As filed with the Securities and Exchange Commission
on November 25, 2013
Securities Act File No. 333- [ ]
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No.
________________________________
ALLIANCEBERNSTEIN CAP FUND, INC.
(Exact Name of Registrant as Specified in Charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code:
(800) 221-5672
________________________________
EMILIE D. WRAPP
AllianceBernstein L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Copies of communications to:
Kathleen K. Clarke
Seward & Kissel LLP
901 K Street, NW
Suite 800
Washington, DC 20001
Approximate Date of Proposed Public Offering:
As soon as practicable after this Registration Statement becomes effective.
It is proposed that this filing will become effective on December 26, 2013
pursuant to Rule 488 under the Securities Act of 1933, as amended.
Title of Securities Being Registered: Advisor Class shares of beneficial
interest, par value $.002 per share, of the following series of the
Registrant: AllianceBernstein Concentrated Growth Fund.
No filing fee is required because an indefinite number of shares has previously
been registered pursuant to Rule 24f-2 under the Investment Company Act of 1940,
as amended.
INVESTMENT MANAGERS SERIES TRUST
W.P. STEWART & CO. GROWTH FUND
803 West Michigan Street
Milwaukee, Wisconsin 53233
January 10, 2014
Dear Shareholders:
The Board of Trustees (the "Trustees") of Investment Managers Series Trust
(the "Trust") is asking the shareholders of W.P. Stewart & Co. Growth Fund (the
"Fund"), a series of the Trust, to approve the acquisition of the assets and
liabilities of the Fund by AllianceBernstein Concentrated Growth Fund (the
"Acquiring Fund"), a series of AllianceBernstein Cap Fund, Inc. For this
purpose, you are invited to a Special Meeting of Shareholders of the Fund (the
"Meeting") to be held on February 25, 2014.
The proposed acquisition is described in more detail in the attached
Prospectus/Proxy Statement. You should review the Prospectus/Proxy Statement
carefully and retain it for future reference. If the shareholders of the Fund
approve the acquisition by the Acquiring Fund, the acquisition is expected to be
completed in the first quarter of 2014.
AllianceBernstein L.P. (the "Adviser") recently acquired the Fund's
previous investment adviser and, in connection with that acquisition, the Fund's
shareholders approved a new investment advisory agreement whereby the Adviser
became the investment adviser of the Fund. The Adviser wishes to integrate the
Fund into the AllianceBernstein mutual fund group (the Adviser currently is the
investment adviser to 33 registered investment companies and 119 separate
investment portfolios). The Acquiring Fund is a newly formed fund organized for
this purpose.
The Fund has the same investment objective as the Acquiring Fund and
substantially the same investment strategies and policies. The Fund's current
portfolio manager, James T. Tierney, Jr., is also the portfolio manager of the
Acquiring Fund. In addition, the Fund and the Acquiring Fund have the same
investment advisory fee and the class of shares of the Acquiring Fund to be
issued to shareholders of the Fund will have the same expense ratio as the Fund
(after fee waivers and/or expense reimbursements) for at least one year after
the date of the Acquiring Fund's prospectus. The acquisition is expected to be
tax-free to the Fund's shareholders for federal income tax purposes. We
anticipate that the proposed acquisition will result in benefits to the
shareholders of the Fund as discussed more fully in the Prospectus/Proxy
Statement.
The Trustees have given careful consideration to the proposed acquisition
and have concluded that the acquisition is in the best interests of the Fund.
The Trustees unanimously recommend that you vote "for" the proposed acquisition
of the Fund by the Acquiring Fund.
If the acquisition of the Fund by the Acquiring Fund is approved by its
shareholders, each shareholder will receive Advisor Class shares of the
Acquiring Fund. These shares will have an aggregate net asset value ("NAV")
equal to the aggregate NAV of the shareholder's shares of the Fund. The Fund
would then be dissolved. Shareholders of the Fund will not be assessed any sales
charges or other individual shareholder fees in connection with the proposed
acquisition.
We welcome your attendance at the Meeting. If you are unable to attend, we
encourage you to authorize proxies to cast your votes. AST Fund Solutions, LLC
(the "Proxy Solicitor"), a proxy solicitation firm, has been selected to assist
in the proxy solicitation process. If we have not received your proxy as the
date of the Meeting approaches, you may receive a telephone call from the Proxy
Solicitor to remind you to submit your proxy. No matter how many shares you own,
your vote is important.
Sincerely,
John P. Zader
President
INVESTMENT MANAGERS SERIES TRUST
W.P. STEWART & CO. GROWTH FUND
803 West Michigan Street
Milwaukee, Wisconsin 53233
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 25, 2014
To the Shareholders of W.P. Stewart & Co. Growth Fund:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
"Meeting") of W.P. Stewart & Co. Growth Fund (the "Acquired Fund"), a series of
Investment Managers Series Trust (the "Trust"), is to be held at 3:00 p.m.
Eastern time at the offices of AllianceBernstein L.P. ("AllianceBernstein"),
1345 Avenue of the Americas, New York, New York l0105, on February 25, 2014.
At the Meeting you will be asked to consider and approve the following
proposals:
(1) To approve an Agreement and Plan of Acquisition and
Liquidation (the "Plan") providing for the acquisition of all
of the assets and the assumption of all of the liabilities of
the Acquired Fund in exchange for shares of beneficial
interest of the AllianceBernstein Concentrated Growth Fund
(the "Acquiring Fund"), a series of AllianceBernstein Cap
Fund, Inc.; and
(2) To transact such other business as may properly come before
the Meeting or any adjournments or postponements thereof.
Record owners of shares of the Acquired Fund as of the close of business
on December 20, 2013, are entitled to vote at the Meeting or any adjournments or
postponements thereof. If you attend the Meeting, you may vote your shares in
person. If you do not attend the Meeting, you may vote by proxy by completing,
signing and returning the enclosed proxy card by mail in the envelope provided,
or by following the instructions on the proxy card to vote by telephone or the
Internet.
Your vote is important. If you have any questions, please contact us
toll-free at (888) 881-8803 for additional information.
By order of the Board of Trustees
Sincerely,
John P. Zader
---------------------
Trustee and President
January 10, 2014
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SPECIAL
MEETING OF SHAREHOLDERS TO BE HELD ON FEBRUARY 25, 2014, OR ANY ADJOURNMENT OR
POSTPONEMENT THEREOF. This Notice and Combined Proxy Statement and Prospectus
are available on the internet at www.proxyonline.com/docs/wpstewart.pdf. On this
website, you will be able to access the Notice, the Combined Proxy Statement and
Prospectus, any accompanying materials and any amendments or supplements to the
foregoing material that are required to be furnished to shareholders. We
encourage you to access and review all of the important information contained in
the proxy materials before voting.
--------------------------------------------------------------------------------
IMPORTANT -- WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT
IN THE ENCLOSED ADDRESSED ENVELOPE, WHICH REQUIRES NO POSTAGE AND IS INTENDED
FOR YOUR CONVENIENCE. YOU ALSO MAY VOTE THROUGH THE INTERNET, BY VISITING THE
WEBSITE ADDRESS ON YOUR PROXY CARD, OR BY TELEPHONE, BY USING THE TOLL-FREE
NUMBER ON YOUR PROXY CARD. YOUR PROMPT VOTE MAY SAVE THE W.P. STEWART & CO.
GROWTH FUND THE NECESSITY OF FURTHER SOLICITATIONS TO ENSURE A QUORUM AT THE
MEETING. IF YOU CAN ATTEND THE MEETING AND WISH TO VOTE YOUR SHARES IN PERSON AT
THAT TIME, YOU WILL BE ABLE TO DO SO.
--------------------------------------------------------------------------------
INVESTMENT MANAGERS SERIES TRUST
W.P. STEWART & CO. GROWTH FUND
803 West Michigan Street
Milwaukee, Wisconsin 53233
QUESTIONS AND ANSWERS
January 10, 2014
The following questions and answers provide an overview of key features of the
proposed acquisition and of the information contained in the attached Combined
Proxy Statement and Prospectus ("Proxy Statement/Prospectus"). Please review
the full Proxy Statement/Prospectus before casting your vote.
1. What is this document and why was it sent to you?
The attached Proxy Statement/Prospectus provides you with information
about the proposed acquisition of W.P. Stewart & Co. Growth Fund (the "Acquired
Fund"), a series of Investment Managers Series Trust (the "Trust"), by
AllianceBernstein Concentrated Growth Fund (the "Acquiring Fund", and, together
with the Acquired Fund, the "Funds"), a series of AllianceBernstein Cap Fund,
Inc. (the "Company") (the "Acquisition"). The purposes of the Proxy
Statement/Prospectus are to (1) solicit votes from shareholders of the Acquired
Fund to approve the proposed Acquisition, as described in the Agreement and Plan
of Acquisition and Liquidation dated as of December 13, 2013, between the
Acquired Fund and the Acquiring Fund (the "Plan"), and (2) provide information
regarding the shares of the Acquiring Fund.
The Proxy Statement/Prospectus contains information that shareholders of
the Acquired Fund should know before voting on the proposed Acquisition. The
Proxy Statement/Prospectus should be retained for future reference.
2. How is this proxy different from the one I received in October?
AllianceBernstein L.P. (the "Adviser") recently acquired the Acquired
Fund's previous investment adviser. The completion of that acquisition
automatically terminated the Acquired Fund's then existing investment advisory
agreement and required shareholder approval of a new investment advisory
agreement. The proxy you received in October requested your approval of a new
investment advisory agreement between the Adviser and the Acquired Fund. The new
investment advisory agreement was approved by shareholders on November 19, 2013.
The attached Proxy Statement/Prospectus relates to the Acquisition, i.e., the
proposed reorganization of the Acquired Fund into the Acquiring Fund, which is a
newly organized Fund in the AllianceBernstein mutual fund group.
3. What is the purpose of the Acquisition?
As noted above, the Acquired Fund's shareholders recently approved a new
investment advisory agreement pursuant to which the Adviser became the
investment adviser for the Acquired Fund. The Adviser wishes to integrate the
Acquired Fund into the AllianceBernstein mutual fund group and has established
the Acquiring Fund for this purpose. The Acquiring Fund will be overseen by the
same Board of Directors and have the same service providers as other funds in
the AllianceBernstein fund complex.
The purpose of the Acquisition is to transfer the assets of the Acquired
Fund into the Acquiring Fund. As discussed in the Proxy Statement/Prospectus,
after carefully considering the recommendation of WPS Advisors, Inc. (the "WPS
Adviser"), the former investment adviser to the Acquired Fund, the Board of
Trustees of the Trust (the "Trustees") concluded that the Acquired Fund's
participation in the Acquisition would be in the best interests of the Acquired
Fund and its shareholders, and approved the submission of the Plan to
shareholders of the Acquired Fund for approval. In reaching this conclusion, the
Trustees considered, among other factors, the expectation that the Acquired Fund
and its shareholders will not recognize any taxable gain or loss in the
Acquisition and that shareholders of the Acquired Fund would benefit from
becoming shareholders of the Acquiring Fund, which has:
o the same investment objectives and substantially the same investment
strategies and policies as the Acquired Fund;
o the same net expense ratio (for the Advisor Class shares to be issued to
shareholders of the Acquired Fund) as the Acquired Fund under the current
expense limitation agreement, which will be effective for one year from
the date of the Acquiring Fund's prospectus;
o the same portfolio manager as the Acquired Fund;
o an adviser and distributor that are better positioned to facilitate the
future growth of the Acquiring Fund; and
o exchange privileges with other AllianceBernstein mutual funds.
The Acquisition will not occur unless it is approved by shareholders of
the Acquired Fund. The Trustees unanimously recommend that you vote "FOR" the
Acquisition.
4. How will the proposed Acquisition work?
Subject to the approval of the shareholders of the Acquired Fund, the Plan
provides for:
o the transfer of all of the assets of the Acquired Fund in exchange for
shares of beneficial interest of Advisor Class shares of the Acquiring
Fund and the assumption by the Acquiring Fund of all of the liabilities of
the Acquired Fund;
o the distribution of the Acquiring Fund Advisor Class shares received by
the Acquired Fund from the Acquiring Fund to shareholders of the Acquired
Fund; and
o the complete termination and liquidation of the Acquired Fund.
Existing shareholders of the Acquired Fund will become shareholders of
Advisor Class shares of the Acquiring Fund, and immediately after the
Acquisition each shareholder will hold Acquiring Fund Advisor Class shares with
an aggregate net asset value ("NAV") equal to the aggregate NAV of the
shareholder's Acquired Fund shares. Please refer to the Proxy Statement/
Prospectus for a detailed explanation of the Acquisition. If the Plan is
approved by the Acquired Fund's shareholders at the Special Meeting of
Shareholders (the "Meeting"), the Acquisition is expected to occur in the first
quarter of 2014 (the "Effective Time").
5. Who is eligible to vote on the Acquisition?
Shareholders of record of the Acquired Fund at the close of business on
December 20, 2013 (the "Record Date"), are entitled to notice of, and to vote
at, the Meeting or any adjournment or postponement thereof. If you held Acquired
Fund shares on the Record Date, you have the right to vote even if you later
sold your shares. Each share is entitled to one vote and fractional shares are
entitled to fractional votes. Shares represented by properly executed proxies,
unless the proxies are revoked before or at the Meeting, will be voted according
to shareholders' instructions. If you sign and return a proxy but do not fill in
a vote, your shares will be voted "FOR" the Acquisition. If any other business
properly comes before the Meeting, your shares will be voted at the discretion
of the persons named as proxies.
6. How will the Acquisition affect me as a shareholder of the Acquired Fund?
A shareholder of the Acquired Fund will become a shareholder of Advisor
Class shares of the Acquiring Fund. The shares of the Acquiring Fund that an
Acquired Fund shareholder receives will have a total NAV equal to the total NAV
of the shares held by such shareholder in the Acquired Fund as of the Effective
Time of the Acquisition. The Acquisition will not affect the value of your
investment at the time of the Acquisition.
7. Who manages the Acquiring Fund?
The Acquiring Fund is a recently created series of the Company, which is a
Maryland corporation. The Adviser serves as investment adviser to the Acquiring
Fund, as well as to the Acquired Fund under an investment advisory agreement
approved by shareholders on November 19, 2013. The Adviser currently manages
assets totaling approximately $445 billion as of September 30, 2013, of which
approximately $86 billion represented assets of registered investment companies
sponsored by the Adviser. Currently, the Adviser advises 33 registered
investment companies, comprising 119 separate investment portfolios.
James T. Tierney, Jr., the portfolio manager of the Acquired Fund, also
serves as the portfolio manager of the Acquiring Fund and is primarily
responsible for the day-to-day management of the Acquiring Fund's investment
portfolio.
8. How will the Acquisition affect the advisory fees and expenses?
The Acquisition will not result in any change in the advisory fee rate of
the Acquired Fund. The investment management fee of the Acquired Fund is an
annual rate of 1.00% of the Acquired Fund's average daily net assets. The
Acquiring Fund has the same investment management fee. The Acquiring Fund also
reimburses the Adviser for its provision of certain administrative services. The
Acquisition will also not result in any increase in the expense ratio of the
shares that you will hold, for at least one year, because the Adviser has agreed
to limit the operating expenses for Advisor Class shares of the Acquiring Fund
to 1.23% of the Fund's average daily net assets pursuant to an expense
limitation agreement that is comparable to the expense limitation agreement
currently in effect with respect to the Acquired Fund and is effective for one
year from the date of the Acquiring Fund's prospectus. The expense ratio may
increase after that one-year period if the Adviser terminates or modifies the
expense limitation undertaking.
9. What happens if shareholders do not approve the Plan?
If shareholders do not approve the Plan, the Acquisition will not occur.
The Adviser will continue to manage the Acquired Fund and the current service
providers will continue to provide services to the Acquired Fund. The Trustees
will consider options for the Acquired Fund, including continuing its operations
as currently constituted.
10. Who is paying for expenses of the Acquisition?
The Adviser is paying for the costs and expenses related to the
Acquisition. Neither the Acquired Fund nor the Acquiring Fund will incur any
expenses in connection with the Acquisition.
11. Who do I call if I have questions about the Meeting or the Acquisition?
If you have any questions about the proposal or the proxy card, please
call the Acquired Fund toll-free at (888) 881-8803 from 9:00 a.m. to 5:00 p.m.
Eastern time or AST Fund Solutions, LLC, the Fund's proxy solicitor, at (866)
864-4946.
12. Where may I find additional information regarding the Acquired Fund and
the Acquiring Fund?
Additional information relating to the Acquired Fund and the Acquiring
Fund has been filed with the Securities and Exchange Commission ("SEC") and can
be found in the following documents:
o The Statement of Additional Information ("SAI") dated February [__], 2014
that has been filed with the SEC in connection with the Proxy Statement/
Prospectus and is incorporated into the Proxy Statement/Prospectus by
reference;
o The annual report to shareholders for the Acquired Fund, which contains
audited financial statements for the fiscal year ended December 31, 2012,
which is incorporated into the Proxy Statement/Prospectus by reference;
o The semi-annual report of the Acquired Fund for the six-month period ended
June 30, 2013, which is incorporated into the Proxy Statement/Prospectus
by reference; and
o The Prospectus and SAI of the Acquired Fund dated April 30, 2013, which
are incorporated into the Proxy Statement/Prospectus by reference.
The Acquiring Fund is a recently created fund that has not yet commenced
operations; therefore, no shareholder reports for the Acquiring Fund are
available.
Copies of the annual and semi-annual reports to shareholders of the Acquired
Fund, and the Prospectus and SAI of the Acquired Fund, are available, along with
the Proxy Statement/Prospectus and SAI, upon request, without charge, by writing
to the address or calling the telephone number listed below.
For the Acquired Fund:
By mail: W.P. Stewart & Co. Growth Fund
P.O. Box 2175
Milwaukee, WI 53201
By phone: (888) 881-8803
For the Acquiring Fund:
By mail: c/o AllianceBernstein Investor Services, Inc.
P.O. Box 786003
San Antonio, TX 78278-6003
By phone: (800) 221-5672
All of this additional information is also available in documents filed with the
SEC. You may view or obtain these documents from the SEC:
In person: at the SEC's Public Reference Room in Washington, DC
By phone: 1-202-551-8090 (for information on the operations of the
Public Reference Room only)
By mail: Public Reference Section, Securities and Exchange
Commission, Washington, DC 20549-1520 (duplicating fee
required)
By electronic mail: publicinfo@sec.gov (duplicating fee required)
On the Internet: www.sec.gov
Other Important Things to Note:
o You may lose money by investing in the Acquired Fund or the Acquiring
Fund.
o The SEC has not approved or disapproved these securities or passed upon
the adequacy of the Proxy Statement/Prospectus. Any representation to the
contrary is a criminal offense.
PROXY STATEMENT/PROSPECTUS
JANUARY 10, 2014
FOR THE ACQUISITION OF
W.P. Stewart & Co. Growth Fund
a series of Investment Managers Series Trust
803 West Michigan Street
Milwaukee, Wisconsin 53233
BY
AllianceBernstein Concentrated Growth Fund
a series of AllianceBernstein Cap Fund, Inc.
1345 Avenue of the Americas
New York, New York l0105
(800) 221-5672
This Combined Proxy Statement and Prospectus (the "Proxy Statement/
Prospectus") is being sent to you in connection with the solicitation of proxies
by the Board of Trustees of Investment Managers Series Trust (the "Trust") for
use at a Special Meeting of Shareholders (the "Meeting") of the W.P. Stewart &
Co. Growth Fund, a series of the Trust (the "Acquired Fund"), managed by
AllianceBernstein L.P. (the "Adviser"), at the principal executive offices of
the Adviser located at 1345 Avenue of the Americas, New York, New York l0105, on
February 25, 2014.
At the Meeting you will be asked to consider and approve the following
proposals:
(1) To approve an Agreement and Plan of Acquisition and Liquidation (the
"Plan") providing for the acquisition of all of the assets and the assumption of
all of the liabilities of the Acquired Fund in exchange for shares of beneficial
interest of the AllianceBernstein Concentrated Growth Fund (the "Acquiring
Fund"), a series of AllianceBernstein Cap Fund, Inc. (the "Company") (the
"Acquisition"); and
(2) To transact such other business as may properly come before the
Meeting or any adjournments or postponements thereof.
The Acquired Fund is a series of the Trust, an open-end management
investment company registered with the Securities and Exchange Commission (the
"SEC") and organized as a Delaware statutory trust. The Acquiring Fund is a
newly created series of the Company, an open-end management investment company
registered with the SEC and organized as a Maryland corporation.
This Proxy Statement/Prospectus sets forth the basic information you
should know before voting on the proposal. You should read it and keep it for
future reference. Additional information relating to the Acquiring Fund and this
Proxy Statement/Prospectus is set forth in the Statement of Additional
Information to this Proxy Statement/Prospectus dated February [ ], 2014, which
is incorporated by reference into this Proxy Statement/Prospectus. Additional
information about the Acquiring Fund has been filed with the SEC and is
available upon request and without charge by writing to the Acquiring Fund or by
calling (800) 227-4618. The Acquired Fund expects that this Proxy
Statement/Prospectus will be mailed to shareholders on or about January 10,
2014.
TABLE OF CONTENTS
Page
PROPOSAL APPROVAL OF AN AGREEMENT AND PLAN OF ACQUISITION AND LIQUIDATION
BETWEEN THE ACQUIRED FUND AND THE ACQUIRING FUND.............................4
SUMMARY........................................................................5
COMPARISON OF INVESTMENT ADVISORY FEES................................5
COMPARISON OF EXPENSES................................................5
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES......................5
PRINCIPAL RISKS.......................................................7
FEDERAL INCOME TAX CONSEQUENCES.......................................7
COMPARISON OF DISTRIBUTION, PURCHASE AND REDEMPTION PROCEDURES........8
SERVICE PROVIDERS.....................................................8
COMPARISON OF BUSINESS STRUCTURES.....................................9
INFORMATION ABOUT THE ACQUISITION.............................................10
INTRODUCTION.........................................................10
DESCRIPTION OF THE PLAN..............................................10
REASONS FOR THE ACQUISITION..........................................10
DESCRIPTION OF THE SECURITIES TO BE ISSUED...........................12
DIVIDENDS AND OTHER DISTRIBUTIONS....................................12
SHARE CERTIFICATES...................................................12
FEDERAL INCOME TAX CONSEQUENCES......................................12
CAPITALIZATION INFORMATION...........................................13
INFORMATION ABOUT THE FUNDS...................................................14
MANAGEMENT OF THE FUNDS..............................................14
ADVISORY AGREEMENTS AND FEES.........................................18
DISTRIBUTOR..........................................................19
VOTING INFORMATION...................................................19
LEGAL MATTERS........................................................20
FINANCIAL HIGHLIGHTS..........................................................20
INFORMATION FILED WITH THE SEC................................................20
Appendix A FORM OF AGREEMENT AND PLAN OF ACQUISITION AND LIQUIDATION.........A-1
Appendix B FUND PERFORMANCE..................................................B-1
Appendix C FEE INFORMATION..................................................C-1
Appendix D COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES..................D-1
Appendix E DESCRIPTION OF PRINCIPAL RISKS OF THE FUNDS.......................E-1
Appendix F CERTAIN INFORMATION APPLICABLE TO ADVISOR CLASS SHARES OF THE
ACQUIRING FUND.............................................................F-1
Appendix G COMPARISON OF BUSINESS STRUCTURE AND ORGANIZATION.................G-1
Appendix H CAPITALIZATION....................................................H-1
Appendix I SHARE OWNERSHIP INFORMATION......................................I-1
--------------------------------------------------------------------------------
THE SECURITIES AND EXCHANGE COMMISSION ("SEC") HAS NOT APPROVED OR
DISAPPROVED THESE SECURITIES NOR HAS IT
PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------------------------------------------------------------------
PROPOSAL
APPROVAL OF AN AGREEMENT AND PLAN OF ACQUISITION AND LIQUIDATION
BETWEEN THE ACQUIRED FUND AND THE ACQUIRING FUND
On November 11, 2013, the Board of Trustees of the Trust (the "Trustees")
approved the Plan. Subject to the approval of the shareholders of the Acquired
Fund, the Plan provides for:
o the transfer of all of the assets of the Acquired Fund to the
Acquiring Fund in exchange for Advisor Class shares of beneficial
interest of the Acquiring Fund and the assumption by the Acquiring
Fund of all of the liabilities of the Acquired Fund;
o the distribution of Acquiring Fund Advisor Class shares of
beneficial interest to the shareholders of the Acquired Fund; and
o the termination and liquidation of the Acquired Fund.
