer, director, member of an

[[Page 25747]]

advisory board, investment adviser or affiliated person of an 
investment adviser of a closed-end investment company be subject to the 
same duties and liabilities as those imposed upon similar classes of 
persons under section 16(a) of the Exchange Act. Applicants request an 
exemption from section 30(h) of the Act to the extent necessary to 
exempt the General Partner of each Fund, directors and officers of the 
General Partner and any other persons who may be deemed members of an 
advisory board or investment adviser (and affiliated persons thereof) 
of such Fund from filing Forms 3, 4, and 5 under section 16(a) of the 
Exchange Act with respect to their ownership of interests in such Fund 
under section 16 of the Exchange Act. Applicants assert that, because 
there will be no trading market and the transfers of interests are 
severely restricted, these filings are unnecessary for the protection 
of investors and burdensome to those required to make them.
    14. Rule 38a-1 requires registered investment companies to adopt, 
implement and periodically review written policies reasonably designed 
to prevent violation of the federal securities laws and to appoint a 
chief compliance officer. Each Fund will comply will rule 38a-1(a), (c) 
and (d), except that: (i) To the extent the Fund does not have a board 
of directors, the board of directors of the General Partner or other 
governing body of the General Partner will fulfill the responsibilities 
assigned to the Fund's board of directors under the rule; (ii) to the 
extent the board of directors or other governing body of the General 
Partner does not have any disinterested members, approval by a majority 
of the disinterested board members required by rule 38a-1 will not be 
obtained; and (iii) to the extent the board of directors or other 
governing body of the General Partner does not have any independent 
members, the Funds will comply with the requirement in rule 38a-
1(a)(4)(iv) that the chief compliance officer meet with the independent 
directors by having the chief compliance officer meet with the board of 
directors or other governing body of the General Partner as 
constituted. Applicants represent that each Fund has adopted written 
policies and procedures reasonably designed to prevent violations of 
the terms and conditions of the application, has appointed a chief 
compliance officer and is otherwise in compliance with the terms and 
conditions of the application.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Each proposed transaction otherwise prohibited by section 17(a) 
or section 17(d) of the Act and rule 17d-1 thereunder to which a Fund 
is a party (the ``Section 17 Transactions'') will be effected only if 
the General Partner determines that: (a) The terms of the Section 17 
Transaction, including the consideration to be paid or received, are 
fair and reasonable to the Fund and the investors and do not involve 
overreaching of such Fund or its investors on the part of any person 
concerned; and (b) the Section 17 Transaction is consistent with the 
interests of the Fund and the investors, such Fund's organizational 
documents and such Fund's reports to its investors.
    In addition, the General Partner will record and preserve a 
description of all Section 17 Transactions, the General Partner's 
findings, the information or materials upon which the findings are 
based and the basis for such findings. All such records will be 
maintained for the life of the Fund and at least six years thereafter, 
and will be subject to examination by the Commission and its staff.\9\
---------------------------------------------------------------------------

    \9\ Each Fund will preserve the accounts, books and other 
documents required to be maintained in an easily accessible place 
for the first two years.
---------------------------------------------------------------------------