Each shareholder of the Acquired Fund will become the owner of the number
of full and fractional Advisor Class shares of the Acquiring Fund having an
aggregate net asset value ("NAV") equal to the aggregate NAV of the
shareholder's Acquired Fund shares. The Funds expect that shareholders of the
Acquired Fund will recognize no gain or loss for federal income tax purposes in
connection with the Acquisition. If approved by shareholders of the Acquired
Fund, the Acquisition is expected to occur in the first quarter of 2014 (the
"Effective Time").
The shareholders of the Acquired Fund must approve the proposal in order
for the Acquisition to occur. Approval of the proposal requires the affirmative
vote of the holders of a majority of the votes entitled to be cast. The
Acquisition does not require approval of the shareholders of the Acquiring Fund.
A quorum for the transaction of business by shareholders of the Acquired
Fund at the Meeting will consist of the presence in person or by proxy of the
holders of one-third of the shares of the Acquired Fund entitled to vote at the
Meeting.
Based on its consideration of, among other factors, the anticipated
tax-free nature of the Acquisition and the benefits expected to be received by
shareholders of the Acquired Fund in becoming shareholders of the Acquiring
Fund, the Trustees concluded that the Acquisition is in the best interests of
the Acquired Fund and its shareholders. In reaching this conclusion, the
Trustees determined that the investment objective and strategies of the Acquired
Fund and the Acquiring Fund (each, a "Fund" and together, the "Funds") will be
substantially the same, the advisory fees and expenses (after fee waiver and/or
reimbursement) of the Funds will be the same, and the portfolio manager of the
Acquired Fund will continue as the portfolio manager of the Acquiring Fund. The
Trustees unanimously recommend that shareholders vote "FOR" the Plan.
For a more complete discussion of the factors considered by the Trustees
in approving the Acquisition, see "Reasons for the Acquisition" in Information
about the Acquisition.
SUMMARY
The following summary highlights differences between the Funds. This
summary is not complete and does not contain all of the information that you
should consider before voting on the Plan. This Summary is qualified in its
entirety by reference to the additional information contained elsewhere in this
Proxy Statement/Prospectus and the Plan, a form of which is attached to this
Proxy Statement/Prospectus as Appendix A. Shareholders should read this entire
Proxy Statement/Prospectus carefully. For more complete information, please read
the prospectus of each of the Acquired Fund and the Acquiring Fund. This Proxy
Statement/Prospectus, the accompanying Notice of the Special Meeting of
Shareholders and the enclosed Proxy Card are being mailed to shareholders of the
Acquired Fund on or about January 10, 2014.
The Acquired Fund is a series of the Trust, an open-end management
investment company organized as a Delaware statutory trust. The Acquiring Fund
is a newly created series of the Company, an open-end management investment
company organized as a Maryland corporation. The investment objective of each of
the Acquired Fund and the Acquiring Fund is to earn capital gains. Each of the
Acquired Fund and the Acquiring Fund is a non-diversified investment company,
which means that it may invest a larger portion of its assets in fewer companies
than a diversified investment company.
The Acquired Fund will be the accounting survivor of the Acquisition and
the Acquiring Fund will carry over the performance record of the Acquired Fund.
Performance information of the Acquired Fund is included in Appendix B.
Comparison of Investment Advisory Fees
The Funds have similar investment advisory agreements and pay advisory
fees at the same annual rates. Each Fund's contractual fee rate is 1.00%,
expressed as an annualized percentage of average daily net assets, accrued daily
and paid monthly in arrears. The advisory agreement for the Acquiring Fund also
provides for reimbursement to the Adviser by the Fund of the Adviser's cost of
providing certain administrative services to the Acquiring Fund.
Comparison of Expenses
The Acquisition is not expected to result in an increase in the total net
expenses paid by shareholders of the Acquired Fund. Under the expense limitation
agreement currently in effect for the Acquired Fund, which is effective until
April 30, 2014, and continues in effect from year-to-year unless terminated 60
days prior to the end of its then current period, the total net operating
expenses of the Acquired Fund are capped at 1.23% of average daily net assets.
The Adviser has agreed to reduce its investment advisory fee and/or pay
Acquiring Fund operating expenses for Advisor Class shares to the extent
necessary to limit the net annual operating expenses of the Acquiring Fund's
Advisor Class shares (excluding acquired fund fees and expenses other than those
associated with any AllianceBernstein mutual fund in which the Fund may invest,
interest expenses, brokerage commissions, and other transaction costs, taxes and
extraordinary expenses) to 1.23% of the Acquiring Fund's average daily net
assets. This expense limitation agreement will continue for one year from the
date of the Acquiring Fund's prospectus, and will continue in effect thereafter
from year-to-year unless terminated by the Adviser 60 days prior to the end of
its then current term. As a result, the total fund operating expenses after fee
waivers and/or expense reimbursements for Advisor Class shares of the Acquiring
Fund will be the same as for shares of the Acquired Fund for so long as the fee
waivers and/or expense reimbursements are in effect. More detailed information
about the Funds' fees is contained in Appendix C.
Comparison of Investment Objectives and Policies
Investment Objectives and Principal Policies. The investment objective of
both the Acquired Fund and the Acquiring Fund is to earn capital gains. Each
Fund seeks to achieve this objective by investing primarily in common stocks of
listed U.S. companies, primarily large-market capitalization companies, which
are defined as companies that have market capitalizations of $5 billion or more
("large-cap").
The following table shows the investment objective and investment
strategies of each Fund:
W.P. Stewart & Co. Growth Fund AllianceBernstein Concentrated Growth
Fund
------------------------------------------------------------------------------------------------------
Investment The investment objective of the Acquired The investment objective of the Acquiring
Objective Fund is to earn capital gains. Fund is to earn capital gains.
------------------------------------------------------------------------------------------------------
Principal The Acquired Fund invests primarily in The Acquiring Fund invests primarily in
Investment common stocks of U.S. companies listed common stocks of listed U.S. companies.
Strategies on the New York Stock Exchange (the The Fund primarily invests in large-cap
"Exchange") based on a variety of companies.
factors. Such factors include: a
company's record and projections of
profit and earnings growth, accuracy and
availability of information with respect
to the company, success and experience
of management, accessibility of
management to the Adviser, product lines
and competitive position both in the
United States and abroad, lack of
cyclicality, large market capitalization
and liquidity of the company's
securities. The Fund primarily invests
in large-cap companies.
The Adviser employs an appraisal method The Adviser employs an appraisal method
that attempts to measure each that attempts to measure each prospective
prospective company's quality and growth company's quality and growth rate by
rate by numerous criteria. Such criteria numerous factors. Such factors include:
include the company's record and a company's record and projections of
projections of profit and earnings profit and earnings growth, accuracy and
growth, accuracy and availability of availability of information with respect
information with respect to the company, to the company, success and experience of
success and experience of management, management, accessibility of management
accessibility of management to the to the Adviser, product lines and
Adviser, product lines and competitive competitive position both in the United
position both in the United States and States and abroad, lack of cyclicality,
abroad, lack of cyclicality, large large market capitalization and liquidity
market capitalization and liquidity of of the company's securities. The Adviser
the company's securities. The Adviser compares these results to the general
compares these results to the general stock markets to determine the relative
stock markets to determine the relative attractiveness of each company at a given
attractiveness of each company at a time. The Adviser weighs economic,
given time. The Adviser weighs economic, political and market factors in making
political and market factors in making investment decisions; this appraisal
investment decisions; this appraisal technique attempts to measure each
technique attempts to measure each investment candidate not only against
investment candidate not only against other stocks of the same industry group,
other stocks of the same industry group, but also against a broad spectrum of
but also against a broad spectrum of investments.
investments.
The Fund invests in a relatively small The Fund invests in a relatively small
number of individual stocks. The Fund number of individual stocks. The Fund is
is considered to be "non-diversified" considered to be "non-diversified", which
which means that the securities laws do means that the securities laws do not
not limit the percentage of its assets limit the percentage of its assets that
that it may invest in any one company it may invest in any one company (subject
(subject to certain limitations under to certain limitations under the Internal
the Internal Revenue Code of 1986, as Revenue Code of 1986, as amended).
amended).
Additional information about the Funds' investment objectives and
policies is contained in Appendix D.
Fundamental and Non-Fundamental Policies. Fundamental policies are
policies that, under the Investment Company Act of 1940 (the "1940 Act"), may
not be changed without a shareholder vote. The 1940 Act requires a fund to
disclose whether it has certain policies relating to, for example, borrowing
money or issuing senior securities, and that these policies be fundamental. The
Acquiring Fund has the same fundamental policies required under the 1940 Act as
the Acquired Fund, restated to match the standardized policies of other
AllianceBernstein mutual funds. The Acquired Fund's fundamental policies that
are not required to be fundamental, including its investment objective, have
been retained as non-fundamental policies of the Acquiring Fund and, in one
case, eliminated. The Adviser will provide shareholders with advance written
notice of not less than 60 days of any material change to the Acquiring Fund's
investment objective. Reclassifying these policies as non-fundamental will give
the Acquiring Fund's Board of Directors (the "Directors") more flexibility to
respond to changed market conditions or other circumstances in a timely manner
without the delay and expense of obtaining a shareholder vote. Please refer to
Appendix D for additional information about these fundamental and
non-fundamental policies.
Principal Risks
The principal risks of the Acquiring Fund are substantially the same as
those of the Acquired Fund but may be stated differently to match the
standardized policies of other AllianceBernstein mutual funds. These risks are
market risk, focused portfolio risk, non-diversification risk and management
risk. The Acquired Fund has specific risks, including growth stock risk and
large-cap risk, which are not described separately in the Acquiring Fund
prospectus because they are included in the broader description of market risk.
A description of each of these risks is provided in Appendix E.
Federal Income Tax Consequences
The Funds expect that the Acquisition will constitute a "reorganization"
within the meaning of Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code"), with substantially the following results: No gain or loss
will be recognized by the Acquired Fund or its shareholders as a result of the
Acquisition. The aggregate tax basis of the shares of the Acquiring Fund
received by a shareholder of the Acquired Fund (including any fractional shares
to which the shareholder may be entitled) will be the same as the aggregate tax
basis of the shareholder's shares of the Acquired Fund. The holding period of
the shares of the Acquiring Fund received by a shareholder of the Acquired Fund
(including any fractional share to which the shareholder may be entitled) will
include the holding period of the shares of the Acquired Fund held by the
shareholder, provided that such shares are held as capital assets by the
shareholder of the Acquired Fund at the time of the Acquisition. The holding
period and tax basis of each asset of the Acquired Fund in the hands of the
Acquiring Fund as a result of the Acquisition will generally be the same as the
holding period and tax basis of each such asset in the hands of the Acquired
Fund prior to the Acquisition. It is a condition to the closing of the
Acquisition that both the Acquired Fund and Acquiring Fund receive an opinion of
Bingham McCutchen LLP confirming these consequences, as further discussed below
under "Information About the Acquisition--Federal Income Tax Consequences." An
opinion of counsel is not binding on the Internal Revenue Service.
Federal income tax law permits a regulated investment company to carry
forward net capital losses that arose in tax years that began on or before
December 22, 2010 ("Pre-2011 Losses") for a period of up to eight taxable years.
Net capital losses that arise in tax years beginning after December 22, 2010
("Post-2010 Losses") may generally be carried forward without limit and such
carryforwards must be fully utilized before the regulated investment company is
permitted to utilize carryforwards of Pre-2011 Losses. The Acquired Fund has net
capital loss carryforwards from its prior taxable years in the amount of
$2,007,123. The Acquired Fund's Pre-2011 Losses and their expiration dates are
as follows:
2013 2014 2015 2016 2017 2018 2019
---- ---- ---- ---- ---- ---- ----
$0 $0 $0 $0 $2,007,123 $0 $0
The Acquired Fund has no carryforwards of Post-2010 Losses.
The Acquisition is not expected to affect the Acquiring Fund's ability to
use capital loss carryforwards. The ability of the Acquiring Fund to use capital
losses to offset gains (even in the absence of the Acquisition) also depends on
factors other than loss limitations, such as the future realization of capital
losses or gains.
Additional tax considerations are discussed under the section on "Federal
Income Tax Consequences" in Information about the Acquisition.
Comparison of Distribution, Purchase and Redemption Procedures
As a result of the Acquisition, holders of Acquired Fund shares will
receive Advisor Class shares of the Acquiring Fund. The distribution and
purchase procedures of the Acquired Fund and the Advisor Class shares of the
Acquiring Fund are similar. Unlike the Acquired Fund, which offers one share
class, the Acquiring Fund will offer multiple share classes, which may include,
in addition to Advisor Class shares, Class A, Class C, Class R, Class K, Class
I, Class Z, Class 1 and Class 2 shares. The shares of each Fund are offered to a
broad range of investors. Acquiring Fund shareholders are entitled to exchange
their shares for shares of the same class of shares of other AllianceBernstein
mutual funds without sales or service charges.
The Acquired Fund has a minimum initial investment of $25,000 for direct
investments and $2,500 for accounts opened through certain broker-dealers
authorized by the Acquired Fund to receive on its behalf purchase and redemption
orders ("Selected Brokers"). There is no minimum for additional investments. The
Acquiring Fund will have no minimum initial investment for Advisor Class shares.
In addition, the Acquiring Fund, unlike the Acquired Fund, will not have a
redemption fee, wire fee, overnight check delivery fee or retirement account
fee. More information on distribution, purchase and redemption procedures of the
Acquiring Fund is provided in Appendix F.
Service Providers
The Adviser serves as investment adviser to each Fund. Ernst & Young LLP,
which is the independent registered accounting firm for the Acquiring Fund, will
serve in that capacity after the Acquisition in lieu of the Acquired Fund's
current independent registered accounting firm, which is Tait, Weller & Baker
LLP. The Acquired Fund's co-administrators, Mutual Fund Administration
Corporation and UMB Fund Services, Inc. ("UMB Fund Services"), will be replaced
by various AllianceBernstein service providers. State Street Bank & Trust
Company, which is the custodian and accounting agent for the Acquiring Fund,
will serve in that capacity after the Acquisition in lieu of the Acquired Fund's
current custodian, UMB Bank, N.A., and fund accountant, UMB Fund Services.
AllianceBernstein Investments, Inc. ("ABI" or the "Distributor"), which is the
distributor for the Acquiring Fund, will serve in that capacity after the
Acquisition in lieu of the Acquired Fund's current distributor, which is IMST
Distributors, LLC. AllianceBernstein Investor Services, Inc. ("ABIS"), which is
an affiliate of the Adviser and the transfer agent for the Acquiring Fund, will
serve in that capacity after the Acquisition in lieu of the Acquired Fund's
current transfer agent, which is UMB Fund Services. ABIS also provides
shareholder services for the Acquiring Fund.
Comparison of Business Structures
The Acquired Fund is a series of the Trust, an open-end management
investment company organized as a Delaware statutory trust, which is governed by
its Declaration of Trust, By-Laws and Delaware law. The Acquiring Fund is a
newly created series of the Company, an open-end management investment company
organized as a Maryland corporation, which is governed by its Charter, Bylaws
and Maryland law. For more information on the comparison of the business
structures of the Funds, see Appendix G.
INFORMATION ABOUT THE ACQUISITION
Introduction
This Proxy Statement/Prospectus is provided to you to solicit your proxy
for exercise at the Meeting to approve the Acquisition of the assets and
assumption of the liabilities of the Acquired Fund by the Acquiring Fund and the
subsequent liquidation and dissolution of the Acquired Fund. The Meeting will be
held at 1345 Avenue of the Americas, New York, New York 10105 at 3:00 p.m.,
Eastern time, on February 25, 2014. This Proxy Statement/Prospectus, the
accompanying Notice of Special Meeting of Shareholders and the enclosed Proxy
Card are being mailed to shareholders of the Acquired Fund on or about January
10, 2014.
Description of the Plan
As provided in the Plan, the Acquiring Fund will acquire all the assets
and assume all the liabilities of the Acquired Fund at the Effective Time. The
value of the assets of the Acquired Fund less the liabilities, determined at the
Effective Time, will be divided by the then NAV of one share of the Acquired
Fund to determine the number of shares of the Acquired Fund then outstanding,
and, in exchange for the transfer of assets by the Acquired Fund to the
Acquiring Fund, the Acquiring Fund will assume the liabilities and
simultaneously issue and deliver to the Acquired Fund, and the Acquired Fund
will distribute to each shareholder, a number of full and fractional Advisor
Class shares of the Acquiring Fund equal to the aggregate NAV of the Acquired
Fund's shares that the shareholder holds of record at the Effective Time. For
this purpose, the Plan provides the times for and methods of determining the net
value of the assets of each Fund.
Following the distribution of Advisor Class shares of the Acquiring Fund
in full liquidation of the Acquired Fund, the Acquired Fund will wind up its
affairs, cease operations and dissolve as soon as is reasonably practicable
after the Acquisition. If the shareholders do not approve the Plan, the
Acquisition will not occur. The Adviser will continue as investment adviser to
the Acquired Fund and the current service providers will continue to provide
services to the Acquired Fund. The Trustees will consider options for the
Acquired Fund, including continuing its operations.
The projected expenses of the Acquisition, primarily legal, accounting,
printing and proxy solicitation expenses, are estimated to total approximately
$100,000. The expenses will be borne by the Adviser.
If the Acquisition is approved, the Acquisition is expected to be
completed in the first quarter of 2014 and is conditioned upon satisfying the
terms of the Plan. Under applicable legal and regulatory requirements, none of
the Acquired Fund's shareholders will be entitled to exercise objecting
shareholders' appraisal rights, i.e., to demand the fair value of their shares
in connection with the Acquisition. Therefore, shareholders will be bound by the
terms of the Acquisition under the Plan. However, any shareholder of the
Acquired Fund may redeem his or her shares prior to the Acquisition.
Completion of the Acquisition is subject to certain conditions set forth
in the Plan, some of which may be waived by a party to the Plan. The Plan may be
amended in any mutually agreed manner, except that no amendment may be made
subsequent to shareholder approval of the Acquisition that materially alters the
obligations of either party. The parties to the Plan may terminate the Plan by
mutual consent and either party has the right to terminate the Plan under
certain circumstances. Among other circumstances, either party may at any time
terminate the Plan unilaterally upon a determination by the party's Directors or
Trustees that proceeding with the Plan is not in the best interests of the
relevant Fund or its shareholders.
The form of the Plan is attached as Appendix A.
Reasons for the Acquisition
At the meeting of the Trustees held on November 11, 2013 (the "Board
Meeting"), WPS Advisors, Inc. (the "WPS Adviser"), the Acquired Fund's
investment adviser at the time of the Board Meeting, recommended that the
Trustees approve and recommend to Acquired Fund shareholders for their approval
the proposed Plan and the Acquisition. At the Board Meeting, the Trustees
reviewed detailed information provided by the WPS Adviser and considered among
other things the factors discussed below, in light of their fiduciary duties
under federal and state law. After careful consideration, the Trustees
(including all Trustees who are not "interested persons" of the Acquired Fund,
the WPS Adviser or its affiliates), with the advice and assistance of
independent counsel, determined that the Acquisition would be in the best
interests of the Acquired Fund. The Trustees approved the Plan and the
Acquisition and recommended that the shareholders of the Acquired Fund vote in
favor of the Acquisition by approving the Plan.
At the Board Meeting, the WPS Adviser discussed with the Trustees that the
Acquired Fund shareholders were being asked to approve a new investment advisory
agreement between the Acquired Fund and the Adviser, which would replace the WPS
Adviser as a result of the acquisition by the Adviser of the WPS Adviser's
parent, W.P. Stewart & Co., Ltd. The WPS Adviser noted that the Adviser advises
33 registered investment companies, comprising 119 separate investment
portfolios, and wishes to integrate the Acquired Fund into the AllianceBernstein
mutual fund group. The WPS Adviser stated that the Adviser believes that
bringing the Acquired Fund into the AllianceBernstein mutual fund group will
result in efficiencies because the Company has the same Board of Directors as
the other funds in the AllianceBernstein mutual fund group, which oversees only
funds managed by the Adviser, and the same entities providing services to these
other funds. The WPS Adviser also noted that the Acquired Fund's shareholders
would likely benefit from the Acquisition because the Adviser's name recognition
and strong distribution capabilities are expected to result in growth of the
Acquired Fund's assets and, as a result, potentially reduce the Acquired Fund's
expenses.
In recommending the proposed Acquisition, the Trustees also considered,
among other things,
o the terms of the Acquisition, including the anticipated
tax-free nature of the transaction for the Acquired Fund and
its shareholders;
o that (i) the investment objectives of the Funds are the same
and (ii) the investment strategies and policies of the Funds
are substantially the same;
o that the portfolio manager of the Acquired Fund will continue
as portfolio manager of the Acquiring Fund;
o that the advisory fees to be paid to the Adviser under the
Acquiring Fund's investment advisory agreement would be the
same as those paid to the WPS Adviser under the Acquired
Fund's previous investment advisory agreement and that the
Adviser had agreed to enter into an expense limitation
agreement comparable to the Acquired Fund's current expense
limitation agreement that would reduce the Adviser's
investment advisory fee and/or pay the Acquiring Fund's
operating expenses to limit the Acquiring Fund's expenses to
1.23% of its average daily net assets for at least one year
from the date of the Acquiring Fund's prospectus;
o that the advisory agreement of the Acquiring Fund provides for
the reimbursement to the Adviser of its cost of providing
certain administrative services to the Acquiring Fund;
o that the Acquisition would not result in the dilution of
shareholders' interests;
o that the Adviser will bear the costs of the Acquisition; and
o other alternatives to the Acquisition, including continuing
the Acquired Fund as a series of the Trust.
Based on the foregoing and additional information presented at the Board
Meeting and at other meetings of the Trustees, the Trustees determined that the
Acquisition would be in the best interests of the Acquired Fund and its
shareholders. The Trustees approved the Acquisition, subject to approval by
shareholders of the Acquired Fund, and the solicitation of the shareholders of
the Acquired Fund to vote "FOR" the approval of the Plan.
Description of the Securities to be Issued
Under the Plan, the Acquiring Fund will issue Advisor Class shares for
distribution to the Acquired Fund shareholders. Under its Charter and Bylaws,
the Acquiring Fund may issue up to 3,000,000,000 shares of common stock, par
value $.002 per share, for each of the Class A, Class C, Advisor Class, Class R,
Class K, Class I, Class Z, Class 1 and Class 2 shares of the Acquiring Fund.
Each Advisor Class share of the Acquiring Fund represents an equal
proportionate interest with the other Advisor Class shares of the Acquiring
Fund. Each share has equal earnings, assets and voting privileges and is
entitled to dividends and other distributions out of the income earned and gain
realized on the assets belonging to the Acquiring Fund as authorized by the
Company's Directors. Advisor Class shares of the Acquiring Fund authorize their
holders to one vote per full share and fractional votes for fractional shares
held. Shares of the Acquiring Fund issued to the shareholders of the Acquired
Fund pursuant to the Acquisition will be duly authorized, validly issued, fully
paid and non-assessable when issued, will be transferable without restriction
and will have no preemptive or conversion rights. Shares will be sold and
redeemed based upon their NAV per share next determined after receipt of the
purchase or redemption request.
Dividends and Other Distributions
On or before the Effective Time, as defined in the Plan, the Acquired Fund
will, if necessary, declare and pay as a distribution substantially all of its
undistributed net investment income, net short-term capital gain and net
long-term capital gain as applicable to maintain its treatment as a regulated
investment company under the Code.
Share Certificates
The Acquiring Fund will not issue certificates representing Acquiring Fund
shares generally or in connection with the Acquisition. Ownership of the
Acquiring Fund's shares will be shown on the books of the Acquiring Fund's
transfer agent. If you currently hold certificates representing shares of the
Acquired Fund, it is not necessary to surrender the certificates.
Federal Income Tax Consequences
Subject to certain stated assumptions contained therein, the Acquired Fund
and the Acquiring Fund will receive an opinion of Bingham McCutchen LLP
substantially to the effect that, for United States federal income tax purposes:
(i) the Acquisition will constitute a "reorganization" within the meaning
of Section 368(a) of the Code, and each of the Acquired Fund and the Acquiring
Fund will be a "party to a reorganization" within the meaning of Section 368(b)
of the Code;
(ii) no gain or loss will be recognized by the Acquired Fund on the
transfer of all of the Acquired Fund's assets to the Acquiring Fund solely in
exchange for Acquiring Fund shares and the assumption by the Acquiring Fund of
the liabilities of the Acquired Fund, or upon the distribution of the Acquiring
Fund shares to the shareholders of the Acquired Fund, except for (A) gain or
loss that may be recognized on the transfer of "section 1256 contracts" as
defined in Section 1256(b) of the Code, (B) gain that may be recognized on the
transfer of stock in a "passive foreign investment company" as defined in
Section 1297(a) of the Code, and (C) any other gain or loss that may be required
to be recognized upon the transfer of an asset regardless of whether such
transfer would otherwise be a non-recognition transaction under the Code;
(iii) the tax basis in the hands of the Acquiring Fund of each asset of
the Acquired Fund will be the same as the tax basis of such asset in the hands
of the Acquired Fund immediately prior to the transfer thereof, increased by the
amount of gain (or decreased by the amount of loss), if any, recognized by the
Acquired Fund on the transfer;
(iv) the holding period of each asset of the Acquired Fund in the hands of
the Acquiring Fund, other than assets with respect to which gain or loss is
required to be recognized, will include in each instance the period during which
such asset was held by the Acquired Fund (except where investment activities of
the Acquiring Fund have the effect of reducing or eliminating the holding period
with respect to an asset);
(v) no gain or loss will be recognized by the Acquiring Fund upon its
receipt of the assets of the Acquired Fund solely in exchange for Acquiring Fund
shares and the assumption of the liabilities of the Acquired Fund;
(vi) no gain or loss will be recognized by the Acquired Fund shareholders
upon the exchange of their Acquired Fund shares for Acquiring Fund shares as
part of the Acquisition;
(vii) the aggregate tax basis of the Acquiring Fund shares that each
Acquired Fund shareholder receives in the Acquisition will be the same as the
aggregate tax basis of the Acquired Fund shares exchanged therefor; and
(viii) each Acquired Fund shareholder's holding period for the Acquiring
Fund shares received in the Acquisition will include the period for which such
shareholder held the Acquired Fund shares exchanged therefor, provided that the
Acquired Fund shareholder held such Acquired Fund shares as capital assets on
the date of the exchange.
This opinion of counsel will not be binding on the Internal Revenue
Service or a court and there is no assurance that the Internal Revenue Service
or a court will not take a view contrary to those expressed in the opinion.
Shareholders of the Acquired Fund are encouraged to consult their tax
advisers regarding the effect, if any, of the Acquisition in light of their
individual circumstances. Because the foregoing only relates to the federal
income tax consequences of the Acquisition, those shareholders also should
consult their tax advisers as to foreign, state and local tax consequences, if
any, of the Acquisition.
Capitalization Information
For information on the existing capitalization of the Acquired Fund and
pro forma capitalization of the Acquiring Fund, see Appendix H.
INFORMATION ABOUT THE FUNDS
Each of the Acquired Fund and the Acquiring Fund is a "non-diversified"
investment company registered under the 1940 Act. The Acquired Fund is a series
of the Trust, an open-end management investment company organized as a Delaware
statutory trust. The Acquiring Fund is a series of the Company, an open-end
management investment company organized as a Maryland corporation.
Management of the Funds
Each Fund's Directors or Trustees oversee the management of the business
and affairs of its respective Fund. Each Fund's Directors or Trustees approve
all significant agreements between the respective Fund and persons or companies
furnishing services to it, including the Fund's agreements with the Adviser and
the Fund's other service providers, including the administrator, custodian and
transfer and dividend disbursing agent. The day-to-day operations of the
Acquiring Fund and the Acquired Fund are delegated to the officers of the
Acquiring Fund and the officers and co-administrators of the Acquired Fund,
respectively, subject to the respective Fund's investment objective and policies
and to general supervision by its Directors or Trustees. Subsequent to the
consummation of the Acquisition, the Directors and officers of the Acquiring
Fund will continue to serve as the Directors and officers of the combined Fund.
The following table presents information about the Company's Directors
(the Acquiring Fund is a series of the Company, which has one Board of Directors
for all its series).
PORTFOLIOS
IN
ALLIANCEBERNSTEIN OTHER PUBLIC COMPANY
PRINCIPAL FUND DIRECTORSHIPS
OCCUPATION(S) COMPLEX* HELD
DURING PAST FIVE YEARS OVERSEEN BY BY DIRECTOR IN THE
NAME AND AGE OR LONGER DIRECTOR PAST FIVE YEARS
------------ --------- -------- ---------------
INDEPENDENT DIRECTORS
Chairman of the Board
Marshall C. Turner, Jr., #, ^ Private Investor since prior to 2009. 100 Xilinx, Inc.
72 Interim CEO of MEMC Electronic (programmable logic
Materials, Inc. (semi-conductor and semi-conductors) and
solar cell substrates) from November MEMC Electronic
2008 until March 2009. He was Materials, Inc.
Chairman and CEO of Dupont (semi-conductor and
Photomasks, Inc. (components of solar cell
semi-conductor manufacturing), substrates) since
2003-2005, and President and CEO, prior to 2009
2005-2006, after the company was
acquired and renamed Toppan
Photomasks, Inc. He has served as a
director or trustee of one or more of
the AllianceBernstein Funds since
1992.
John H. Dobkin, # Independent Consultant since prior to 100 None
71 2009. Formerly, President of Save
Venice, Inc. (preservation
organization) from 2001-2002, Senior
Advisor from June 1999-June 2000 and
President of Historic Hudson Valley
(historic preservation) from December
1989-May 1999. Previously, Director
of the National Academy of Design. He
has served as a director or trustee
of various AllianceBernstein Funds
since 1992.
Michael J. Downey, # Private Investor since prior to 2009. 100 The Asia Pacific
70 Formerly, managing partner of Fund, Inc. since
Lexington Capital, LLC (investment prior to 2009,
advisory firm) from December 1997 Prospect Acquisition
until December 2003. From 1987 until Corp. (financial
1993, Chairman and CEO of Prudential services) from 2007
Mutual Fund Management, director of until 2009 and The
the Prudential mutual funds, and Merger Fund since
member of the Executive Committee of prior to 2009 until
Prudential Securities Inc. He has 2013
served as a director or trustee of
the AllianceBernstein Funds since
2005 and is a director and chairman
of one other registered investment
company.
William H. Foulk, Jr., #, ## Investment Adviser and an Independent 100 None
81 Consultant since prior to 2009.
Previously, he was Senior Manager of
Barrett Associates, Inc., a
registered investment adviser. He was
formerly Deputy Comptroller and Chief
Investment Officer of the State of
New York and, prior thereto, Chief
Investment Officer of the New York
Bank for Savings. He has served as a
director or trustee of various
AllianceBernstein Funds since 1983
and was Chairman of the AllianceBernstein
Funds and of the Independent Directors
Committee of such Funds since 2003 through
December 2013.
D. James Guzy, # Chairman of the Board of PLX 100 PLX Technology
77 Technology (semi-conductors) and of (semi-conductors) since
SRC Computers Inc., with which he has prior to 2009, Cirrus
been associated since prior to 2009. Logic Corporation
He was a director of Intel (semi-conductors) since
Corporation (semi-conductors) from prior to 2009 until
1969 until 2008, and served as July 2011
Chairman of the Finance Committee of
such company for several years until
May 2008. He has served as a director
or trustee of one or more of the
AllianceBernstein Funds since 1982.
Nancy P. Jacklin, # Professorial Lecturer at the Johns 100 None
65 Hopkins School of Advanced
International Studies since 2008.
Formerly, U.S. Executive Director of
the International Monetary Fund
(December 2002-May 2006); Partner,
Clifford Chance (1992-2002); Sector
Counsel, International Banking and
Finance, and Associate General
Counsel, Citicorp (1985-1992);
Assistant General Counsel
(International), Federal Reserve
Board of Governors (1982-1985); and
Attorney Advisor, U.S. Department of
the Treasury (1973-1982). Member of
the Bar of the District of Columbia
and of New York; and member of the
Council on Foreign Relations. She
has served as a director or trustee
of the AllianceBernstein Funds since
2006.
Garry L. Moody, # Independent Consultant. Formerly, 100 Greenbacker Renewable
61 Partner, Deloitte & Touche LLP Energy Company LLC,
(1995-2008) where he held a number of (renewable energy and
senior positions, including Vice energy efficiency projects)
Chairman, and U.S. and Global since August 2013
Investment Management Practice
Managing Partner; President, Fidelity
Accounting and Custody Services
Company (1993-1995); and Partner,
Ernst & Young LLP (1975-1993), where
he served as the National Director of
Mutual Fund Tax Services and Managing
Partner of its Chicago Office Tax
department. He is a member of both
the Governing Council of the
Independent Directors Council (IDC),
an organization of independent
directors of mutual funds, and the
Trustee Advisory Board of BoardIQ, a
biweekly publication focused on
issues and news affecting directors
of mutual funds. He has served as a
director or trustee, and as Chairman
of the Audit Committee, of the
AllianceBernstein Funds since 2008.
Earl D. Weiner, # Of Counsel, and Partner prior to 100 None
74 January 2008, of the law firm
Sullivan & Cromwell LLP and member of
ABA Federal Regulation of Securities
Committee Task Force to draft
editions of the Fund Director's
Guidebook. He has served as a
director or trustee of the
AllianceBernstein Funds since 2007
and is Chairman of the Governance and
Nominating Committees of the Funds.
INTERESTED DIRECTOR
Robert M. Keith, +, ++ Senior Vice President of the 100 None
53 Adviser++ and the head of
AllianceBernstein Investments, Inc.
("ABI")++ since July 2008; Director
of ABI and President of the
AllianceBernstein Mutual Funds.
Previously, he served as Executive
Managing Director of ABI from
December 2006 to June 2008. Prior to
joining ABI in 2006, Executive
Managing Director of Bernstein Global
Wealth Management, and prior thereto,
Senior Managing Director and Global
Head of Client Service and Sales of
the Adviser's institutional
investment management business since
2004. Prior thereto, he was Managing
Director and Head of North American
Client Service and Sales in the
Adviser's institutional investment
management business, with which he
had been associated since prior to
2004.
----------------
* The registered investment companies for which the Adviser serves as
investment adviser are referred to collectively as the "AllianceBernstein
Fund Complex."
# Member of the Company's Audit Committee, the Governance and Nominating
Committee and the Independent Directors Committee.
## Member of the Company's Fair Value Pricing Committee.
+ Mr. Keith is an "interested person", as defined in Section 2(a)(19) of the
1940 Act, of the Acquiring Fund due to his position as a Senior Vice
President of the Adviser.
++ The Adviser and ABI are affiliates of the Acquiring Fund.
^ Mr. Turner became Chairman of the Board on January 1, 2014.
The day-to-day management of, and investment decisions for, each of the
Acquired Fund and the Acquiring Fund are made by James T. Tierney, Jr. Mr.
Tierney is primarily responsible for the day-to-day management of the Acquiring
Fund's portfolio. Mr. Tierney is a Senior Vice President of the Adviser, with
which he has been associated since the Acquiring Fund's inception. Previously,
he was Chief Investment Officer of W.P. Stewart and Co. Ltd. ("WPS") from 2010
through 2013 and Portfolio Manager/Analyst and Senior Vice President of WPS from
2000 to 2010.
Subsequent to the consummation of the Acquisition, Mr. Tierney will
continue to be primarily responsible for the day-to-day management of the
Acquiring Fund. The Statement of Additional Information ("SAI") provides
additional information about the portfolio manager's compensation, other
accounts managed by the portfolio manager, and the portfolio manager's ownership
of securities in the Acquiring Fund.
Advisory Agreements and Fees
Each Fund's investment adviser is the Adviser, which is located at 1345
Avenue of the Americas, New York, New York 10105. The Adviser is an
international investment adviser supervising client accounts with assets
totaling approximately $445 billion as of September 30, 2013, of which
approximately $88 billion represented assets of registered investment companies
sponsored by the Adviser. As of September 30, 2013, the Adviser managed
retirement assets for many of the largest public and private employee benefit
plans (including 16 of the nation's FORTUNE 100 companies), for public employee
retirement funds in 26 states and the District of Columbia, for investment
companies, and for foundations, endowments, banks and insurance companies
worldwide. Currently, the Adviser manages 33 registered investment companies,
comprising 120 separate investment portfolios, with approximately 2.6 million
accounts. The Adviser also serves as administrator for the Acquiring Fund.
Under each Fund's advisory agreement with the Adviser (each an "Advisory
Agreement"), the Adviser provides investment advisory services to the Fund.
Under its Advisory Agreement, each Fund pays the Adviser an advisory fee at an
annual rate of 1.00% of the average daily net assets of such Fund. Such fee is
accrued daily and paid monthly.
Under the Acquiring Fund's Advisory Agreement, the Adviser may provide
persons to perform clerical, accounting, administrative and other services as
the Fund may request. The Acquiring Fund will pay the Adviser the cost of such
personnel at amounts agreed upon by the Fund and the Adviser. There is no
similar provision in the Acquired Fund's Advisory Agreement, although the
Acquired Fund pays separate fees to its co-administrators for providing certain
comparable services.
Each Advisory Agreement continues in effect (after an initial term of two
years) from year to year if such continuance is specifically approved, at least
annually, by a majority vote of the Directors (or Trustees) of the relevant Fund
who neither are interested persons of the Fund nor have any direct or indirect
financial interest in the Advisory Agreement, cast in person at a meeting called
for the purpose of voting on such approval. A discussion regarding the basis for
the Trustees approving the Advisory Agreement of the Acquired Fund is available
in the Acquired Fund's proxy statement to shareholders filed by the Trust with
the SEC on October 2, 2013. A discussion regarding the basis for the Acquiring
Fund's Directors approving the Advisory Agreement of the Acquiring Fund will be
available in the Acquiring Fund's first annual report to shareholders for the
period ending June 30, 2014.
In addition, the Adviser has agreed to limit the operating expenses of the
Acquiring Fund pursuant to an expense limitation agreement with the Company, on
behalf of the Acquiring Fund, that is substantially similar to the expense
limitation agreement between the Adviser and the Trust, on behalf of the
Acquired Fund.
The Acquisition will not result in an increase in the expense ratio of the
class of shares to be received by shareholders of the Acquired Fund for at least
one year from the date of the Acquiring Fund's prospectus. Under the expense
limitation agreement currently in effect for the Acquired Fund, which continues
in effect from year-to-year unless terminated 60 days prior to the end of its
then current period, the total net operating expenses of the Acquired Fund are
capped at 1.23%. The Adviser has agreed to reduce its investment management fee
and/or pay Acquiring Fund operating expenses for Advisor Class shares to the
extent necessary to limit the annual operating expenses of the Acquiring Fund's
Advisor Class shares (excluding acquired fund fees and expenses other than the
advisory fees of any AllianceBernstein mutual fund in which the Fund may invest,
interest expenses, brokerage commissions, and other transaction costs, taxes and
extraordinary expenses) to 1.23% of the Acquiring Fund's average daily net
assets. This expense limitation agreement will continue for one year from the
date of the Acquiring Fund's prospectus, and will continue in effect thereafter
from year-to-year unless terminated by the Adviser 60 days prior to the end of
its then current term. Termination of the expense limitation agreement may
result in a substantial increase in the expense ratio of the shareholders of the
Acquired Fund.
Distributor
ABI, a wholly-owned subsidiary of the Adviser, serves as the distributor
of the Acquiring Fund's shares. No distribution and/or service fees are paid
with respect to Advisor Class shares, which the Acquired Fund shareholders will
receive in the Acquisition. Under a Distribution Services Agreement, adopted
under the Acquiring Fund's Rule 12b-1 Plan, the Acquiring Fund pays distribution
and service fees to the Distributor at an annual rate of up to .30% of the
Fund's average daily net assets attributable to its Class A shares, up to 1.00%
of the Fund's average daily net assets attributable to its Class C shares, up to
..50% of the Fund's average daily net assets attributable to its Class R shares,
and up to .25% of the Fund's average daily net assets attributable to its Class
K and Class 1 shares. The Distribution Services Agreement provides that the
Distributor will use such payments in their entirety for distribution assistance
and promotional activities. Because these fees are paid out of the Fund's assets
on an ongoing basis, over time these fees will increase the cost of an
investment in these share classes and may cost more than paying other types of
sales charges.
VOTING INFORMATION
The Trustees have fixed the close of business on December 20, 2013, as the
Record Date for the determination of shareholders entitled to notice of, and to
vote at, the Meeting and at any adjournments thereof. As of October 31, 2013,
the Acquired Fund had 1,008,723.979 shares issued and outstanding. Appendix I to
this Proxy Statement/Prospectus identifies holders of more than five percent of
the Acquired Fund's shares, and contains information about any holdings of the
shares of the Acquired Fund by the executive officers and Trustees of the
Acquired Fund.
Those shareholders who hold shares directly and not through a broker or
nominee (that is, a shareholder of record) may vote by appearing in person at
the Meeting, by returning the enclosed Proxy Card or by casting their vote via
telephone or the Internet using the instructions provided on the enclosed Proxy
Card. To vote by telephone or using the Internet, please use the telephone
number or Internet address, as applicable, found on the Proxy Card. Owners of
shares held through a broker or nominee (who is the shareholder of record for
those shares) should follow directions provided to the shareholder by the broker
or nominee to submit voting instructions. Instructions to be followed by a
shareholder of record to submit a proxy via telephone or through the Internet,
including use of the Control Number on the shareholder's Proxy Card, are
designed to verify shareholder identities, to allow shareholders to give voting
instructions and to confirm that shareholder instructions have been recorded
properly. Shareholders who authorize proxies by telephone or through the
Internet should not also return a Proxy Card.
A shareholder of record may revoke that shareholder's proxy at any time
prior to exercise thereof by notifying the Secretary of the Trust in writing at
803 West Michigan Street, Milwaukee, Wisconsin 53233, or by returning a proxy
with a later date. You also can revoke a proxy by voting in person at the
Meeting.
All properly executed proxies received prior to the Meeting will be voted
in accordance with the instructions marked thereon or otherwise as provided
therein. Unless instructions to the contrary are marked, proxies will be voted
"FOR" the approval of the Acquisition.
Properly executed proxies may be returned with instructions to abstain
from voting or to withhold authority to vote (an "abstention") or may represent
a broker "non-vote" (which is a proxy from a broker or nominee indicating that
the broker or nominee has not received instructions from the beneficial owner or
other person entitled to vote shares on a particular matter with respect to
which the broker or nominee does not have discretionary power to vote).
Approval of the Acquisition requires the affirmative vote of the holders
of not less than a majority of the outstanding voting securities of the Acquired
Fund.
Abstentions and broker non-votes will be considered present for purposes
of determining the existence of a quorum for the transaction of business but
will have the effect of a vote against the Acquisition.
If any proposal, other than the Acquisition, to be voted on by the
shareholders of the Acquired Fund properly comes before the Meeting, the shares
represented by proxies will be voted on all such proposals in the discretion of
the person or persons voting the proxies. The Funds have not received notice of,
and are not otherwise aware of, any other matter to be presented at the Meeting.
A quorum for the transaction of business by the shareholders of the
Acquired Fund at the Meeting will consist of the presence in person or by proxy
of the holders of one-third of the outstanding shares of the Acquired Fund
entitled to vote at the Meeting. If a quorum is not represented at the Meeting
or, even if a quorum is so present, if sufficient votes are not received by the
date of the Meeting, or for any other reason, a person named as proxy may
propose one or more adjournments from time to time to permit further
solicitation of proxies.
The Acquired Fund has engaged AST Fund Solutions, LLC (the "Proxy
Solicitor") to assist in soliciting proxies for the Meeting. The Adviser will
pay the Proxy Solicitor a fee of $3,500 for the Proxy Solicitor's solicitation
services for the Acquired Fund, plus reimbursement of out-of-pocket expenses.
LEGAL MATTERS
The validity of shares offered hereby will be passed upon for the
Acquiring Fund by Seward & Kissel LLP.
FINANCIAL HIGHLIGHTS
The fiscal year-ends of the Acquired Fund and the Acquiring Fund are
December 31 and June 30, respectively.
The financial highlights of the Acquired Fund for the five years ended
December 31, 2012, are contained in the Acquired Fund's most recent annual
report dated December 31, 2012, and the financial highlights information for the
fiscal periods ended December 31, 2012, 2011, 2010 and 2009 have been audited by
Tait, Weller & Baker, LLP, independent registered public accounting firm of the
Acquired Fund. The information in the financial highlights for period prior to
2009 was audited by the Acquired Fund's prior auditor.
The Acquiring Fund has not been operational for a full fiscal period;
therefore, financial highlights are not available.
INFORMATION FILED WITH THE SEC
The Trust and the Company are subject to the information requirements of
the Securities Exchange Act of 1934 and the 1940 Act and in accordance
therewith, file reports and other information, including proxy materials and
charter documents, with the SEC. Reports, proxy statements, registration
statements and other information filed by the Trust may be inspected without
charge and copied at the public reference facilities maintained by the SEC at
100 F Street, N.E., Washington, DC 20549, and at the following regional offices
of the SEC: Northeast Regional Office, 3 World Financial Center, Suite 400, New
York, New York 10281; Southeast Regional Office, 801 Brickell Avenue, Suite
1800, Miami, Florida 33131; Midwest Regional Office, 175 West Jackson Boulevard,
Suite 900, Chicago, Illinois 60604; Central Regional Office, 1801 California
Street, Suite 1500, Denver, Colorado 80202; and Pacific Regional Office, 5670
Wilshire Boulevard, Suite 1100, Los Angeles, California 90036.
You may also view or obtain these documents from the SEC:
By phone: 1-202-551-8090 (for information on the operations of the
Public Reference Room only)
By electronic mail: publicinfo@sec.gov (duplicating fee required)
On the Internet: www.sec.gov
Information relating to the Acquired Fund and the Acquiring Fund can be
found in the following documents:
o The Statement of Additional Information ("SAI") dated February
[__], 2014 that has been filed with the SEC in connection with
the Proxy Statement/Prospectus and is incorporated into this
Proxy Statement/Prospectus by reference;
o The annual report to shareholders for the Acquired Fund, which
contains audited financial statements for the fiscal year
ended December 31, 2012, which is incorporated into the Proxy
Statement/Prospectus by reference;
o The semi-annual report of the Acquired Fund for the six-month
period ended June 30, 2013, which is incorporated into the
Proxy Statement/Prospectus by reference; and
o The Prospectus and SAI of the Acquired Fund dated April 30,
2013, which are incorporated into the Proxy Statement/
Prospectus by reference.