    2. The General Partner will adopt, and periodically review and 
update, procedures designed to ensure that reasonable inquiry is made, 
prior to the consummation of any Section 17 Transaction, with respect 
to the possible involvement in the transaction of any affiliated person 
or promoter of or principal underwriter for such Fund, or any 
affiliated person of such a person, promoter or principal underwriter.
    3. The General Partner will not cause the funds of any Fund to be 
invested in any investment in which a ``Co-Investor'' (as defined 
below) has acquired or proposes to acquire the same class of securities 
of the same issuer, where the investment involves a joint enterprise or 
other joint arrangement within the meaning of rule 17d-1 in which the 
Fund and a Co-Investor are participants, unless prior to such 
investment any such Co-Investor agrees, prior to disposing of all or 
part of its investment, to (a) give the General Partner sufficient, but 
not less than one day's, notice of its intent to dispose of its 
investment; and (b) refrain from disposing of its investment unless the 
Fund has the opportunity to dispose of the Fund's investment prior to 
or concurrently with, on the same terms as, and on a pro rata basis 
with, the Co-Investor. The term ``Co-Investor'' with respect to any 
Fund means any person who is: (a) An ``affiliated person'' (as defined 
in section 2(a)(3) of the Act) of the Fund (other than an AB Third 
Party Fund); (b) AB (except when an AB Entity co-invests with a Fund 
and an AB Third Party Fund pursuant to a contractual obligation to the 
AB Third Party Fund); (c) an officer or director of an AB Entity; or 
(d) an entity (other than an AB Third Party Fund) in which AB acts as 
general partner or has similar capacity to control the sale or other 
disposition of the entity's securities. The restrictions contained in 
this condition, however, shall not be deemed to limit or prevent the 
disposition of an investment by a Co-Investor: (a) To its direct or 
indirect wholly-owned subsidiary, to any company (a ``Parent'') of 
which the Co-Investor is a direct or indirect wholly-owned subsidiary 
or to a direct or indirect wholly-owned subsidiary of its Parent; (b) 
to immediate family members of the Co-Investor, including step or 
adoptive relationships, or a trust or other investment vehicle 
established for any Co-Investor or any such family member; or (c) when 
the investment is comprised of securities that are (i) listed on a 
national securities exchange registered under section 6 of the Exchange 
Act, (ii) NMS stocks, pursuant to section 11A(a)(2) of the Exchange Act 
and rule 600(a) of Regulation NMS thereunder, (iii) government 
securities as defined in section 2(a)(16) of the Act, (iv) ``Eligible 
Securities'' as defined in rule 2a-7 under the Act, or (v) listed or 
traded on any foreign securities exchange or board of trade that 
satisfies regulatory requirements under the law of the jurisdiction in 
which such foreign securities exchange or board of trade is organized 
similar to those that apply to a national securities exchange or a 
national market system for securities.
    4. Each Fund and its General Partner will maintain and preserve, 
for the life of such Fund and at least six years thereafter, such 
accounts, books and other documents as constitute the record forming 
the basis for the audited financial statements that are to be provided 
to the investors in such Fund, and each annual report of such Fund 
required to be sent to such investors, and agree that all such records 
will be subject to examination by the Commission and its staff.\10\
---------------------------------------------------------------------------

    \10\ Each Fund will preserve the accounts, books and other 
documents required to be maintained in an easily accessible place 
for the first two years.
---------------------------------------------------------------------------

    5. Within 120 days after the end of each fiscal year of each Fund, 
or as soon

[[Page 25748]]

as practicable thereafter, the General Partner of each Fund will send 
to each investor in such Fund who had an interest in any capital 
account of the Fund, at any time during the fiscal year then ended, 
Fund financial statements audited by the Fund's independent 
accountants, except in the case of a Fund formed to make a single 
portfolio investment. In such cases, financial statements will be 
unaudited, but each investor will receive financial statements of the 
single portfolio investment audited by such entity's independent 
accountants. At the end of each fiscal year and at other times as 
necessary in accordance with customary practice, the General Partner 
will make a valuation or cause a valuation to be made of all of the 
assets of the Fund as of the fiscal year end. In addition, as soon as 
practicable after the end of each tax year of a Fund, the General 
Partner of such Fund will send a report to each person who was an 
investor in such Fund at any time during the fiscal year then ended, 
setting forth such tax information as shall be necessary for the 
preparation by the investor of his, her or its U.S. federal and state 
income tax returns and a report of the investment activities of the 
Fund during that fiscal year.
    6. If a Fund makes purchases or sales from or to an entity 
affiliated with the Fund by reason of an officer, director or employee 
of AB (a) serving as an officer, director, general partner or 
investment adviser of the entity, or (b) having a 5% or more investment 
in the entity, such individual will not participate in the Fund's 
determination of whether or not to effect the purchase or sale.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
 Robert W. Errett,
 Deputy Secretary.
[FR Doc. 2016-10020 Filed 4-28-16; 8:45 am]
 BILLING CODE 8011-01-P