The Acquiring Fund is a recently created fund that has not yet commenced
operations; therefore, no shareholder reports for the Acquiring Fund are
available.
Copies of the annual and semi-annual reports to shareholders of the
Acquired Fund, and the Prospectus and SAI of the Acquired Fund, are available,
along with the Proxy Statement/Prospectus and SAI, upon request, without charge,
by writing to the address or calling the telephone number listed below.
For the Acquired Fund:
By mail: W.P. Stewart & Co. Growth Fund
P.O. Box 2175
Milwaukee, WI 53201
By phone: (888) 881-8803
For the Acquiring Fund:
By mail: c/o AllianceBernstein Investor Services, Inc.
P.O. Box 786003
San Antonio, TX 78278-6003
By phone: (800) 221-5672
THE TRUSTEES RECOMMEND THAT YOU VOTE FOR THE PROPOSAL.
Appendix A
FORM OF AGREEMENT AND PLAN OF ACQUISITION AND LIQUIDATION
RELATING TO THE ACQUISITION OF THE ASSETS AND LIABILITIES OF
W.P. STEWART & CO. GROWTH FUND
As of
December 13, 2013
This Agreement and Plan of Acquisition and Liquidation (the "Plan") is
made as of this 13th day of December 2013, by and among AllianceBernstein Cap
Fund, Inc., a Maryland corporation (the "Company") on behalf of its series
AllianceBernstein Concentrated Growth Fund (the "Acquiring Fund"), Investment
Managers Series Trust, a Delaware statutory trust (the "Trust"), on behalf of
its series W.P. Stewart & Co. Growth Fund (the "Acquired Fund"), and, solely for
purposes of Section 24, AllianceBernstein L.P., the investment adviser to the
Acquiring Fund and the Acquired Fund ("AllianceBernstein").
WHEREAS, the Acquiring Fund and the Acquired Fund (together, the "Funds")
are each a series of an open-end management investment company registered with
the Securities and Exchange Commission (the "SEC") under the Investment Company
Act of 1940, as amended (the "1940 Act");
WHEREAS, the parties desire that the Acquired Fund transfer all of its
assets to the Acquiring Fund in exchange for Advisor Class shares of the
Acquiring Fund of equal net asset value ("Acquisition Shares") and assumption by
the Acquiring Fund of the liabilities of the Acquired Fund and distribute the
Acquisition Shares to shareholders of the Acquired Fund (the "Acquisition"); and
WHEREAS, the parties intend that the Acquisition qualify as a
"reorganization" within the meaning of Section 368(a) of the United States
Internal Revenue Code of 1986, as amended (the "Code"), and any successor
provisions, and that with respect to the Acquisition, the Acquiring Fund and the
Acquired Fund will each be a "party to a reorganization" within the meaning of
Section 368(b) of the Code;
Now, therefore, the Company and the Trust agree as follows:
1. Definitions
-----------
In addition to the terms elsewhere defined herein, each of the following
terms shall have the meaning indicated for that term as follows:
1933 Act............. Securities Act of 1933, as amended.
Assets............... All assets of any kind and all interests, rights,
privileges and powers of or attributable to the Acquired
Fund or its shares, as appropriate, whether or not
determinable at the appropriate Effective Time and
wherever located, including, without limitation, all
cash, cash equivalents, securities, commodities, futures
interests, claims (whether absolute or contingent, known
or unknown, accrued or unaccrued or conditional or
unmatured), contract rights, rights to register shares
under applicable securities laws, and receivables
(including dividend and interest receivables) owned by
the Acquired Fund or attributable to its shares and any
deferred or prepaid expense shown as an asset on the
Acquired Fund's books.
Closing Date......... Such date as the parties may agree.
Effective Time....... 5:00 p.m. Eastern time on the Closing Date, or such
other time as the parties may agree to in writing.
Financial Statements. The audited financial statements of the Acquired Fund
for its most recently completed fiscal year and the
unaudited financial statements of the Acquired Fund for
its most recently completed semi-annual period.
Fund................. The Acquiring Fund and/or the Acquired Fund, as the case
may be.
Liabilities.......... All liabilities, debts, expenses and obligations of any
kind whatsoever of the Acquired Fund, whether known or
unknown, accrued or unaccrued, absolute or contingent or
conditional or unmatured.
N-14 Registration
Statement............ The Registration Statement of the Acquiring Fund on Form
N-14 under the 1940 Act that will register the
Acquisition Shares to be issued in the Acquisition and
will include the proxy materials necessary for the
shareholders of the Acquired Fund to approve the
Acquisition.
Shareholders......... The shareholders of the Acquired Fund.
Valuation Time....... The close of regular session trading on the New York
Stock Exchange (the "Exchange") on the Closing Date,
when for purposes of the Plan, the Acquiring Fund
determines its net asset value per Acquisition Share and
the Acquired Fund determines the net value of the
Assets.
NAV.................. A Fund's net asset value per share, which is calculated
by valuing and totaling its assets and then subtracting
its liabilities and then dividing the balance by the
number of its shares that are outstanding.
2. Regulatory Filings
------------------
The Acquiring Fund shall promptly prepare and file the N-14 Registration
Statement with the SEC, and the Acquiring Fund and the Acquired Fund also shall
make any other required or appropriate filings with respect to the actions
contemplated hereby.
3. Shareholder Action
------------------
As soon as practicable after the effective date of the N-14 Registration
Statement, the Acquired Fund shall hold a meeting of the Shareholders to
consider and approve the Acquisition and the Plan and such other matters as the
Acquired Fund's Board of Trustees may determine. Such approval by the
Shareholders shall, to the extent necessary to permit the consummation of the
transactions contemplated herein without violating any investment objective,
policy or restriction of the Acquired Fund, be deemed to constitute approval by
the Shareholders of a temporary amendment of any investment objective, policy or
restriction that would otherwise be inconsistent with, or violated upon, the
consummation of such transactions solely for the purpose of consummating such
transactions.
4. Transfer of the Acquired Fund's Assets
--------------------------------------
The Acquiring Fund and the Acquired Fund shall take the following steps
with respect to the Acquisition, as applicable:
(a) On or prior to the Closing Date, the Acquired Fund shall pay or
provide for the payment of all of the Liabilities, expenses, costs
and charges of or attributable to the Acquired Fund that are known
to the Acquired Fund and that are due and payable prior to or as of
the Closing Date.
(b) At or before the Effective Time, the Acquiring Fund shall redeem the
Initial Share (as defined in Section 8(j) hereof) of the Acquiring
Fund for an amount of cash equal to the amount of cash for which the
Initial Share was issued.
(c) At the Effective Time, pursuant to a Certificate of Transfer
accepted for record by the Secretary of State of Delaware, the
Acquired Fund shall assign, transfer, deliver and convey the Assets
to the Acquiring Fund, subject to the Liabilities. The Acquiring
Fund shall then accept the Assets and assume the Liabilities such
that at and after the Effective Time (i) the Assets at and after the
Effective Time shall become and be assets of the Acquiring Fund, and
(ii) the Liabilities at the Effective Time shall attach to the
Acquiring Fund, and shall be enforceable against the Acquiring Fund
to the same extent as if initially incurred by the Acquiring Fund.
(d) Within a reasonable time prior to the Closing Date, the Acquired
Fund shall provide, if requested, a list of the Assets to the
Acquiring Fund. The Acquired Fund may sell any asset on such list
prior to the Effective Time. After the Acquired Fund provides such
list, the Acquired Fund will not acquire any additional securities
or permit to exist any encumbrances, rights, restrictions or claims
not reflected on such list, without the approval of the Acquiring
Fund.
(e) The Acquired Fund shall assign, transfer, deliver and convey the
Assets to the Acquiring Fund at the Effective Time on the following
basis:
(i) The value of the Assets less the Liabilities of the Acquired
Fund, determined as of the Valuation Time, shall be divided by
the then NAV of one share of the Acquired Fund to determine
the number of shares of the Acquired Fund then outstanding,
and, in exchange for the transfer of the Assets by the
Acquired Fund to the Acquiring Fund, the Acquiring Fund shall
assume the Liabilities and simultaneously issue and deliver to
the Acquired Fund a number of Acquisition Shares (including
fractional shares) equal in aggregate net asset value to the
aggregate net asset value of shares of the Acquired Fund then
outstanding, rounded to the second decimal place or such other
decimal place as the parties may agree to in writing;
(ii) The NAV of Acquisition Shares to be delivered to the Acquired
Fund shall be determined as of the Valuation Time in
accordance with the Acquiring Fund's then applicable valuation
procedures, and the net value of the Assets to be conveyed to
the Acquiring Fund shall be determined as of the Valuation
Time in accordance with the then applicable valuation
procedures of the Acquired Fund; and
(iii) The portfolio securities of the Acquired Fund shall be made
available by the Acquired Fund to State Street Bank and Trust
Company, as custodian for the Acquiring Fund (the
"Custodian"), for examination no later than five business days
preceding the Valuation Time. On the Closing Date, such
portfolio securities and all the Acquired Fund's cash shall be
delivered by the Acquired Fund to the Custodian for the
account of the Acquiring Fund, such portfolio securities to be
duly endorsed in proper form for transfer in such manner and
condition as to constitute good delivery thereof in accordance
with the custom of brokers or, in the case of portfolio
securities held in the U.S. Treasury Department's book-entry
system or by The Depository Trust Company, Participants Trust
Company or other third party depositories, by transfer to the
account of the Custodian in accordance with Rule 17f-4, Rule
17f-5 or Rule 17f-7, as the case may be, under the 1940 Act
and accompanied by all necessary federal and state stock
transfer stamps or a check for the appropriate purchase price
thereof. The cash delivered shall be in the form of currency
or certified or official bank checks, payable to the order of
the Custodian, or shall be wired to an account pursuant to
instructions provided by the Acquiring Fund.
(f) Promptly after the Closing Date, the Acquired Fund will deliver to
the Acquiring Fund a Statement of Assets and Liabilities of the
Acquired Fund as of the Closing Date.
5. Termination of the Acquired Fund, Registration of Acquisition Shares and
Access to Records
--------------------------------------------------------------------------
The Acquired Fund and the Acquiring Fund also shall take the following
steps, as applicable:
(a) At or as soon as reasonably practical after the Effective Time, the
Acquired Fund shall terminate and completely liquidate by
transferring pro rata to its Shareholders of record Acquisition
Shares received by the Acquired Fund pursuant to Section 4(e)(i) of
the Plan. The Acquiring Fund shall establish accounts on its share
records and note on such accounts the names of the former
Shareholders and the amounts of Acquisition Shares that former
Acquired Fund Shareholders are due based on their respective
holdings of shares of the Acquired Fund as of the close of business
on the Closing Date. Fractional Acquisition Shares shall be carried
to the second decimal place. The Acquiring Fund shall not issue
certificates representing the Acquisition Shares in connection with
such exchange. All issued and outstanding Acquired Fund shares in
connection with such exchange will be simultaneously redeemed and
cancelled on the books of the Acquired Fund. Ownership of
Acquisition Shares will be shown on the books of the Acquiring
Fund's transfer agent.
Following distribution by the Acquired Fund to its Shareholders of
all Acquisition Shares delivered to the Acquired Fund, the Acquired
Fund shall wind up its affairs and shall take all steps as are
necessary and proper to terminate its existence as soon as is
reasonably possible after the Effective Time.
(b) At and after the Closing Date, the Acquired Fund shall provide the
Acquiring Fund and its transfer agent with immediate access to: (i)
all records containing the names, addresses and taxpayer
identification numbers of all of the Shareholders and the number and
percentage ownership of the outstanding shares of the Acquired Fund
owned by Shareholders as of the Effective Time, and (ii) all
original documentation (including all applicable Internal Revenue
Service forms, certificates, certifications and correspondence)
relating to the Shareholders' taxpayer identification numbers and
their liability for or exemption from back-up withholding. The
Acquired Fund shall preserve and maintain, or shall direct its
service providers to preserve and maintain, records with respect to
the Acquired Fund as required by Section 31 of, and Rules 31a-1 and
31a-2 under, the 1940 Act.
6. Certain Representations and Warranties of the Acquired Fund
-----------------------------------------------------------
The Acquired Fund represents and warrants to the Acquiring Fund as
follows:
(a) The Acquired Fund is a duly established series of the Trust, which
is a statutory trust duly established, validly existing and in good
standing under the laws of the State of Delaware. The Trust is
registered with the SEC as an open-end management investment company
under the 1940 Act and the registration of the Acquired Fund shares
under the 1933 Act will be in full force and effect as of the
Effective Time.
(b) The Acquired Fund has the power and all necessary federal, state and
local qualifications and authorizations to own all of the Assets, to
carry on its business, to enter into the Plan and to consummate the
transactions contemplated herein.
(c) The current prospectus, statement of additional information,
shareholder reports, marketing and other related materials of the
Acquired Fund and each prospectus and statement of additional
information of the Acquired Fund used at all times prior to the date
of this Agreement conforms or conformed at the time of its use in
all material respects to the applicable requirements of the 1933 Act
and the 1940 Act and the rules and regulations of the SEC thereunder
and does not or did not at the time of its use include any untrue
statement of material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made,
not materially misleading.
(d) The Board of Trustees of the Trust has duly authorized the execution
and delivery of the Plan and the transactions contemplated herein on
behalf of the Acquired Fund. Duly authorized officers of the Trust
have executed and delivered the Plan. The Plan represents a valid
and binding contract of the Acquired Fund, enforceable against the
Acquired Fund in accordance with its terms, subject as to
enforcement to bankruptcy, insolvency, reorganization, arrangement,
moratorium, and other similar laws of general applicability relating
to or affecting creditors' rights and to general equity principles.
The execution and delivery of the Plan by the Trust does not, and,
subject to the approval of Shareholders referred to in Section 3
hereof, the consummation of the transactions contemplated by the
Plan will not, violate the federal securities laws or Delaware law
or the Trust's Agreement and Declaration of Trust ("Declaration"),
its By-Laws or any material agreement to which the Acquired Fund is
subject. Except for the approval of the Shareholders and the Board
of Trustees of the Trust, the Trust does not need to take any other
action to authorize its officers to effectuate the Plan and the
transactions contemplated herein on behalf of the Acquired Fund.
(e) The Acquired Fund has qualified as a regulated investment company
under Part I of Subchapter M of Subtitle A, Chapter 1, of the Code,
and has been eligible for taxation under Section 852(b) of the Code,
in respect of each taxable year since the commencement of its
operations and intends to continue to qualify as a regulated
investment company for its taxable year that includes the Closing
Date.
(f) The information pertaining to the Acquired Fund included within the
N-14 Registration Statement when filed with the SEC, when Part A of
the N-14 Registration Statement is distributed to Shareholders, at
the time of the Shareholder meeting of the Acquired Fund for
approval of the Acquisition, and at the Effective Time, insofar as
it relates to the Acquired Fund, shall (i) comply in all material
respects with the applicable provisions of the 1933 Act and the 1940
Act, and the rules and regulations thereunder and applicable state
securities laws, and (ii) not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
(g) The Trust has duly authorized and validly issued all of the issued
and outstanding shares of the Acquired Fund, and all such shares are
fully paid and non-assessable and were offered for sale and sold in
conformity with the registration requirements of all applicable
federal and state securities laws. There are no outstanding options,
warrants or other rights to subscribe for or purchase any of the
shares of the Acquired Fund, nor are there any securities
convertible into shares of the Acquired Fund.
(h) The Acquired Fund shall operate its business in the ordinary course
between the date hereof and the Effective Time. Such ordinary course
of business will include the declaration and payment of customary
dividends and distributions.
(i) At the Effective Time, the Acquired Fund will have good and
marketable title to the Assets and full right, power and authority
to assign, transfer, deliver and convey the Assets.
(j) The Financial Statements of the Acquired Fund, a copy of which has
been previously delivered to the Acquiring Fund, fairly present the
financial position of the Acquired Fund as of the Acquired Fund's
most recent fiscal year-end and the results of the Acquired Fund's
operations and changes in the Acquired Fund's net assets for the
periods indicated.
(k) Reserved.
(l) To the knowledge of the Acquired Fund, the Acquired Fund has no
liabilities, whether or not determined or determinable, other than
the liabilities disclosed or provided for in its Financial
Statements or liabilities incurred in the ordinary course of
business subsequent to the date of the most recent Financial
Statement referencing liabilities and reflected in its net asset
value per share.
(m) To the knowledge of the Acquired Fund, except as has been disclosed
in writing to the Acquiring Fund, no claims, actions, suits,
investigations or proceedings of any type are pending or threatened
against the Acquired Fund or any of its properties or assets or any
person whom the Acquired Fund may be obligated to indemnify in
connection with such litigation, proceeding or investigation.
Subject to the foregoing, there are no facts that the Acquired Fund
has reason to believe are likely to form the basis for the
institution of any such claim, action, suit, investigation or
proceeding against the Acquired Fund. The Acquired Fund is not a
party to nor subject to the provisions of any order, decree or
judgment of any court or governmental body that adversely affects,
or is reasonably likely to adversely affect, its financial
condition, results of operations, the Assets or its ability to
consummate the transactions contemplated by the Plan.
(n) Except for agreements entered into or granted in the ordinary course
of its business, in each case under which no material default
exists, and the Plan, the Acquired Fund is not a party to or subject
to any material contract or other commitments that, if terminated,
may result in material liability to the Acquired Fund or under which
(whether or not terminated) any material payment for periods
subsequent to the Closing Date will be due from the Acquired Fund.
(o) The Acquired Fund has filed or will file its federal income tax
returns, copies of which have been previously made available or will
be made available to the Acquiring Fund, for all taxable years
ending on or before the Closing Date, and has paid or will pay all
taxes shown as due on such returns. All of the Acquired Fund's tax
liabilities will have been adequately provided for on its books. To
the best of the Acquired Fund's knowledge, no such return is
currently under audit and no unpaid assessment has been asserted
with respect to such returns. To the best of the Acquired Fund's
knowledge, it will not have any tax deficiency or liability asserted
against it or question with respect thereto raised, and it will not
be under audit by the Internal Revenue Service or by any state or
local tax authority for taxes in excess of those already paid.
(p) Since the date of the Financial Statements of the Acquired Fund,
there has been no material adverse change in its financial
condition, results of operations, business, or Assets. For this
purpose, negative investment performance shall not be considered a
material adverse change.
(q) The Acquired Fund's investment operations from inception to the date
hereof have been in compliance in all material respects with the
investment policies and investment restrictions set forth in its
prospectus and statement of additional information as in effect from
time to time, except as previously disclosed in writing to the
Acquiring Fund.
(r) The Acquisition Shares to be issued to the Acquired Fund pursuant to
Section 4(e)(i) hereof will not be acquired for the purpose of
making any distribution thereof other than to the Shareholders as
provided in Section 4(e)(i) hereof.
(s) The Acquired Fund or its agents (i) have obtained a valid Form
W-8BEN, Certificate of Foreign Status of Beneficial Owner for United
States Withholding (or other appropriate series of Form W-8, as the
case may be) or Form W-9, Request for Taxpayer Identification Number
and Certification, for each Shareholder of record, which Form W-8 or
Form W-9 can be associated with reportable payments made by the
Acquired Fund to such Shareholder, and/or (ii) has otherwise timely
instituted any required backup withholding procedures with respect
to such Shareholder as provided by Section 3406 of the Code and the
regulations thereunder.
7. Certain Representations and Warranties of the Acquiring Fund
------------------------------------------------------------
The Acquiring Fund represents and warrants to the Acquired Fund as
follows:
(a) The Acquiring Fund is a duly established series of the Company,
which is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Maryland. The Company
is registered with the SEC as an open-end management investment
company under the 1940 Act and the registration of the Acquiring
Fund shares under the 1933 Act will be in full force and effect as
of the Effective Time.
(b) The Acquiring Fund shall operate its business in the ordinary course
between its commencement of operations and the Effective Time. Such
ordinary course of business will include the declaration and payment
of customary dividends and distributions.
(c) The Acquiring Fund has the power and all necessary federal, state
and local qualifications and authorizations to own all of its
assets, to carry on its business, to enter into the Plan and to
consummate the transactions contemplated herein.
(d) The Board of Directors of the Company has duly authorized execution
and delivery of the Plan and the transactions contemplated herein on
behalf of the Acquiring Fund. Duly authorized officers of the
Company have executed and delivered the Plan. The Plan represents a
valid and binding contract of the Acquiring Fund, enforceable
against the Acquiring Fund in accordance with its terms, subject as
to enforcement to bankruptcy, insolvency, reorganization,
arrangement, moratorium and other similar laws of general
applicability relating to or affecting creditors' rights and to
general equity principles. The execution and delivery of the Plan by
the Company does not, and the consummation of the transactions
contemplated by the Plan will not, violate the federal securities
laws or Maryland law or the Charter of the Company, its Bylaws or
any material agreement to which the Acquiring Fund is subject.
Except for the approval of the Board of Directors of the Company,
the Company does not need to take any other action to authorize its
officers to effectuate the Plan and the transactions contemplated
herein on behalf of the Acquiring Fund.
(e) The Acquiring Fund is a recently formed separate series of the
Company that, immediately after the Acquisition, will be treated as
a separate corporation from each other series of the Company under
Section 851(g) of the Code. Prior to the Closing Date, the Acquiring
Fund will have no assets (except cash in payment for the Initial
Share), liabilities or operations of any kind. The Acquiring Fund
intends to qualify as a regulated investment company under Part I of
Subchapter M of Subtitle A, Chapter 1, of the Code and to be
eligible for taxation under Section 852(b) of the Code for the
taxable year that will include the Closing Date and each subsequent
taxable year.
(f) The N-14 Registration Statement, when filed with the SEC, when Part
A of the N-14 Registration Statement is distributed to Shareholders,
at the time of the Shareholder meeting of the Acquired Fund for
approval of the Acquisition, and at the Effective Time, insofar as
it relates to the Acquiring Fund, shall (i) comply in all material
respects with the applicable provisions of the 1933 Act and the 1940
Act, and the rules and regulations thereunder and applicable state
securities laws and (ii) not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
(g) The Company has duly authorized and validly issued all issued and
outstanding shares of the Acquiring Fund, and all such shares are
fully paid and non-assessable and were offered for sale and sold in
conformity with the registration requirements of all applicable
federal and state securities laws. The Acquiring Fund has duly
authorized the Acquisition Shares of the Acquiring Fund referred to
in Section 4(e) hereof to be issued and delivered to the Acquired
Fund as of the Effective Time. When issued and delivered, such
Acquisition Shares of the Acquiring Fund shall be validly issued,
fully paid and non-assessable, and no Shareholder of the Acquiring
Fund shall have any preemptive right of subscription or purchase in
respect of any such share. There are no outstanding options,
warrants or other rights to subscribe for or purchase any
Acquisition Shares, nor are there any securities convertible into
Acquisition Shares.
(h) To the knowledge of the Acquiring Fund, except as has been disclosed
in writing to the Acquired Fund, no claims, actions, suits,
investigations or proceedings of any type are pending or threatened
against the Acquiring Fund or any of its properties or assets or any
person whom the Acquiring Fund may be obligated to indemnify in
connection with such litigation, proceeding or investigation.
Subject to the foregoing, there are no facts that the Acquiring Fund
currently has reason to believe are likely to form the basis for the
institution of any such claim, action, suit, investigation or
proceeding against the Acquiring Fund. The Acquiring Fund is not a
party to or subject to the provisions of any order, decree or
judgment of any court or governmental body that adversely affects,
or is reasonably likely to adversely affect, its financial
condition, results of operations, its assets or its ability to
consummate the transactions contemplated by the Plan.
(i) Except for agreements entered into or granted in the ordinary course
of its business, in each case under which no material default
exists, the Acquiring Fund is not a party to or subject to any
material contract, debt instrument, employee benefit plan, lease,
franchise, license or permit of any kind or nature whatsoever.
(j) Reserved.
(k) The Acquiring Fund will use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act
and such state securities laws as it may deem appropriate in order
to continue its operations after the Closing Date.
8. Conditions to the Obligations of the Acquiring Fund and the Acquired Fund
-------------------------------------------------------------------------
The obligations of the Acquiring Fund and the Acquired Fund with respect
to the Acquisition shall be subject to the following conditions precedent:
(a) The Shareholders shall have approved the Acquisition in the manner
required by the Declaration, its By-Laws and applicable law. If
Shareholders fail to approve the Acquisition as required, that
failure shall release the Funds of their obligations under the Plan.
(b) Each of the Company and the Trust shall have delivered to the other
party a certificate dated as of the Closing Date and executed in its
name by its President and its Treasurer, in a form reasonably
satisfactory to the receiving party, stating that the
representations and warranties of the Acquiring Fund or the Acquired
Fund, as applicable, in the Plan that apply to the Acquisition are
true and correct in all material respects at and as of the Valuation
Time.
(c) The Acquiring Fund and the Acquired Fund shall have performed and
complied in all material respects with each of its representations
and warranties required by the Plan to be performed or complied with
by it prior to or at the Valuation Time and the Effective Time.
(d) There shall have been no material adverse change in the financial
condition, results of operations, business, properties or assets of
the Acquired Fund since the date of the most recent Financial
Statements. Negative investment performance shall not be considered
a material adverse change.
(e) The Acquiring Fund and the Acquired Fund shall have received an
opinion of Bingham McCutchen LLP, reasonably satisfactory to each of
them, substantially to the effect that for federal income tax
purposes:
(i) the Acquisition will constitute a "reorganization" within the
meaning of Section 368(a) of the Code and each of the
Acquiring Fund and the Acquired Fund will be a "party to a
reorganization" within the meaning of Section 368(b) of the
Code;
(ii) no gain or loss will be recognized by the Acquired Fund on the
transfer of all of the Acquired Fund's Assets to the Acquiring
Fund solely in exchange for the Acquisition Shares and the
assumption by the Acquiring Fund of the Liabilities, or upon
the distribution of the Acquisition Shares to Shareholders,
except for (A) gain or loss that may be recognized on the
transfer of "section 1256 contracts" as defined in Section
1256(b) of the Code, (B) gain that may be recognized on the
transfer of stock in a "passive foreign investment company" as
defined in Section 1297(a) of the Code, and (C) any other gain
or loss that may be required to be recognized upon the
transfer of an Asset regardless of whether such transfer would
otherwise be a non-recognition transaction under the Code;
(iii) the tax basis in the hands of the Acquiring Fund of each Asset
of the Acquired Fund will be the same as the tax basis of such
Asset in the hands of the Acquired Fund immediately prior to
the transfer thereof, increased by the amount of gain (or
decreased by the amount of loss), if any, recognized by the
Acquired Fund on the transfer;
(iv) the holding period of each Asset of the Acquired Fund in the
hands of the Acquiring Fund, other than Assets with respect to
which gain or loss is required to be recognized, will include
in each instance the period during which such Asset was held
by the Acquired Fund (except where investment activities of
the Acquiring Fund have the effect of reducing or eliminating
the holding period with respect to an Asset);
(v) no gain or loss will be recognized by the Acquiring Fund upon
its receipt of the Assets of the Acquired Fund solely in
exchange for Acquisition Shares and the assumption of the
Liabilities;
(vi) no gain or loss will be recognized by the Shareholders upon
the exchange of their Acquired Fund shares for Acquisition
Shares as part of the Acquisition;
(vii) the aggregate tax basis of the Acquisition Shares that each
Shareholder receives in the Acquisition will be the same as
the aggregate tax basis of the Acquired Fund shares exchanged
therefor; and
(viii)each Shareholder's holding period for the Acquisition Shares
received in the Acquisition will include the period for which
such Shareholder held the Acquired Fund shares exchanged
therefor, provided that the Shareholder held such Acquired
Fund shares as capital assets on the date of the exchange.
The opinion will be based on certain factual certifications made by
officers of the Funds and will also be based on customary
assumptions and subject to certain qualifications. The parties
acknowledge that the opinion is not a guarantee that the tax
consequences of the Acquisition will be as described above.
Each Fund shall agree to make and provide additional factual
representations to Bingham McCutchen LLP with respect to the Funds
that are reasonably necessary to enable Bingham McCutchen LLP to
deliver the tax opinion. Notwithstanding anything in the Plan to the
contrary, neither Fund may waive in any material respect the
conditions set forth under this subparagraph (e).
(f) The N-14 Registration Statement shall have become effective under
the 1933 Act as to the Acquisition Shares, and the SEC shall not
have instituted and, to the knowledge of the Acquiring Fund, is not
contemplating instituting, any stop order suspending the
effectiveness of the N-14 Registration Statement.
(g) No action, suit or other proceeding shall be threatened or pending
before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in
connection with the Acquisition.
(h) The SEC shall not have issued any unfavorable advisory report under
Section 25(b) of the 1940 Act nor instituted any proceeding seeking
to enjoin consummation of the Acquisition under Section 25(c) of the
1940 Act.
(i) Neither party shall have terminated the Plan with respect to the
Acquisition pursuant to Section 13 of the Plan.
(j) Before the Closing Date, the Company's Board of Directors shall have
authorized the issuance of, and the Company shall have issued, one
share of the Acquiring Fund (the "Initial Share") to the Adviser or
an affiliate thereof, in consideration of the payment of $10.00 (or
such other amount that the Company's Board of Directors determines),
to vote on the investment advisory agreement and to take whatever
action it may be required to take as the Acquiring Fund's sole
shareholder.
9. Conditions to the Obligations of the Acquired Fund
--------------------------------------------------
The obligations of the Acquired Fund with respect to the Acquisition shall be
subject to the condition precedent that the Acquired Fund shall have received an
opinion of Seward & Kissel LLP, counsel to the Acquiring Fund, in form and
substance reasonably satisfactory to the Acquired Fund and dated as of the
Closing Date, substantially to the effect that:
(a) The Acquiring Fund is a series of a corporation duly incorporated,
validly existing and in good standing under the laws of the State of
Maryland and is a series of an open-end, management investment
company registered under the 1940 Act;
(b) The Plan has been duly authorized, executed and delivered by the
Acquiring Fund and, assuming the N-14 Registration Statement
referred to in Section 2 of the Plan does not contain any material
misstatements or omissions, and assuming due authorization,
execution and delivery of the Plan by the Acquired Fund, represents
a legal, valid and binding contract, enforceable in accordance with
its terms, subject to the effect of bankruptcy, insolvency,
moratorium, fraudulent conveyance and transfer and similar laws
relating to or affecting creditors' rights generally and court
decisions with respect thereto, and further subject to the
application of equitable principles in any proceeding, whether at
law or in equity or with respect to the enforcement of provisions of
the Plan and the effect of judicial decisions that have held that
certain provisions are unenforceable when their enforcement would
violate an implied covenant of good faith and fair dealing or would
be commercially unreasonable or when default under the Plan is not
material;
(c) The Acquisition Shares to be delivered as provided for by the Plan
are duly authorized and upon delivery will be validly issued, fully
paid and non-assessable by the Acquiring Fund;
(d) The execution and delivery of the Plan did not, and the consummation
of the Acquisition will not, violate the Charter of the Company, its
Bylaws or any agreement of the Acquiring Fund known to such counsel,
after reasonable inquiry, and no approval of the Plan by the
shareholders of the Acquiring Fund is required under Company's
Charter, Bylaws or applicable law; and
(e) To the knowledge of such counsel, no consent, approval,
authorization or order of any federal or state court or
administrative or regulatory agency, other than the acceptance of
record of the Certificate of Transfer by the Secretary of State of
Delaware, is required for the Acquiring Fund to enter into the Plan
or carry out its terms, except those that have been obtained under
the 1933 Act, the 1940 Act and the rules and regulations under those
Acts or that may be required under state securities laws or
subsequent to the Effective Time or when the failure to obtain the
consent, approval, authorization or order would not have a material
adverse effect on the operation of the Acquiring Fund.
In rendering such opinion Seward & Kissel LLP may (i) rely on the opinion of
Venable LLP as to matters of Maryland law to the extent set forth in such
opinion, (ii) make assumptions regarding the authenticity, genuineness and/or
conformity of documents and copies thereof without independent verification
thereof, (iii) limit such opinion to applicable federal and state law, (iv)
define the word "knowledge" and related terms to mean the knowledge of attorneys
then with such firm who have devoted substantive attention to matters directly
related to the Plan and (v) rely on certificates of officers or directors of the
Company as to factual matters.
10. Conditions to the Obligations of the Acquiring Fund
---------------------------------------------------
The obligations of the Acquiring Fund with respect to the Acquisition
shall be subject to the condition precedent that the Acquiring Fund shall have
received an opinion of Bingham McCutchen LLP, counsel to the Acquired Fund, in
form and substance reasonably satisfactory to the Acquiring Fund and dated as of
the Closing Date, substantially to the effect that:
(i) The Trust is a statutory trust organized and existing under the laws
of the State of Delaware and has power as a statutory trust to own
all of its properties and assets and to carry on its business as an
open-end investment company as described in the N-14 Registration
Statement, and the Acquired Fund is a series thereof duly
constituted in accordance with the Declaration and By-Laws of the
Trust.
(ii) The Plan has been duly authorized, executed and delivered by the
Trust, on behalf of the Acquired Fund, and assuming the due
authorization, execution and delivery of the Plan by the Company, on
behalf of the Acquiring Fund, is a valid and binding obligation of
the Trust and the Acquired Fund enforceable against the Trust and
the Acquired Fund in accordance with its terms, subject to the
effect of bankruptcy, insolvency, moratorium, fraudulent conveyance
and transfer and similar laws relating to or affecting creditors'
rights generally and court decisions with respect thereto, and
further subject to the application of equitable principles in any
proceeding, whether at law or in equity or with respect to the
enforcement of provisions of the Plan and the effect of judicial
decisions which have held that certain provisions are unenforceable
when their enforcement would violate an implied covenant of good
faith and fair dealing or would be commercially unreasonable or when
default under the Plan is not material.
(iii) The execution and delivery of the Plan by the Trust on behalf of the
Acquired Fund did not, and the performance by the Trust and the
Acquired Fund of their obligations thereunder will not: (a) violate
the Declaration or By-Laws of the Trust; or (b) violate any
provision of any agreement disclosed in or filed with the Acquired
Fund's prospectus or the Acquired Fund's registration statement on
Form N-1A to which the Trust or the Acquired Fund is a party or by
which it is bound.
(iv) To such counsel's knowledge, no consent, approval, authorization or
order of any Delaware (with respect to the Delaware Statutory Trust
Act) or federal court or governmental authority is required for the
consummation by the Trust or the Acquired Fund of the transactions
contemplated by the Agreements, except such as have been obtained.
(v) The Trust is registered with the SEC as an open-end management
investment company under the 1940 Act, and, to such counsel's
knowledge, such registration under the 1940 Act has not been revoked
or suspended.
In rendering such opinion, Bingham McCutchen LLP may (i) make assumptions
regarding the authenticity, genuineness and/or conformity of documents and
copies thereof without independent verification thereof, (ii) limit such opinion
to applicable federal and state law, (iii) define the word "knowledge" and
related terms to mean the knowledge of attorneys then with such firm who have
devoted substantive attention to matters directly related to the Plan and (iv)
rely on certificates of officers or trustees of the Trust as to factual matters.
11. Closing
-------
(a) The Closing shall be held on the Closing Date at the offices of the
Company, 1345 Avenue of the Americas, New York, New York 10105, or
at such other time or place as the parties may agree.
(b) In the event that at the Valuation Time (i) the Exchange shall be
closed to trading or trading thereon shall be restricted, or (ii)
trading or the reporting of trading on the Exchange or elsewhere
shall be disrupted so that accurate appraisal of the value of the
net assets of the Acquired Fund is impracticable, the Closing Date
shall be postponed until the first business day after the day when
trading shall have been fully resumed and reporting shall have been
restored; provided that if trading shall not be fully resumed and
reporting restored within three business days of the Valuation Time,
the Plan may be terminated by either the Trust or the Company upon
the giving of written notice to the other party.
(c) The Acquiring Fund will provide to the Acquired Fund evidence
satisfactory to the Acquired Fund that Acquisition Shares issuable
pursuant to the Acquisition have been credited to the Acquired
Fund's account on the books of the Acquiring Fund. After the Closing
Date, the Acquiring Fund will provide to the Acquired Fund evidence
satisfactory to the Acquired Fund that such Shares have been
credited pro rata to open accounts in the names of the Acquired Fund
Shareholders.
(d) At the Closing, each party shall deliver to the other such bills of
sale, instruments of assumption of liabilities, checks, assignments,
stock certificates, receipts or other documents as such other party
or its counsel may reasonably request in connection with the
transfer of assets, assumption of liabilities and liquidation
contemplated by the Plan.
12. Survival of Representations and Warranties; Confidentiality
-----------------------------------------------------------
(a) Except for Sections 6, 7, 14, 18, 19, 21, 22, 23 and 24 of the Plan,
no representations, warranties or covenants in or pursuant to the
Plan (including certificates of officers) shall survive the
completion of the transactions contemplated herein.
(b) Each party agrees to treat confidentially and as proprietary
information of the other party all records and other information,
including any information relating to portfolio holdings, of its
Fund and not to use such records and information for any purpose
other than the performance of its duties under the Plan; provided,
however, that after prior notification of and written approval by
party (which approval shall not be withheld if the other party would
be exposed to civil or criminal contempt proceedings for failure to
comply when requested to divulge such information by duly
constituted authorities having proper jurisdiction, and which
approval shall not be withheld unreasonably in any other
circumstance), the other party may disclose such records and/or
information as so approved.
13. Termination of Plan
-------------------
A majority of either the Company's Board of Directors or the Trust's Board
of Trustees may terminate the Plan with respect its respective Fund at any time
before the applicable Effective Time if: (a) the Fund's conditions precedent set
forth in Sections 8, 9 or 10 as appropriate, would not be or are not satisfied;
or (b) the Board of Directors or the Board of Trustees of either the Company or
the Trust determines that the consummation of the Acquisition is not in the best
interests of the Acquiring Fund or the Acquired Fund, as the case may be, or its
shareholders, and gives notice of such termination to the other party.
14. Governing Law
-------------
The Plan and the transactions contemplated hereby shall be governed,
construed and enforced in accordance with the laws of the State of New York,
except to the extent preempted by federal law, without regard to conflicts of
law principles.
15. Brokerage Fees
--------------
Each party represents and warrants that there are no brokers or finders
entitled to receive any payments in connection with the transactions provided
for in the Plan.
16. Amendments
----------
The parties may, by agreement in writing authorized by their respective
Board of Directors or Board of Trustees, amend the Plan at any time before or
after the Shareholders of the Acquired Fund approve the Acquisition. However,
after Shareholders of the Acquired Fund approve the Acquisition, the parties may
not amend the Plan in a manner that materially alters the obligations of the
other party. This Section shall not preclude the parties from changing the
Closing Date or the Effective Time by mutual agreement.
17. Waivers
-------
At any time prior to the Closing Date, either party may by written
instrument signed by it (a) waive the effect of any inaccuracies in the
representations and warranties made to it contained herein and (b) waive
compliance with any of the agreements, covenants or conditions made for its
benefit contained herein. Any waiver shall apply only to the particular
inaccuracy or requirement for compliance waived, and not any other or future
inaccuracy or lack of compliance.
18. Indemnification of Trustees
---------------------------
The Company agrees that all rights to indemnification and all limitations
of liability existing in favor of the Trust's current and former Trustees and
officers, acting in their capacities as such, under the Trust's Declaration and
By-Laws as in effect as of the date of the Plan shall survive the Acquisition as
obligations of the Acquiring Fund and shall continue in full force and effect,
without any amendment thereto, and shall constitute rights which may be asserted
against the Acquiring Fund, its successors or assigns.
19. Cooperation and Further Assurances
----------------------------------
Each party will cooperate with the other in fulfilling its obligations
under the Plan and will provide such information and documentation as is
reasonably requested by the other in carrying out the Plan's terms. Each party
will provide such further assurances concerning the performance of its
obligations hereunder and execute all documents for or in connection with the
consummation of the Acquisition as, with respect to such assurances or
documents, the other shall deem necessary or appropriate.
20. Updating of N-14 Registration Statement
---------------------------------------
If at any time prior to the Effective Time, a party becomes aware of any
untrue statement of a material fact or omission to state a material fact
required to be stated therein or necessary to make the statements made not
misleading in the N-14 Registration Statement, the party discovering the item
shall notify the other party and the parties shall cooperate in promptly
preparing, filing and clearing with the SEC and, if appropriate, distributing to
Shareholders appropriate disclosure with respect to the item.
21. Limitation on Liabilities
-------------------------
The obligations of the Trust, the Company, the Acquired Fund and the
Acquiring Fund shall not bind any of the directors or trustees, shareholders,
nominees, officers, employees or agents of the Trust or the Company personally,
but shall bind only the Trust, the Company, the Acquired Fund or the Acquiring
Fund, as appropriate. The execution and delivery of the Plan by an officer of
either party shall not be deemed to have been made by the officer individually
or to impose any liability on the officer personally, but shall bind only the
Trust or the Company, as appropriate. No series of the Trust or the Company
shall be liable for the obligations of any other series of the Trust or Company,
respectively.
22. Termination of the Acquired Fund
--------------------------------
If the parties complete the Acquisition, the Trust shall terminate the
Acquired Fund and cease its operations.
23. Notices
-------
Any notice, report, statement, certificate or demand required or permitted
by any provision of the Plan shall be in writing and shall be given in person or
by telecopy, certified mail or overnight express courier to:
For the Trust or the Acquired Fund:
Investment Managers Series Trust - W.P. Stewart & Co.
Growth Fund
803 West Michigan Street
Milwaukee, Wisconsin 53233
Attention: Secretary
For the Company or the Acquiring Fund:
AllianceBernstein Cap Fund, Inc. - Concentrated Growth
Fund
1345 Avenue of the Americas
New York, New York 10105
Attention: Secretary
24. Expenses
--------
All expenses relating to the Acquisition shall be paid by
AllianceBernstein. Notwithstanding the foregoing, expenses relating to the
Acquisition will in any event be paid by the party directly incurring such
expenses if and to the extent that the payment by another person of such
expenses would result in a Fund's failure to qualify for tax treatment as a
"regulated investment company" within the meaning of Section 851 of the Code or
would prevent the Acquisition from qualifying as a "reorganization" within the
meaning of Section 368(a) of the Code.
25. General
-------
The Plan supersedes all prior agreements between the parties with respect
to the subject matter hereof and may be amended only in writing signed by both
parties. The headings contained in the Plan are for reference only and shall not
affect in any way the meaning or interpretation of the Plan. Whenever the
context so requires, the use in the Plan of the singular will be deemed to
include the plural and vice versa. Nothing in the Plan, expressed or implied,
confers upon any other person any rights or remedies under or by reason of the
Plan. Neither party may assign or transfer any right or obligation under the
Plan without the written consent of the other party.
*** Signature Page Follows ***
In Witness Whereof, the parties hereto have executed the Plan as of the
day and year first above written.
Investment Managers Series Trust--W.P. Stewart & Co. Growth Fund
Attest:
_______________________________________ By: ___________________________________
Name: _________________________________ Name: _____________________________
Title: ________________________________ Title: ____________________________
AllianceBernstein Cap Fund, Inc.--Concentrated Growth Fund
Attest:
_______________________________________ By: ___________________________________
Name: _________________________________ Name: _____________________________
Title: ________________________________ Title: ____________________________
Solely for purposes of Section 24,
AllianceBernstein L.P.
Attest:
_______________________________________ By: ___________________________________
Name: _________________________________ Name: _____________________________
Title: ________________________________ Title: ____________________________
Appendix B
FUND PERFORMANCE
Set forth below is the performance information for the Acquired Fund. The
Acquiring Fund is a newly created fund that does not have performance
information for at least one calendar year. As a result, no performance
information for the Acquiring Fund is included in this Proxy
Statement/Prospectus.
The information shown below reflects the historical performance of W.P.
Stewart & Co. Growth Fund, Inc., a Maryland corporation (the "Predecessor Fund")
and of the Acquired Fund. Effective as of the close of business on November 30,
2009, the Predecessor Fund was reorganized into the Acquired Fund. The
Predecessor Fund and the Acquired Fund have identical investment objectives and
strategies and, until December 13, 2013, the same investment adviser. The
performance information provided below indicates some of the risks of investing
in the Acquired Fund by showing changes in the Predecessor Fund's and the
Acquired Fund's performance from year to year and by comparing the performance
of the Predecessor Fund and the Acquired Fund with the performance of a
broad-based market index. The table below illustrates the Predecessor Fund's and
the Acquired Fund's total return compared with a broad-based securities market
index. Updated performance information is available on the Acquired Fund's
website at www.wpstewart.com/WPSCOGF.aspx. Performance information represents
only past performance, before and after taxes, and does not necessarily indicate
future results. The Acquired Fund and the Acquiring Fund may not perform at the
same level in the future.
Through September 30, 2013, the year-to-date unannualized return for the
Acquired Fund's shares was 22.32%.
[The following table was depicted as a bar chart in the printed material.]
16.85 17.73 5.49 6.85 -0.03 -31.06 32.65 12.61 0.82 15.87
--------------------------------------------------------------------------------
03 04 05 06 07 08 09 10 11 12
During the 10-year period shown in the bar chart, the highest return for a
quarter was 17.10% (quarter ended March 31, 2012) and the lowest return for a
quarter was -20.33% (quarter ended December 31, 2008).
Average Annual Total Returns
(for periods ended December 31, 2012)
---------------------------------------------------------------------------------------------------------------
Since Inception
One Year Five Years Ten Years (2/28/94)
---------------------------------------------------------------------------------------------------------------
Return Before Taxes 15.87% 3.76% 6.43% 7.69%
---------------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions* 15.87% 3.58% 5.78% 6.81%
---------------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and 10.32% 3.18% 5.52% 6.57%
Sale of Fund Shares*
---------------------------------------------------------------------------------------------------------------
S&P 500(R) Index (reflects no deduction 16.00% 1.66% 7.10% 8.16%
for fees, expenses or taxes)
---------------------------------------------------------------------------------------------------------------
* After-tax returns are estimated and based on calculations using the historical
highest individual federal marginal income tax rates and do not reflect the
impact of state and local taxes. Actual after-tax returns depend on an
individual investor's tax situation and are likely to differ from those shown.
After-tax returns are not relevant to investors who hold Acquired Fund shares
through tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts.
Appendix C
FEE INFORMATION
Fee Table
The purpose of the tables below is to assist an investor in understanding
the various costs and expenses that a shareholder bears directly and indirectly
from an investment in the Funds. The tables allow you to compare any sales
charges and expenses of the Acquired Fund and (pro forma) estimates for the
Acquiring Fund in its first year following the Acquisition. Under the Plan,
shares of beneficial interest in the Acquired Fund will be reorganized into
Advisor Class shares of the Acquiring Fund. The tables also include Annual Fund
Operating Expenses and Expense Examples on a pro forma combined basis.
The Annual Fund Operating Expenses and Example tables shown below are
based on actual expenses incurred for the fiscal period ended June 30, 2013, for
the Acquired Fund and estimated expenses for the fiscal year ending June 30,
2014, for the Acquiring Fund. Pro forma numbers are estimated in good faith and
are hypothetical. As indicated in the fee and expense information set forth
below, the total fund operating expenses after fee waiver and/or expense
reimbursement for Advisor Class shares of the Acquiring Fund will be the same as
for shares of the Acquired Fund.
Shareholder Fees (fees paid directly from your investment)
Acquired Fund Acquiring Fund -
Advisor Class Shares
------------------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on None
Purchases (as a percentage of offering price) None
------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) None
(as a percentage of offering price or
redemption proceeds, whichever is lower) None
------------------------------------------------------------------------------------------
Redemption fee if redeemed within 60 days as of
purchase (as a percentage of amount redeemed) 1.00% None
------------------------------------------------------------------------------------------
Annual Fund Operating Expenses (expenses that you pay each year as a percentage
of the value of your investment)
Acquiring Fund - Advisor Class
Acquired Fund (pro forma)
---------------------------------------------------------------------------------------------------------
Management Fees 1.00% 1.00%
Distribution and/or Service (12b-1) Fees
None None
Other Expenses:
Transfer Agent 0.18% 0.28%
Other Expenses 0.77% 1.33%
----- -----
Total Other Expenses 0.95% 1.61%(a)
----- --------
Total Annual Fund Operating Expenses 1.95% 2.61%
===== =====
Fee Waiver and/or Expense Reimbursement (0.70)% (1.38)%
------- -------
Total Annual Fund Operating Expenses After Fee Waiver
and/or Expense Reimbursement 1.23%(b) 1.23%(c)
======== ========
---------------------------------------------------------------------------------------------------------
(a) Total other expenses are based on estimated amounts for the current fiscal
year.
(b) The WPS Adviser has contractually agreed to waive its fees and/or pay for
operating expenses of the Acquired Fund to ensure that total annual fund
operating expenses (excluding taxes, leverage interest, brokerage
commissions, dividend or interest expenses on short sales, acquired fund
fees and expenses, expenses incurred in connection with any merger or
acquisition or extraordinary expenses, such as litigation expenses) do not
exceed 1.23% of average daily net assets of the Acquired Fund. The
agreement was effective until April 30, 2014, and was terminated by the
acquisition of the WPS Adviser.
(c) The Adviser has also contractually agreed to waive its management fees
and/or to bear expenses of the Acquiring Fund through the period ending
one year from the date of the Acquiring Fund's Prospectus to the extent
necessary to prevent total operating expenses of the Acquiring Fund
(excluding expenses associated with acquired fund fees and expenses other
than the advisory fees of any AllianceBernstein Mutual Funds in which the
Acquiring Fund may invest, interest expense, taxes, extraordinary
expenses, and brokerage commissions and other transaction costs), on an
annualized basis, from exceeding 1.23% of average daily net assets,
respectively, for Advisor Class shares. The expense limitation agreement
may be terminated after one year upon 60 days' prior written notice by the
Adviser.
Examples
The following examples are intended to help you compare the costs of
investing in each of the Acquired Fund and the Acquiring Fund. The examples
assume that you invest $10,000 in each of the Acquired Fund and the Acquiring
Fund after the Acquisition for the time periods indicated. The examples also
assume that your investment has a 5% return each year, that all distributions
are reinvested and that each Fund's operating expenses remain the same. The
examples reflect the contractual fee waivers through the end of their respective
terms. Your actual costs may be higher or lower.
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Acquired Fund $135 $552 $994 $2,224
Acquiring Fund - Advisor Class (pro forma) $125 $680 $1,262 $2,841
Portfolio Turnover
Each Fund pays transaction costs, such as commissions, when it buys and
sells securities (or "turns over" its portfolio). A higher portfolio turnover
rate may indicate higher transaction costs and may result in higher taxes when
Fund shares are held in a taxable account. These costs, which are not reflected
in annual fund operating expenses or in the examples, affect the Fund's
performance. During the most recent fiscal year, the Acquired Fund's portfolio
turnover rate was 34% of the average value of its portfolio.
Appendix D
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
The Acquired Fund and the Acquiring Fund have identical or substantially
identical investment objectives and strategies. The following chart compares the
investment objective, status and investment policies of each Fund. The second
chart contained in this Appendix compares the fundamental and non-fundamental
investment policies of each Fund.
W.P. Stewart & Co. Growth Fund AllianceBernstein Concentrated Growth Fund
------------------------------ ------------------------------------------
---------------------------------------------------------------------------------------------------
Investment The Fund's investment objective is to earn Same, except that the investment objective is a
Objective capital gains. This is a fundamental policy.(1) non-fundamental policy.(2)
--------
(1) Fundamental investment policies are policies that may not be changed
without a shareholder vote.
(2) "Same" means the same as W.P. Stewart & Co. Growth Fund, except as certain
policies are non-materially revised to match the Adviser's standardized
policies. Non-fundamental policies are policies that may be changed
without a shareholder vote.
Status The Fund is non-diversified. Same.
Investment Policies
---------------------------------------------------------------------------------------------------
Investment The Fund invests primarily in common stocks of Substantially the same, except for certain
Policies U.S. companies listed on the New York Stock non-material differences.
Exchange (the "Exchange") based on a variety
of factors. Such factors include: a company's
record and projections of profit and earnings
growth, accuracy and availability of
information with respect to the company,
success and experience of management,
accessibility of management to the Fund's
Adviser, product lines and competitive
position both in the United States and abroad,
lack of cyclicality, large market
capitalization and liquidity of the company's
securities. The Fund primarily invests in
large-cap companies.
The Adviser employs an appraisal method which
attempts to measure each prospective company's
quality and growth rate by numerous criteria.
Such criteria include the company's record and
projections of profit and earnings growth,
accuracy and availability of information with
respect to the company, success and experience
of management, accessibility of management to
the Adviser, product lines and competitive
position both in the United States and abroad,
lack of cyclicality, large market
capitalization and liquidity of the company's
securities. The Adviser compares these results
to the general stock markets to determine the
relative attractiveness of each company at a
given time. The Adviser weighs economic,
political and market factors in making
investment decisions; this appraisal technique
attempts to measure each investment candidate
not only against other stocks of the same
industry group, but also against a broad
spectrum of investments.
The Fund invests in a relatively small number
of individual stocks. The Fund is considered
to be "non-diversified" which means that the
securities laws do not limit the percentage of
its assets that it may invest in any one
company (subject to certain limitations under
the Internal Revenue Code of 1986, as
amended).
Common Stock The Fund may invest in common stock, which Same.
represents an equity (ownership) interest in a
company, and usually possesses voting rights
and earns dividends.
Preferred Stock The Fund may invest in preferred stock, which Same.
is a class of stock having a preference over
common stock as to the payment of dividends
and the recovery of investment in the event a
company is liquidated, although preferred
stock is usually subordinate to the debt
securities of the issuer.
Mid-Cap Stocks Although the Fund primarily invests in Same.
large-cap stocks (i.e., in companies that have
market capitalizations of $5 billion or more),
it may also invest in the stocks of
mid-capitalization companies, which are
companies that have market capitalizations of
$2 billion to $5 billion ("mid-cap").
Convertible The Fund may invest in convertible securities, Same.
Securities which include preferred stocks, warrants or
other securities that may be converted or
exchanged for a prescribed amount of common
stock or other security of the same or a
different issuer or into cash within a
particular period of time at a specified price
or formula.
Foreign The Fund may invest in stocks issued by Same.
Investments and non-U.S. companies. Such investments will
Foreign Currency normally be made through the purchase of
American Depositary Receipts ("ADRs").
The Fund does not intend to enter into any
type of transaction to hedge currency
fluctuations.
The Fund may purchase foreign bank
obligations.
Depositary The Fund may invest in depositary receipts, Same.
Receipts including ADRs, European Depositary Receipts
("EDRs") and Global Depositary Receipts
("GDRs").
Debt Securities The Fund may invest in debt securities used by Same.
issuers to borrow money.
Temporary The Fund may take temporary defensive measures Same.
Investments that are inconsistent with the Fund's normal
fundamental or non-fundamental investment
policies and strategies in response to adverse
market, economic, political, or other
conditions as determined by the Adviser.
Repurchase The Fund may acquire securities pursuant to Same.
Agreements repurchase agreements. Repurchase agreements
will be fully collateralized at all times. It
is the policy of the Fund to obtain possession
of collateral with a market value equal to or
in excess of the principal amount of the cash
transferred under the agreement.
Other The Fund may invest in shares of other Same.
Investment investment companies (each, an "Underlying
Companies Fund"), including open-end funds, closed-end
funds, unit investment trusts ("UITs") and
exchange-traded funds ("ETFs"), to the extent
permitted by applicable law (including the
Investment Company Act of 1940 (the "1940
Act")) and subject to certain restrictions.
Borrowing The Fund is authorized to borrow money in Same.
amounts up to 33 1/3% of the Fund's total
assets (including the amount borrowed) for any
purpose. The Fund also is authorized to borrow
an additional 5% of its total assets (not
including the amount borrowed) for temporary
purposes (such as clearance of portfolio
transactions, the payment of dividends and
share redemptions). Neither the Fund nor the
Adviser, on behalf of the Fund, presently
intends to borrow more than 5% of the Fund's
net assets, except that for temporary
purposes, borrowings may be up to 10% of the
Fund's net assets.
Illiquid The Fund may hold up to 5% of the value of its Same, except that this policy is non-fundamental.
Securities total assets in illiquid securities, including
certain securities which cannot be readily
resold to the public because of legal or
contractual restrictions, non-negotiable
deposits with banks, repurchase agreements
which have a maturity of longer than seven
days and securities that are not readily
marketable. This is a fundamental policy.
Lending The Fund may lend its portfolio securities to Same, except that the Fund has no restrictions
Portfolio brokers, dealers and financial institutions on securities lending and intends to lend its
Securities when secured by collateral maintained on a securities subject to applicable 1940 Act and
daily marked-to-market basis in an amount regulatory restrictions.
equal to at least 100% of the market value,
determined daily, of the loaned securities.
The Fund intends to limit its securities
lending activities so that no more than 5% of
the value of the Fund's total assets will be
represented by securities loaned. The Fund
does not currently intend to lend securities.
Fundamental Investment Policies
---------------------------------------------------------------------------------------------------
The Fund will not make short sales of Same, except that this is a non-fundamental
securities, invest in warrants or put or call investment policy.
options (or combinations thereof) or purchase
any securities on margin, except for
short-term credits necessary for clearance of
portfolio transactions.
The Fund will not issue senior securities. Same.
The Fund may borrow money in amounts up to 33 Same.
1/3% of its total assets (including the amount
borrowed) and the Fund may borrow up to an
additional 5% of its total assets (not
including the amount borrowed) for temporary
purposes.
The Fund will not underwrite securities issued Same.
by others except to the extent the Fund may be
deemed to be an underwriter, under federal
securities laws, in connection with the sale
of its portfolio securities.
The Fund will not invest more than 5% of the This policy has been eliminated because it was a
value of its total assets in securities of policy connected to state law requirements that
companies which, including their predecessors, were in effect prior to 1996 that are not
have a record of less than three years' applicable to the Fund.
continuous operation.
The Fund will not invest more than 25% of the Same.
value of its total assets in any one industry
or group of related industries.
The Fund will not invest in real estate, real Same.
estate limited partnerships or real estate
mortgage loans, although the Fund may invest
in marketable securities that are secured by
real estate and marketable securities of
companies that invest or deal in real estate
or real estate mortgage loans.
The Fund will not engage in the purchase or Same.
sale of commodities or commodity futures
contracts or invest in oil, gas or other
mineral exploration or development programs,
although the Fund may invest in securities
issued by companies that engage in such
activities.
The Fund will not make loans, except that this Same.
restriction shall not prohibit the Fund from
(i) purchasing publicly distributed debt
securities in accordance with the Fund's
investment objectives and policies, (ii)
lending portfolio securities and (iii)
entering into repurchase agreements.
Appendix E
DESCRIPTION OF PRINCIPAL RISKS OF THE FUNDS
Each Fund has the same investment risks although they may be described
differently. These risks are market risk, focused portfolio risk,
non-diversification risk and management risk. The Acquired Fund includes
specific risks, including growth stock risk and large-cap risk, which are not
described separately in the Acquiring Fund prospectus because they are included
in the broader description of market risk. Each of these risks is more fully
described below. Each Fund could become subject to additional risks because the
types of investments made by each Fund can change over time.
Market Risk The value of the Fund's assets will fluctuate as the
stock market fluctuates. The value of the Fund's
investments may decline, sometimes rapidly and
unpredictably, simply because of economic changes or
other events that affect large portions of the market.
It includes the risk that a particular style of
investing, such as growth, may underperform the market
generally.
Focused Portfolio
Risk Investments in a limited number of companies may have
more risk because changes in the value of a single
security may have a more significant effect, either
negative or positive, on the Fund's net asset value, or
NAV.
Non-diversification
Risk The Fund is a "non-diversified" investment company,
which means that the Fund may invest a larger portion of
its assets in fewer companies than a diversified
investment company. This increases the risks of
investing in the Fund since the performance of each
stock has a greater impact on the Fund's performance. To
the extent that the Fund invests a relatively high
percentage of its assets in securities of a limited
number of companies, the Fund may also be more
susceptible than a diversified investment company to any
single economic, political or regulatory occurrence.
Management Risk The Fund is subject to management risk because it is an
actively-managed investment fund. The Adviser will apply
its investment techniques and risk analyses in making
investment decisions, but there is no guarantee that its
techniques will produce the intended results.
Appendix F
CERTAIN INFORMATION APPLICABLE TO ADVISOR CLASS SHARES OF THE ACQUIRING FUND
HOW TO BUY SHARES
The purchase of the Fund's shares is priced at the next-determined net
asset value ("NAV") after your order is received in proper form.
Other Purchase Information
Your broker or financial advisor must receive your purchase request by the
Fund Closing Time, which is the close of regular trading on any day the New York
Stock Exchange (the "Exchange") is open (ordinarily, 4:00 p.m., Eastern time,
but sometimes earlier, as in the case of scheduled half-day trading or
unscheduled suspensions of trading) and submit it to the Fund by a pre-arranged
time for you to receive the next-determined NAV.
If you are an existing Fund shareholder and you have completed the
appropriate section of the Mutual Fund Application, you may purchase additional
shares by telephone with payment by electronic funds transfer in amounts not
exceeding $500,000. AllianceBernstein Investor Services, Inc., or ABIS, must
receive and confirm telephone requests before the Fund Closing Time to receive
that day's public offering price. Call 800-221-5672 to arrange a transfer from
your bank account.
Advisor Class Shares
You may purchase Advisor Class shares through your financial advisor at
NAV. Advisor Class shares may be purchased and held solely:
o through accounts established under a fee-based program,
sponsored and maintained by a registered broker-dealer or
other financial intermediary and approved by AllianceBernstein
Investments, Inc. ("ABI");
o through a defined contribution employee benefit plan (e.g., a
401(k) plan) and that purchases shares directly without the
involvement of a financial intermediary;
o by investment advisory clients of, and certain other persons
associated with, the Adviser and its affiliates or the Fund;
and
o through certain special arrangements approved by the Adviser,
such as purchases by shareholders of the Acquired Fund.
The Fund's Statement of Additional Information ("SAI") has more detailed
information about who may purchase and hold Advisor Class shares.
Procedures
Payment may be made by wire transfer or check. All checks should be made payable
to the Fund. Payment must be made in U.S. Dollars. All purchase orders will be
confirmed in writing.
Required Information
The Fund is required by law to obtain, verify and record certain personal
information from you or persons on your behalf in order to establish an account.
Required information includes name, date of birth, permanent residential address
and taxpayer identification number (for most investors, your social security
number). The Fund may also ask to see other identifying documents. If you do not
provide the information, the Fund will not be able to open your account. If the
Fund is unable to verify your identity, or that of another person(s) authorized
to act on your behalf, or if the Fund believes it has identified potentially
criminal activity, the Fund reserves the right to take action it deems
appropriate or as required by law, which may include closing your account. If
you are not a U.S. citizen or resident alien, your account must be affiliated
with a Financial Industry Regulatory Authority, or FINRA, member firm.
The Fund is required to withhold 28% of taxable dividends, capital gains
distributions, and redemptions paid to any shareholder who has not provided the
Fund with his or her correct taxpayer identification number. To avoid this, you
must provide your correct tax identification number on your Mutual Fund
Application.
General
IRA custodians, plan sponsors, plan fiduciaries, plan recordkeepers, and
other financial intermediaries may establish their own eligibility requirements
as to the purchase, sale or exchange of Fund shares, including minimum and
maximum investment requirements. The Fund is not responsible for, and has no
control over, the decisions of any plan sponsor, fiduciary or other financial
intermediary to impose such differing requirements. ABI may refuse any order to
purchase shares. The Fund reserves the right to suspend the sale of its shares
to the public in response to conditions in the securities markets or for other
reasons.
SHARE CLASS EXPENSES
Advisor Class Shares are not subject to any initial sales charge or
Contingent Deferred Sales Charge ("CDSC"), although your financial advisor may
charge a fee.
A transaction, service, administrative or other similar fee may be charged
by your broker-dealer, agent or other financial intermediary, with respect to
the purchase, sale or exchange of Advisor Class shares made through your
financial advisor. Financial intermediaries, a fee-based program, or, for group
retirement plans, a plan sponsor or plan fiduciary, also may impose requirements
on the purchase, sale or exchange of shares that are different from, or in
addition to, those described in the Fund's Prospectus and SAI, including
requirements as to the minimum initial and subsequent investment amounts. The
Fund is not responsible for, and has no control over, the decision of any
financial intermediary, plan sponsor or fiduciary to impose such differing
requirements.
OTHER PROGRAMS
Dividend Reinvestment Program
Unless you specifically have elected to receive dividends or distributions
in cash, they will automatically be reinvested in the same class of additional
shares of the Fund. If you elect to receive distributions in cash, you will only
receive a check if the amount of the distribution is equal to or exceeds $25.00.
Distributions of less than $25.00 will automatically be reinvested in shares of
the Fund. To receive distributions of less than $25.00 in cash, you must have
bank instructions associated to your account so that distributions can be
delivered to you electronically via Electronic Funds Transfer using the
Automated Clearing House or "ACH". In addition, the Fund may reinvest your
distribution check (and future checks) in additional shares of the Fund if your
check (i) is returned as undeliverable or (ii) remains uncashed for nine months.
Dividend Direction Plan
A shareholder who already maintains accounts in more than one
AllianceBernstein Mutual Fund may direct the automatic investment of income
dividends and/or capital gains by one Fund, in any amount, without the payment
of any sales charges, in shares of the same class of one or more other
AllianceBernstein Mutual Fund(s).
Automatic Investment Program
The Automatic Investment Program allows investors to purchase shares of
the Fund through pre-authorized transfers of funds from the investor's bank
account. Under the Automatic Investment Program, an investor may (i) make an
initial purchase of at least $2,500 and invest at least $50 monthly or (ii) make
an initial purchase of less than $2,500 and commit to a monthly investment of
$200 or more until the investor's account balance is $2,500 or more. Please see
the Fund's SAI for more details.
PAYMENTS TO FINANCIAL ADVISORS AND THEIR FIRMS
Financial intermediaries market and sell shares of the Fund. These
financial intermediaries employ financial advisors and receive compensation for
selling shares of the Fund. Your individual financial advisor may receive some
or all of the amounts paid to the financial intermediary that employs him or
her.
--------------------------------------------------------------------------------
WHAT IS A FINANCIAL INTERMEDIARY?
A financial intermediary is a firm that receives compensation for
selling shares of the Fund and/or provides services to the Fund's
shareholders. Financial intermediaries may include, among others, your
broker, your financial planner or advisors, banks and insurance companies.
Financial intermediaries may employ financial advisors who deal with you
and other investors on an individual basis.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Your financial advisor's firm receives compensation from the Fund, ABI
and/or the Adviser in several ways from various sources, which include
some or all of the following:
- up front sales commissions;
- Rule 12b-1 fees;
- additional distribution support;
- defrayal of costs for educational seminars and training; and
- payments related to providing shareholder record-keeping and/or
transfer agency services.
Please read the Prospectus carefully for information on this compensation.
--------------------------------------------------------------------------------
Other Payments for Distribution Services and Educational Support
In addition to the commissions paid to financial intermediaries at the
time of sale and Rule 12b-1 fees, some or all of which may be paid to financial
intermediaries (and, in turn, to your financial advisor), ABI, at its expense,
currently provides additional payments to firms that sell shares of the
AllianceBernstein Mutual Funds. Although the individual components may be higher
and the total amount of payments made to each qualifying firm in any given year
may vary, the total amount paid to a financial intermediary in connection with
the sale of shares of the AllianceBernstein Mutual Funds will generally not
exceed the sum of (a) 0.25% of the current year's fund sales by that firm and
(b) 0.10% of average daily net assets attributable to that firm over the year.
These sums include payments to reimburse directly or indirectly the costs
incurred by these firms and their employees in connection with educational
seminars and training efforts about the AllianceBernstein Mutual Funds for the
firms' employees and/or their clients and potential clients. The costs and
expenses associated with these efforts may include travel, lodging,
entertainment and meals. ABI may pay a portion of "ticket" or other
transactional charges.
For 2013, ABI's additional payments to these firms for distribution
services and educational support related to the AllianceBernstein Mutual Funds
is expected to be approximately 0.05% of the average monthly assets of the
AllianceBernstein Mutual Funds, or approximately $21 million. In 2012, ABI paid
approximately 0.05% of the average monthly assets of the AllianceBernstein
Mutual Funds or approximately $19 million for distribution services and
educational support related to the AllianceBernstein Mutual Funds.
A number of factors are considered in determining the additional payments,
including each firm's AllianceBernstein Mutual Fund sales, assets and redemption
rates, and the willingness and ability of the firm to give ABI access to its
financial advisors for educational and marketing purposes. In some cases, firms
will include the AllianceBernstein Mutual Funds on a "preferred list". ABI's
goal is to make the financial advisors who interact with current and prospective
investors and shareholders more knowledgeable about the AllianceBernstein Mutual
Funds so that they can provide suitable information and advice about the funds
and related investor services.
The Fund and ABI also make payments for recordkeeping and other transfer
agency services to financial intermediaries that sell AllianceBernstein Mutual
Fund shares. These expenses paid by the Fund are included in "Other Expenses"
under "Fees and Expenses of the Fund--Annual Fund Operating Expenses" in the
Summary Information at the beginning of the Fund's Prospectus.
--------------------------------------------------------------------------------
If one mutual fund sponsor makes greater distribution assistance payments
than another, your financial advisor and his or her firm may have an
incentive to recommend one fund complex over another. Similarly, if your
financial advisor or his or her firm receives more distribution assistance
for one share class versus another, then they may have an incentive to
recommend that class.
Please speak with your financial advisor to learn more about the total
amounts paid to your financial advisor and his or her firm by the Fund,
the Adviser, ABI and by sponsors of other mutual funds he or she may
recommend to you. You should also consult disclosures made by your
financial advisor at the time of purchase.
--------------------------------------------------------------------------------
As of the date of the Prospectus, ABI anticipates that the firms that will
receive additional payments for distribution services and/or educational support
include:
Advisor Group, Inc.
Ameriprise Financial Services
AXA Advisors
Cadaret, Grant & Co.
CCO Investment Services Corp.
Chase Investment Services
Citigroup Global Markets, Inc.
Commonwealth Financial Network
Donegal Securities
Financial Network Investment Company
LPL Financial
Merrill Lynch
Morgan Stanley
Multi-Financial Securities Corporation
Northwestern Mutual Investment Services
PrimeVest Financial Services
Raymond James
RBC Wealth Management
Robert W. Baird
UBS Financial Services
Wells Fargo Advisors
Although the Fund may use brokers and dealers that sell shares of the Fund
to effect portfolio transactions, the Fund does not consider the sale of
AllianceBernstein Mutual Fund shares as a factor when selecting brokers or
dealers to effect portfolio transactions.
HOW TO EXCHANGE ADVISOR CLASS SHARES
You may exchange your Advisor Class shares for shares of the same class of
other AllianceBernstein Mutual Funds (including AllianceBernstein Exchange
Reserves, a money market fund managed by the Adviser) provided that the other
fund offers the same class of shares and, in the case of retirement plans, is an
investment option under the plan. Exchanges of shares are made at the
next-determined NAV, without sales or service charges, after your order is
received in proper form. All exchanges are subject to the minimum investment
restrictions set forth in the prospectus for the AllianceBernstein Mutual Fund
whose shares are being acquired. You may request an exchange either directly or
through your financial intermediary or, in the case of retirement plan
participants, by following the procedures specified by your plan sponsor or plan
recordkeeper. In order to receive a day's NAV, ABIS must receive and confirm
your telephone exchange request by the Fund Closing Time on that day. The Fund
may modify, restrict or terminate the exchange privilege on 60 days' written
notice.
HOW TO SELL OR REDEEM SHARES
You may "redeem" your shares (i.e., sell your shares to the Fund) on any
day the Exchange is open, either directly or through your financial intermediary
or, in the case of retirement plan participants, by following the procedures
specified by your plan sponsor or plan recordkeeper. Your sale price will be the
next-determined NAV after the Fund receives your redemption request in proper
form. Normally, redemption proceeds are sent to you within seven days. If you
recently purchased your shares by check or electronic funds transfer, your
redemption payment may be delayed until the Fund is reasonably satisfied that
the check or electronic funds transfer has been collected (which may take up to
15 days). If you are in doubt about what procedures or documents are required by
your fee-based program or employee benefit plan to sell your shares, you should
contact your financial advisor.
Selling Shares Through Your Financial Intermediary or Retirement Plan
Your financial intermediary or plan recordkeeper must receive your sales
request by the Fund Closing Time and submit it to the Fund by a pre-arranged
time for you to receive that day's NAV. Your financial intermediary, plan
sponsor or plan recordkeeper is responsible for submitting all necessary
documentation to the Fund and may charge you a fee for this service.
Selling Shares Directly to the Fund By Mail:
o Send a signed letter of instruction or stock power, along with
certificates, to:
AllianceBernstein Investor Services, Inc.
P.O. Box 786003
San Antonio, TX 78278-6003
o For certified or overnight deliveries, send to:
AllianceBernstein Investor Services, Inc.
8000 IH 10 W, 4th floor
San Antonio, TX 78230
o For your protection, a bank, a member firm of a national stock
exchange or another eligible guarantor institution must
guarantee signatures. Stock power forms are available from
your financial intermediary, ABIS and many commercial banks.
Additional documentation is required for the sale of shares by
corporations, intermediaries, fiduciaries and surviving joint
owners. If you have any questions about these procedures,
contact ABIS.
By Telephone:
o You may redeem your shares for which no stock certificates
have been issued by telephone request. Call ABIS at
800-221-5672 with instructions on how you wish to receive your
sale proceeds.
o ABIS must receive and confirm a telephone redemption request
by the Fund Closing Time for you to receive that day's NAV.
o For your protection, ABIS will request personal or other
information from you to verify your identity and will
generally record the calls. Neither the Fund nor the Adviser,
ABIS, ABI or other Fund agent will be liable for any loss,
injury, damage or expense as a result of acting upon telephone
instructions purporting to be on your behalf that ABIS
reasonably believes to be genuine.
o If you have selected electronic funds transfer in your Mutual
Fund Application, the redemption proceeds will be sent
directly to your bank. Otherwise, the proceeds will be mailed
to you.
o Redemption requests by electronic funds transfer or check may
not exceed $100,000 per Fund account per day.
o Telephone redemption is not available for shares held in
nominee or "street name" accounts, retirement plan accounts,
or shares held by a shareholder who has changed his or her
address of record within the previous 30 calendar days.
FREQUENT PURCHASES AND REDEMPTIONS OF FUND SHARES
-------------------------------------------------
The Fund's Board has adopted policies and procedures designed to detect
and deter frequent purchases and redemptions of Fund shares or excessive or
short-term trading that may disadvantage long-term Fund shareholders. These
policies are described below. There is no guarantee that the Fund will be able
to detect excessive or short-term trading or to identify shareholders engaged in
such practices, particularly with respect to transactions in omnibus accounts.
Shareholders should be aware that application of these policies may have adverse
consequences, as described below, and avoid frequent trading in Fund shares
through purchases, sales and exchanges of shares. The Fund reserves the right to
restrict, reject or cancel, without any prior notice, any purchase or exchange
order for any reason, including any purchase or exchange order accepted by any
shareholder's financial intermediary.
Risks Associated With Excessive Or Short-Term Trading Generally. While the
Fund will try to prevent market timing by utilizing the procedures described
below, these procedures may not be successful in identifying or stopping
excessive or short-term trading in all circumstances. By realizing profits
through short-term trading, shareholders that engage in rapid purchases and
sales or exchanges of the Fund's shares dilute the value of shares held by
long-term shareholders. Volatility resulting from excessive purchases and sales
or exchanges of Fund shares, especially involving large dollar amounts, may
disrupt efficient portfolio management and cause the Fund to sell shares at
inopportune times to raise cash to accommodate redemptions relating to
short-term trading activity. In particular, the Fund may have difficulty
implementing its long-term investment strategies if it is forced to maintain a
higher level of its assets in cash to accommodate significant short-term trading
activity. In addition, the Fund may incur increased administrative and other
expenses due to excessive or short-term trading, including increased brokerage
costs and realization of taxable capital gains.
Funds that may invest significantly in securities of foreign issuers may
be particularly susceptible to short-term trading strategies. This is because
securities of foreign issuers are typically traded on markets that close well
before the time the Fund calculates its NAV at 4:00 p.m., Eastern time, which
gives rise to the possibility that developments may have occurred in the interim
that would affect the value of these securities. The time zone differences among
international stock markets can allow a shareholder engaging in a short-term
trading strategy to exploit differences in Fund share prices that are based on
closing prices of securities of foreign issuers established some time before the
Fund calculates its own share price (referred to as "time zone arbitrage"). The
Fund has procedures, referred to as fair value pricing, designed to adjust
closing market prices of securities of foreign issuers to reflect what is
believed to be the fair value of those securities at the time the Fund
calculates its NAV. While there is no assurance, the Fund expects that the use
of fair value pricing, in addition to the short-term trading policies discussed
below, will significantly reduce a shareholder's ability to engage in time zone
arbitrage to the detriment of other Fund shareholders.
A shareholder engaging in a short-term trading strategy may also target
the Fund irrespective of its investments in securities of foreign issuers. Any
Fund that invests in securities that are, among other things, thinly traded,
traded infrequently or relatively illiquid has the risk that the current market
price for the securities may not accurately reflect current market values. A
shareholder may seek to engage in short-term trading to take advantage of these
pricing differences (referred to as "price arbitrage"). The Fund may be
adversely affected by price arbitrage.
Policy Regarding Short-Term Trading. Purchases and exchanges of shares of
the Fund should be made for investment purposes only. The Fund seeks to prevent
patterns of excessive purchases and sales of Fund shares to the extent they are
detected by the procedures described below, subject to the Fund's ability to
monitor purchase, sale and exchange activity. The Fund reserves the right to
modify this policy, including any surveillance or account blocking procedures
established from time to time to effectuate this policy, at any time without
notice.
o Transaction Surveillance Procedures. The Fund, through its
agents, ABI and ABIS, maintains surveillance procedures to
detect excessive or short-term trading in Fund shares. This
surveillance process involves several factors, which include
scrutinizing transactions in Fund shares that exceed certain
monetary thresholds or numerical limits within a specified
period of time. Generally, more than two exchanges of Fund
shares during any 60-day period or purchases of shares
followed by a sale within 60 days will be identified by these
surveillance procedures. For purposes of these transaction
surveillance procedures, the Fund may consider trading
activity in multiple accounts under common ownership, control
or influence. Trading activity identified by either, or a
combination, of these factors, or as a result of any other
information available at the time, will be evaluated to
determine whether such activity might constitute excessive or
short-term trading. With respect to managed or discretionary
accounts for which the account owner gives his/her broker,
investment adviser or other third-party authority to buy and
sell Fund shares, the Fund may consider trades initiated by
the account owner, such as trades initiated in connection with
bona fide cash management purposes, separately in their
analysis. These surveillance procedures may be modified from
time to time, as necessary or appropriate to improve the
detection of excessive or short-term trading or to address
specific circumstances.
o Account Blocking Procedures. If the Fund determines, in its
sole discretion, that a particular transaction or pattern of
transactions identified by the transaction surveillance
procedures described above is excessive or short-term trading
in nature, the Fund will take remedial action that may include
issuing a warning, revoking certain account-related privileges
(such as the ability to place purchase, sale and exchange
orders over the internet or by phone) or prohibiting or
"blocking" future purchase or exchange activity. However,
sales of Fund shares back to the Fund or redemptions will
continue to be permitted in accordance with the terms of the
Fund's current Prospectus. As a result, unless the shareholder
redeems his or her shares, which may have consequences if the
shares have declined in value or adverse tax consequences may
result, the shareholder may be "locked" into an unsuitable
investment. A blocked account will generally remain blocked
for 90 days. Subsequent detections of excessive or short-term
trading may result in an indefinite account block or an
account block until the account holder or the associated
broker, dealer or other financial intermediary provides
evidence or assurance acceptable to the Fund that the account
holder did not or will not in the future engage in excessive
or short-term trading.
o Applications of Surveillance Procedures and Restrictions to
Omnibus Accounts. Omnibus account arrangements are common
forms of holding shares of the Fund, particularly among
certain brokers, dealers and other financial intermediaries,
including sponsors of retirement plans. The Fund applies its
surveillance procedures to these omnibus account arrangements.
As required by SEC rules, the Fund has entered into agreements
with all of its financial intermediaries that require the
financial intermediaries to provide the Fund, upon the request
of the Fund or its agents, with individual account level
information about their transactions. If the Fund detects
excessive trading through its monitoring of omnibus accounts,
including trading at the individual account level, the
financial intermediaries will also execute instructions from
the Fund to take actions to curtail the activity, which may
include applying blocks to accounts to prohibit future
purchases and exchanges of Fund shares. For certain retirement
plan accounts, the Fund may request that the retirement plan
or other intermediary revoke the relevant participant's
privilege to effect transactions in Fund shares via the
internet or telephone, in which case the relevant participant
must submit future transaction orders via the U.S. Postal
Service (i.e., regular mail).
DIVIDENDS, DISTRIBUTIONS AND TAXES
Income dividends and capital gains distributions, if any, declared by the
Fund on its outstanding shares will, at the election of each shareholder, be
paid in cash or in additional shares of the same class of shares of the Fund. If
paid in additional shares, the shares will have an aggregate NAV as of the close
of business on the declaration date of the dividend or distribution equal to the
cash amount of the dividend or distribution. You may make an election to receive
dividends and distributions in cash or in shares at the time you purchase
shares. Your election can be changed at any time prior to a record date for a
dividend. There is no sales or other charge in connection with the reinvestment
of dividends or capital gains distributions. Cash dividends may be paid by
check, or, at your election, electronically via the ACH network.
If you receive an income dividend or capital gains distribution in cash
you may, within 120 days following the date of its payment, reinvest the
dividend or distribution in additional shares of the Fund without charge by
returning to the Adviser, with appropriate instructions, the check representing
the dividend or distribution. Thereafter, unless you otherwise specify, you will
be deemed to have elected to reinvest all subsequent dividends and distributions
in shares of the Fund.
While it is the intention of the Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and timing of any dividend or distribution will depend
on the realization by the Fund of income and capital gains from investments.
There is no fixed dividend rate and there can be no assurance that the Fund will
pay any dividends or realize any capital gains. The final determination of the
amount of the Fund's return of capital distributions for the period will be made
after the end of each calendar year.
You will normally have to pay federal income tax, and any state or local
income taxes, on the distributions you receive from the Fund, whether you take
the distributions in cash or reinvest them in additional shares. Distributions
of net capital gains from the sale of investments that the Fund owned for more
than one year and that are properly designated as capital gains distributions
are taxable as long-term capital gains. Distributions of dividends to the Fund's
non-corporate shareholders may be treated as "qualified dividend income", which
is taxed at the same preferential tax rates applicable to long-term capital
gains, if, in general, such distributions are derived from, and designated by
the Fund as, "qualified dividend income" and provided that holding period and
other requirements are met by both the shareholder and the Fund. "Qualified
dividend income" generally is income derived from dividends from U.S.
corporations and "qualified foreign corporations".
Other distributions by the Fund are generally taxable to you as ordinary
income. Dividends declared in October, November, or December and paid in January
of the following year are taxable as if they had been paid the previous
December. The Fund will notify you as to how much of the Fund's distributions,
if any, qualify for these reduced tax rates.
Investment income received by the Fund from sources within foreign
countries may be subject to foreign income taxes withheld at the source. To the
extent that the Fund is liable for foreign income taxes withheld at the source,
the Fund intends, if possible, to operate so as to meet the requirements of the
Code to "pass through" to the Fund's shareholders credits for foreign income
taxes paid (or to permit shareholders to claim a deduction for such foreign
taxes), but there can be no assurance that the Fund will be able to do so.
Furthermore, a shareholder's ability to claim a foreign tax credit or deduction
for foreign taxes paid by the Fund may be subject to certain limitations imposed
by the Code, as a result of which a shareholder may not be permitted to claim a
credit or deduction for all or a portion of the amount of such taxes.
Under certain circumstances, if the Fund realizes losses (e.g., from
fluctuations in currency exchange rates) after paying a dividend, all or a
portion of the dividend may subsequently be characterized as a return of
capital. Returns of capital are generally nontaxable, but will reduce a
shareholder's basis in shares of the Fund. If that basis is reduced to zero
(which could happen if the shareholder does not reinvest distributions and
returns of capital are significant), any further returns of capital will be
taxable as capital gain.
If you buy shares just before the Fund deducts a distribution from its
NAV, you will pay the full price for the shares and then receive a portion of
the price back as a taxable distribution.
The sale or exchange of Fund shares is a taxable transaction for federal
income tax purposes.
Each year shortly after December 31, the Fund will send you tax
information stating the amount and type of all its distributions for the year.
You are encouraged to consult your tax adviser about the federal, state, and
local tax consequences in your particular circumstances, as well as about any
possible foreign tax consequences.
Non-U.S. Shareholders
If you are a nonresident alien individual or a foreign corporation for
federal income tax purposes, please see the Fund's SAI for information on how
you will be taxed as a result of holding shares in the Fund.
Appendix G
COMPARISON OF BUSINESS STRUCTURE AND ORGANIZATION
The following information provides only a summary of the key features of
the organizational structure and governing documents of the Funds. The Acquiring
Fund is a series of the Company, an open-end management investment company
organized as a Maryland corporation. The Charter and Bylaw provisions that
govern the Company apply to the Acquiring Fund. The Acquired Fund is a series of
the Trust, an open-end management investment company organized as a Delaware
statutory trust. The Declaration of Trust ("Declaration") and By-Law provisions
that govern the Trust apply to the Acquired Fund. The differences in the Charter
and Bylaw provisions of the Company and the Declaration and By-Law provisions of
the Trust, and their respective corporate organizational structures are noted
below.
General
Each Fund has procedures available to its respective shareholders for
calling shareholders' meetings and for the removal of Directors (or Trustees).
Under Maryland law, unless the charter provides otherwise (which the Company's
does not), a director may be removed, either with or without cause, at a meeting
duly called and at which a quorum is present by the affirmative vote of the
holders of a majority of the votes entitled to be cast for the election of
Directors. Under the Bylaws of the Company, shareholder-requested special
meetings of shareholders for any other purpose shall be called by the Company's
Secretary only upon the written request of shareholders entitled to cast not
less than a majority of all the votes entitled to be cast at the meeting.
Under the Declaration of the Trust, a Trustee may be removed, either with
or without cause, at a meeting duly called and at which a quorum is present by
the affirmative vote of the holder of two-thirds of the votes entitled to be
cast for the election of Trustees. Under the By-Laws of the Trust, a
shareholder-requested special meeting of shareholders for any other purpose
shall be called by the Trust's Trustees only upon the written request of
shareholders holding at least ten percent (10%) of the shares then outstanding.
If the Trustees fail to call or give notice of any such meeting for a period of
thirty (30) days after written request by shareholders, then shareholders
holding at least ten percent (10%) of the shares then outstanding may call and
give notice of such meeting.
For each of the Company and the Trust, the presence in person or by proxy
of the holders of at least one-third of the shares entitled to be cast
constitutes a quorum at any meeting of shareholders of the Company or Trust,
respectively, or their series, as applicable. When a quorum is present at any
meeting, the affirmative vote of a majority of the votes (or with respect to the
election of Directors (or Trustees), a plurality of votes) cast shall decide any
question brought before such meeting, except as otherwise required by law.
Shares of the Funds
The Funds' shares have no preemptive rights. Each share has equal voting,
dividend, distribution and liquidation rights. Shareholders are entitled to one
vote per share. All voting rights for the election of Directors (or Trustees)
are non-cumulative, which means that the holders of more than 50% of the shares
of common stock of the Fund can elect 100% of the Directors (or Trustees) then
nominated for election if they choose to do so and, in such event, the holders
of the remaining shares of will not be able to elect any Directors (or
Trustees). The Acquiring Fund is organized as a series of a Maryland corporation
and thus its shareholders have the rights due to them under Maryland law. The
Acquired Fund is organized as a series of a Delaware statutory trust and thus
its shareholders have the rights due to them under Delaware law. The Company and
the Trust are not required to, and do not, hold annual meetings of shareholders
and have no current intention to hold such meetings, except as required by the
1940 Act. Under the 1940 Act, the Company and the Trust are required to hold a
shareholder meeting if, among other reasons, the number of Directors (or
Trustees) elected by shareholders is less than a majority of the total number of
Directors (or Trustees), or if a Fund seeks to change its fundamental investment
policies.
Dividends and Distributions
The Funds have substantially similar dividends and distributions policies.
While each of the Funds intends to distribute to its shareholders substantially
all of each fiscal year's net income and net realized capital gains, if any, the
amount and time of any dividend or distribution will depend on the realization
by the Fund of income and capital gains from investments. There is no fixed
dividend rate and there can be no assurance that the Fund will pay any dividends
or realize any capital gains. The final determination of the amount of the
Acquiring Fund's return of capital distributions for the period will be made
after the end of each calendar year. The Acquired Fund makes distributions of
net investment income and net capital gains, if any, at least annually,
typically in December.
The income dividends and capital gains distributions for each of the
Funds, if any, declared will, at the election of each shareholder, be paid in
cash or in additional shares. If paid in additional shares, the shares will have
an aggregate net asset value as of the close of business on the declaration date
of the dividend or distribution equal to the cash amount of the dividend or
distribution. A shareholder of the Acquiring Fund may make an election to
receive dividends and distributions in cash or in shares at the time of purchase
of shares. The shareholder's election can be changed at any time prior to a
record date for a dividend. Dividends and distributions of the Acquired Fund
will be reinvested in the Fund unless a shareholder elects to (i) receive net
investment income dividends in cash, while reinvesting capital gain
distributions in additional Fund shares, or (ii) receive all dividends and
distributions in cash. There is no sales or other charge in connection with the
reinvestment of dividends or capital gains distributions.
Indemnification and Liability of Directors (or Trustees) and Officers
The Charter of the Company generally provides for the indemnification of
officers and Directors, as applicable, to the full extent permitted by Maryland
law. This indemnification does not protect any such person against any liability
to the Company or any shareholder thereof to which such person would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the satisfaction of such person's
office.
Maryland law permits a Maryland corporation to include in its charter a
provision limiting the liability of its Directors and officers to the
corporation and its shareholders for money damages except for liability
resulting from (a) actual receipt of an improper benefit or profit in money,
property or services or (b) active and deliberate dishonesty established by a
final judgment as being material to the cause of action. The Company's charter
contains such a provision that eliminates Directors' and officers' liability to
the maximum extent permitted by Maryland law. This exculpation does not protect
any such person against any liability to the Company or any shareholder thereof
to which such person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the satisfaction of such person's office.
The Declaration of the Trust provides for the indemnification of officers
and Trustees, as applicable, against all liabilities, including but not limited
to amounts paid in satisfaction of judgments, in compromise or as fines and
penalties, and expenses, including reasonable accountants' and counsel fees,
incurred by any Trustee or officer in connection with the defense or disposition
of any action, suit or other proceeding, whether civil or criminal, before any
court or administrative or legislative body, in which such person may be or may
have been involved as a party or otherwise or with which such person may be or
may have been threatened, while in office or thereafter, by reason of being or
having been such a Trustee or officer. This indemnification does not protect any
such person against any liability to the Trust or any shareholder thereof to
which such person would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
satisfaction of such person's office.
Appendix H
CAPITALIZATION
The following table shows on an unaudited basis the capitalization of each
of the Funds as of June 30, 2013, and on a pro forma combined basis, giving
effect to the acquisition of the assets and liabilities of the Acquired Fund by
the Acquiring Fund at net asset value as of June 30, 2013:
Acquired Fund Acquiring Fund Pro Forma Adjustments Combined Fund
(Advisor Class) (Advisor Class)
(pro forma)(1)
-------------- --------------- ---------------------- ---------------
Total Net Assets $20,530,405 $0 $(0) $20,530,405
Shares Outstanding 945,394 0 (0) $945,394(2)
NAV Per Share $21.72 $0 - $21.72
--------
(1) Assumes the Acquisition was consummated on February 28, 2014 and is for information purposes only. No
assurance can be given as to how many shares of the Acquiring Fund will be received by shareholders of
the Acquired Fund on the date the Acquisition takes place, and the foregoing should not be relied upon to
reflect the number of shares of the Acquiring Fund that will actually be received on or after such date.
(2) In connection with the Acquisition, shares of the Acquiring Fund will be issued to the shareholders of
the Acquired Fund. The number of shares assumed to be issued is equal to the net asset value of the
Acquired Fund divided by the net asset value per share of the Acquiring Fund as of February 28, 2014.
Appendix I
SHARE OWNERSHIP INFORMATION
Shares Outstanding
As of October 31, 2013, the Acquired Fund had 1,008,723.979 shares of
common stock outstanding.
Ownership of Shares
As of October 31, 2013, the Trustees and officers of the Acquired Fund as
a group beneficially owned less than 1% of the outstanding shares of common
stock of the Acquired Fund. To the knowledge of the Trust, the following table
shows the persons owning as of October 31, 2013, either of record or
beneficially, 5% or more of the outstanding shares of the Acquired Fund. As of
October 31, 2013, no shareholders may be deemed to "control" the Acquired Fund.
"Control" for this purpose is the ownership of more than 25% of the Acquired
Fund's voting securities.
Name and Address Number of Outstanding Percentage of Outstanding
of Shareholder Shares Owned Shares Owned
-------------- ------------ ------------
Arthur B. Schuller PSP & Trust 55350.910 5.49%
Carmel Valley, CA 93924
Charles Schwab & Co. Inc. 241279.004 23.93%
San Francisco, CA 94104
[LOGO]
ALLIANCEBERNSTEIN CAP FUND, INC.
ALLIANCEBERNSTEIN CONCENTRATED GROWTH FUND
(Class A-[____]; Class C-[____]; Advisor Class-[____]; Class R-[____];
Class K-[____]; Class I-[____]; Class Z-[____]; Class 1-[____];
Class 2-[____])
--------------------------------------------------------------------------------
1345 Avenue of the Americas
New York, New York 10105
Toll Free (800) 221-5672
--------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY [__], 2014
This Statement of Additional Information ("SAI") relates to the proposed
acquisition (the "Acquisition") of all of the assets and liabilities of the W.P.
Stewart & Co. Growth Fund (the "Acquired Fund"), a series of Investment Managers
Series Trust, by AllianceBernstein Concentrated Growth Fund (the "Acquiring
Fund"), a series of AllianceBernstein Cap Fund, Inc. (the "Company"), in
exchange solely for shares of the Acquiring Fund. (the Acquiring Fund and the
Acquired Fund are each a "Fund" and collectively, the "Funds").
This SAI contains information which may be of interest to shareholders but
which is not included in the Proxy Statement/Prospectus dated January 10, 2014
(the "Proxy Statement/Prospectus") of the Acquiring Fund which relates to the
Acquisition. As described in the Proxy Statement/Prospectus, the Acquisition
would involve the transfer of all the assets of the Acquired Fund in exchange
for Advisor Class shares of the Acquiring Fund and the assumption by the
Acquiring Fund of all the liabilities of the Acquired Fund. The Acquired Fund
would distribute the Acquiring Fund Advisor Class shares it receives to its
shareholders in complete liquidation of the Fund. The Acquiring Fund will be the
survivor for accounting purposes. In addition to Advisor Class shares, the
Acquiring Fund may offer Class A, Class C, Class R, Class K, Class I, Class Z,
Class 1 and Class 2 shares.
This SAI is not a prospectus and should be read in conjunction with the
Proxy Statement/Prospectus. The Proxy Statement/Prospectus has been filed with
the Securities and Exchange Commission ("SEC") and is available upon request and
without charge by writing to a Fund at 1345 Avenue of the Americas, New York,
New York 10105, or by calling 1-800-227-4618. This SAI incorporates by reference
the entire Proxy Statement/Prospectus.
TABLE OF CONTENTS
Page
ADDITIONAL INFORMATION ABOUT THE ACQUIRED FUND.................................3
FINANCIAL STATEMENTS...........................................................3
INFORMATION ABOUT THE ACQUIRING FUND AND ITS INVESTMENTS.......................4
INVESTMENT RESTRICTIONS.......................................................12
MANAGEMENT OF THE FUND........................................................14
EXPENSES OF THE FUND..........................................................31
PURCHASE OF SHARES............................................................33
REDEMPTION AND REPURCHASE OF SHARES...........................................52
SHAREHOLDER SERVICES..........................................................54
NET ASSET VALUE...............................................................57
DIVIDENDS, DISTRIBUTIONS AND TAXES............................................60
PORTFOLIO TRANSACTIONS........................................................66
GENERAL INFORMATION...........................................................69
FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM..............................................................72
APPENDIX A: STATEMENT OF POLICIES AND PROCEDURES FOR PROXY VOTING..........A-1
--------
AllianceBernstein(R) and the AB Logo are registered trademarks and service marks
used by permission of the owner, AllianceBernstein L.P.
ADDITIONAL INFORMATION ABOUT THE ACQUIRED FUND
Further information about the Acquired Fund is contained in its Statement
of Additional Information, dated April 30, 2013, which is incorporated herein by
reference and available upon request and without charge by writing to the
address or calling the telephone number listed below.
By mail: W.P. Stewart & Co. Growth Fund
P.O. Box 2175
Milwaukee, WI 53201
By phone: (888) 881-8803
FINANCIAL STATEMENTS
The Financial Statements and Report of Independent Registered Public Accounting
Firm contained in the Annual Report for the twelve months ended December 31,
2012, of the Acquired Fund, which report contains historical financial
information regarding the Portfolio, has been filed with the SEC and is
incorporated herein by reference. In addition, the financial statements for the
six months ended June 30, 2013 for the Acquired Fund have been filed with the
SEC and are incorporated by reference to the Semi-Annual Report for the Acquired
Fund. The Acquiring Fund is recently formed and has not prepared or filed any
shareholder reports.
No pro forma financial statements have been prepared and included relating to
the Acquisition of the Acquired Fund into the Acquiring Fund because the
Acquiring Fund is a newly-organized fund and does not have any assets or
liabilities as of the date hereof.
ADDITIONAL INFORMATION ABOUT THE ACQUIRING FUND
--------------------------------------------------------------------------------
INFORMATION ABOUT THE ACQUIRING FUND AND ITS INVESTMENTS
--------------------------------------------------------------------------------
Introduction to the Acquiring Fund
----------------------------------
The Company is an open-end investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Company's
shares are offered in separate series. The Acquiring Fund (hereinafter, the
"Fund") is a series of the Company, a separate pool of assets constituting, in
effect, a separate open-end management investment company with its own
investment objective and policies. Except as otherwise noted, the Fund's
investment objective and policies described below are not "fundamental policies"
within the meaning of the 1940 Act, and may, therefore, be changed by the Board
of Directors of the Company (the "Board" or the "Directors") without shareholder
approval. However, the Fund will not change its investment objective without at
least 60 days' prior written notice to shareholders. There is no guarantee that
the Fund will achieve its investment objective. Whenever any investment policy
or restriction states a percentage of the Fund's assets that may be invested in
any security or other asset, it is intended that such percentage limitation be
determined immediately after and as a result of the Fund's acquisition of such
securities or other assets. Accordingly, any later increases or decreases in
percentage beyond the specified limitations resulting from a change in values or
net assets will not be considered a violation of this percentage limitation.
Additional Investment Policies and Practices
--------------------------------------------
The following information about the Fund's investment policies and
practices supplements the information set forth in the Proxy
Statement/Prospectus.
Common Stock
------------
Common stock represents an equity (ownership) interest in a company,
and usually possesses voting rights and earns dividends. Dividends on common
stock are not fixed but are declared at the discretion of the issuer. Common
stock generally represents the riskiest investment in a company. In addition,
common stock generally has the greatest appreciation and depreciation potential
because increases and decreases in earnings are usually reflected in a company's
stock price. The fundamental risk of investing in common stock is that the value
of the stock might decrease. Stock values fluctuate in response to the
activities of an individual company or in response to general market and/or
economic conditions. While common stocks have historically provided greater
long-term returns than preferred stocks, fixed-income and money market
investments, common stocks have also experienced significantly more volatility
in those returns.
Convertible Securities
----------------------
Convertible securities include bonds, debentures, corporate notes,
warrants and preferred stocks that are convertible at a stated exchange rate
into shares of the underlying common stock. Prior to their conversion,
convertible securities have the same general characteristics as non-convertible
debt securities, which provide a stable stream of income with generally higher
yields than those of equity securities of the same or similar issuers. As with
all debt securities, the market value of convertible securities tends to decline
as interest rates increase and, conversely, to increase as interest rates
decline. While convertible securities generally offer lower interest or dividend
yields than non-convertible debt securities of similar quality, they do enable
the investor to benefit from increases in the market price of the underlying
common stock.
When the market price of the common stock underlying a convertible
security increases, the price of the convertible security increasingly reflects
the value of the underlying common stock and may rise accordingly. As the market
price of the underlying common stock declines, the convertible security tends to
trade increasingly on a yield basis, and thus may not depreciate to the same
extent as the underlying common stock. Convertible securities rank senior to
common stocks in an issuer's capital structure. They consequently entail less
risk than the issuer's common stock, although the extent to which such risk is
reduced depends in large measure upon the degree to which the convertible
security sells above its value as a fixed-income security.
Debt Securities
---------------
Debt securities are used by issuers to borrow money. Generally,
issuers pay investors periodic interest and repay the amount borrowed either
periodically during the life of the security and/or at maturity. Some debt
securities, such as zero coupon bonds, do not pay current interest, but are
purchased at a discount from their face values and accrue interest at the
applicable coupon rate over a specified time period. The market prices of debt
securities fluctuate depending on such factors as interest rates, credit quality
and maturity. In general, market prices of debt securities decline when interest
rates rise and increase when interest rates fall.
Lower rated debt securities, those rated Ba or below by Moody's
Investors Service, Inc. and/or BB or below by Standard & Poor's Ratings Services
or unrated but determined by the Adviser to be of comparable quality, are
described by the rating agencies as speculative and involve greater risk of
default or price changes than higher rated debt securities due to changes in the
issuer's creditworthiness or the fact that the issuer may already be in default.
The market prices of these securities may fluctuate more than higher quality
securities and may decline significantly in periods of general economic
difficulty. It may be more difficult to sell or to determine the value of lower
rated debt securities.
Certain additional risk factors related to debt securities are
discussed below:
Sensitivity to interest rate and economic changes. Debt securities
may be sensitive to economic changes, political and corporate developments, and
interest rate changes. In addition, during an economic downturn or periods of
rising interest rates, issuers that are highly leveraged may experience
increased financial stress that could adversely affect their ability to meet
projected business goals, obtain additional financing, and service their
principal and interest payment obligations. Furthermore, periods of economic
change and uncertainty can be expected to result in increased volatility of
market prices and yields of certain debt securities. For example, prices of
these securities can be affected by financial contracts held by the issuer or
third parties (such as derivatives) related to the security or other assets or
indices.
Payment expectations. Debt securities may contain redemption or call
provisions. If an issuer exercises these provisions in a lower interest rate
environment, the Fund would have to replace the security with a lower yielding
security, resulting in decreased income to investors. If the issuer of a debt
security defaults on its obligations to pay interest or principal or is the
subject of bankruptcy proceedings, the Fund may incur losses or expenses in
seeking recovery of amounts owed to it.
Liquidity and valuation. There may be limited trading in the
secondary market for particular debt securities, which may adversely affect the
Fund's ability to accurately value or sell such debt securities. Adverse
publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the value and/or liquidity of debt securities. The
Adviser attempts to reduce the risks described above through diversification of
the Fund's portfolio, credit analysis of each issuer, and by monitoring broad
economic trends as well as corporate and legislative developments, but there can
be no assurance that it will be successful in doing so. Credit ratings of debt
securities provided by rating agencies indicate a measure of the safety of
principal and interest payments, not market value risk. The rating of an issuer
is a rating agency's view of past and future potential developments related to
the issuer and may not necessarily reflect actual outcomes. There can be a lag
between corporate developments and the time a rating is assigned and updated.
Bond rating agencies may assign modifiers (such as +/-) to ratings
categories to signify the relative position of a credit within the rating
category. Investment policies that are based on ratings categories should be
read to include any security within that category, without considering the
modifier.
Depositary Receipts
-------------------
The Fund may invest in depositary receipts. American Depositary
Receipts ("ADRs") are depositary receipts typically issued by a U.S. bank or
trust company that evidence ownership of underlying securities issued by a
foreign corporation. European Depositary Receipts ("EDRs"), Global Depositary
Receipts ("GDRs") or other types of depositary receipts are typically issued by
non-U.S. banks or trust companies and evidence ownership of underlying
securities issued by either a U.S. or non-U.S. company. Transactions in these
securities may not necessarily be settled in the same currency as transactions
in the securities that they represent. In addition, the issuers of the
securities of unsponsored depositary receipts are not obligated to disclose
material information in the United States. Generally, ADRs, in registered form,
are designed for use in the U.S. securities markets, EDRs, in bearer form, are
designed for use in European securities markets and GDRs, in bearer form, are
designed for use in two or more securities markets, such as those of Europe and
Asia.
Illiquid Securities
-------------------
The Fund will not invest in illiquid securities if immediately after
such investment more than 5% of the Fund's net assets would be invested in such
securities. For this purpose, illiquid securities include, among others, (a)
direct placements or other securities which are subject to legal or contractual
restrictions on resale or for which there is no readily available market (e.g.,
trading in the security is suspended or, in the case of unlisted securities,
market makers do not exist or will not entertain bids or offers), (b) options
purchased by the Fund over-the-counter and the cover for options written by the
Fund over-the-counter, and (c) repurchase agreements not terminable within seven
days. As discussed in more detail below, securities that have legal or
contractual restrictions on resale but have a readily available market are not
deemed illiquid for purposes of this limitation. If, through the appreciation of
illiquid securities or the depreciation of liquid securities, more than 15% of
the value of the Fund's net assets is invested in illiquid securities, the Fund
will take such steps as is deemed advisable, if any, to protect liquidity.
Mutual funds do not typically hold a significant amount of
restricted securities (securities that are subject to restrictions on resale to
the general public) or other illiquid securities because of the potential for
delays on resale and uncertainty in valuation. Limitations on resale may have an
adverse effect on the marketability of portfolio securities and a mutual fund
might be unable to dispose of restricted or other illiquid securities promptly
or at reasonable prices and might thereby experience difficulty satisfying
redemptions within seven days. A mutual fund may also have to take certain steps
or wait a certain amount of time in order to remove the transfer restrictions
for such restricted securities in order to dispose of them, resulting in
additional expense and delay.
Rule 144A under the Securities Act of 1933, as amended, (the
"Securities Act") allows a broader institutional trading market for securities
otherwise subject to restriction on resale to the general public. Rule 144A
establishes a "safe harbor" from the registration requirements of the Securities
Act for resales of certain securities to qualified institutional buyers. An
insufficient number of qualified institutional buyers interested in purchasing
certain restricted securities held by the Fund, however, could affect adversely
the marketability of such portfolio securities and the Fund might be unable to
dispose of such securities promptly or at reasonable prices.
The Adviser, acting under the oversight of the Board, will monitor
the liquidity of restricted securities in the Fund that are eligible for resale
pursuant to Rule 144A. In reaching liquidity decisions, the Adviser will
consider, among others, the following factors: (1) the frequency of trades and
quotes for the security; (2) the number of dealers issuing quotations to
purchase or sell the security; (3) the number of other potential purchasers of
the security; (4) the number of dealers undertaking to make a market in the
security; (5) the nature of the security (including its unregistered nature) and
the nature of the marketplace for the security (e.g., the time needed to dispose
of the security, the method of soliciting offers and the mechanics of the
transfer); and (6) any SEC interpretation or position with respect to such type
of securities.
Investment in Exchange-Traded Funds and Other Investment Companies
------------------------------------------------------------------
The Fund may invest in shares of ETFs subject to the restrictions
and limitations of the 1940 Act or any applicable rules, exemptive orders or
regulatory guidance. ETFs are pooled investment vehicles, which may be managed
or unmanaged, that generally seek to track the performance of a specific index.
ETFs will not track their underlying indices precisely since the ETFs have
expenses and may need to hold a portion of their assets in cash, unlike the
underlying indices, and the ETFs may not invest in all of the securities in the
underlying indices in the same proportion as the underlying indices for various
reasons. The Fund will incur transaction costs when buying and selling ETF
shares, and indirectly bear the expenses of the ETFs. In addition, the market
value of an ETF's shares, which are based on supply and demand in the market for
the ETFs shares, may differ from its NAV. Accordingly, there may be times when
an ETF's shares trade at a discount to its NAV.
The Fund may also invest in investment companies other than ETFs as
permitted by the 1940 Act or the rules and regulations thereunder. As with ETF
investments, if the Fund acquires shares in other investment companies,
shareholders would bear, indirectly, the expenses of such investment companies
(which may include management and advisory fees), which are in addition to the
Fund's expenses. The Fund intends to invest uninvested cash balances in an
affiliated money market fund as permitted by Rule 12d1-1 under the 1940 Act.
Loans of Portfolio Securities
-----------------------------
The Fund may seek to increase income by lending portfolio securities
to brokers, dealers and financial institutions ("borrowers") to the extent
permitted under the 1940 Act or the rules and regulations thereunder (as such
statute, rules and regulations may be amended from time to time). Under the
securities lending program, all securities loans will be secured continually by
cash collateral. A principal risk in lending portfolio securities is that the
borrower will fail to return the loaned securities upon termination of the loan
and the collateral will not be sufficient to replace the loaned securities upon
the borrower's default.
In determining whether to lend securities to a particular borrower,
the Adviser (subject to oversight by the Board) will consider all relevant facts
and circumstances, including the creditworthiness of the borrower. The loans
would be made only to firms deemed by the Adviser to be creditworthy, and when,
in the judgment of the Adviser, the consideration that can be earned currently
from securities loans of this type justifies the attendant risk. The Fund will
be compensated for the loan from the net return from the interest earned on the
cash collateral after a rebate is paid to the borrower (which may be a negative
amount - i.e, the borrower may pay a fee to the Fund in connection with the
loan) and fees are paid to the securities lending agent and for certain other
administrative expenses.
The Fund will have the right, by providing notice to the borrower at
any time, to call a loan and obtain the securities loaned within the normal and
customary settlement time for the securities. While securities are on loan, the
borrower is obligated to pay the Fund amounts equal to any income or other
distributions from the securities.
The Fund will invest any cash collateral in a money market fund that
complies with Rule 2a-7, has been approved by the Board and is expected to be
advised by the Adviser. Any such investment of cash collateral will be subject
to the money market fund's risks. The Fund may pay reasonable finders',
administrative, and custodial fees in connection with a loan.
The Fund will not have the right to vote on any securities having
voting rights during the existence of the loan. The Fund will have the right to
regain record ownership of loaned securities or equivalent securities in order
to exercise voting or ownership rights. When the Fund lends its securities, its
investment performance will continue to reflect the value of securities on loan.
The Fund intends to limit its securities lending activities so that
no more than 5% of the value of the Fund's assets will be represented by
securities loaned.
Mid-Cap Stocks
--------------
Although the Fund primarily invests in large-cap stocks (i.e., in
companies that have market capitalizations of $5 billion or more), it may also
invest in the stocks of mid-capitalization companies, which are companies that
have market capitalizations of $2 billion to $5 billion ("mid-cap"). Investments
in larger companies present certain advantages in that such companies generally
have greater financial resources, more extensive research and development,
manufacturing, marketing and service capabilities, and more stability and
greater depth of management and personnel. Investments in smaller, less seasoned
companies may present greater opportunities for growth but also may involve
greater risks than customarily are associated with larger companies. The
securities of smaller companies may be subject to more abrupt or erratic market
movements than larger, more established companies. These companies may have
limited product lines, markets or financial resources, or they may be dependent
upon a limited management group.
Preferred Stock
---------------
The Fund may invest in preferred stock. Preferred stock is an equity
security that has features of debt because it generally entitles the holder to
periodic payments at a fixed rate of return. Preferred stock is subordinated to
any debt the issuer has outstanding but has liquidation preference over common
stock. Accordingly, preferred stock dividends are not paid until all debt
obligations are first met. Therefore, preferred stock may be subject to more
fluctuations in market value, due to changes in market participants' perceptions
of the issuer's ability to continue to pay dividends, than debt of the same
issuer.
Repurchase Agreements
---------------------
From a technical perspective, in a repurchase agreement transaction
the Fund buys a security and simultaneously agrees to sell it back to the
counterparty at a specified price in the future. The purchase and repurchase
obligations are transacted under one document. However, a repurchase agreement
is economically similar to a secured loan, in that the Fund lends cash to a
counterparty for a specific term, normally a day or a few days, and is given
acceptable collateral (the purchased securities) to hold in case the
counterparty does not repay the loan. The difference between the purchase price
and the repurchase price of the securities reflects an agreed-upon "interest
rate". The interest rate is related to the current market rate of the purchased
security rather than its coupon rate. Given that the price at which the Fund
will sell the collateral back is specified in advance, the Fund is not exposed
to price movements on the collateral unless the counterparty defaults. If the
counterparty defaults on its obligation to buy back the securities at the
maturity date and the liquidation value of the collateral is less than the
outstanding loan amount, the Fund would suffer a loss. In order to further
mitigate any potential credit exposure to the counterparty, if the value of the
securities on any day falls below a specified level that is linked to the loan
amount during the life of the agreement, the counterparty must provide
additional collateral to support the loan. Because a repurchase agreement
permits the Fund to invest temporarily available cash on a fully-collateralized
basis, repurchase agreements permit the Fund to earn a return on such cash while
retaining "overnight" flexibility in pursuit of investments of a longer-term
nature.
If the counterparty fails to repurchase the underlying security,
whether because of its bankruptcy or otherwise, the Fund would attempt to
exercise its rights with respect to the underlying security, including possible
sale of the security. The Fund may incur various expenses in connection with the
exercise of its rights and may be subject to various delays and risks of loss,
including (a) possible declines in the value of the underlying securities, (b)
possible reduction in levels of income and (c) lack of access to the securities
(if they are held through a third-party custodian) and possible inability to
enforce the Fund's rights. The Board has established procedures, which are
periodically reviewed by the Board, pursuant to which the Adviser monitors the
creditworthiness of the dealers with which the Fund enters into repurchase
agreement transactions. The underlying securities are ordinarily U.S. Government
securities, but may consist of other securities in which the Fund is permitted
to invest.
The Fund may enter into buy/sell back transactions, which are
similar to repurchase agreements. In this type of transaction, the Fund enters a
trade to buy securities at one price and simultaneously enters a trade to sell
the same securities at another price on a specified date. Similar to a
repurchase agreement, the repurchase price is higher than the sale price and
reflects current interest rates. Unlike a repurchase agreement, however, the
buy/sell back transactions, though done simultaneously, are two separate legal
agreements. A buy/sell back transaction also differs from a repurchase agreement
in that the seller is not required to provide margin payments if the value of
the securities falls below the repurchase price because the transaction is two
separate transactions. The Fund has the risk of changes in the value of the
purchased security during the term of the buy/sell back agreement although these
agreements typically provide for the repricing of the original transaction at a
new market price if the value of the security changes by a specific amount.
Certain Risk and Other Considerations
-------------------------------------
Borrowing and Use of Leverage. The Fund may use borrowings for
investment or other purposes subject to the restrictions of the 1940 Act.
Borrowings by the Fund result in leveraging of the Fund's shares of common
stock. The proceeds of such borrowings will be invested in accordance with the
Fund's investment objective and policies. The Fund may also borrow up to 5% of
its total assets for temporary purposes (such as clearance of portfolio
transactions, the payment of dividends and share redemptions). Neither the Fund
nor the Adviser, on behalf of the Fund, presently intends to borrow more than 5%
of the Fund's net assets, except that for temporary purposes, borrowings may be
up to 10% of the Fund's net assets.
Utilization of leverage, which is usually considered speculative,
however, involves certain risks to the Fund's shareholders. These include a
higher volatility of the NAV of the Fund's shares of common stock and the
relatively greater effect on the NAV of the shares caused by favorable or
adverse changes in market conditions or interest rates. So long as the Fund is
able to realize a net return on the leveraged portion of its investment
portfolio that is higher than the interest expense paid on borrowings, the
effect of leverage will be to cause the Fund's shareholders to realize higher
current net investment income than if the Fund were not leveraged. However, to
the extent that the interest expense on borrowings approaches the return on the
leveraged portion of the Fund's investment portfolio, the benefit of leverage to
the Fund's shareholders will be reduced, and if the interest expense on
borrowings were to exceed such return, the Fund's use of leverage would result
in a lower rate of return than if the Fund were not leveraged. Similarly, the
effect of leverage in a declining market would normally be a greater decrease in
NAV per share than if the Fund were not leveraged. In an extreme case, if the
Fund's current investment income were not sufficient to meet the interest
expense on borrowings, it could be necessary for the Fund to liquidate certain
of its investments in adverse circumstances, potentially significantly reducing
the NAV of the Fund's shares.
Risks of Investments in Foreign Securities. Investors should
understand and consider carefully the substantial risks involved in securities
of foreign companies and governments of foreign nations, some of which are
referred to below, and which are in addition to the usual risks inherent in
domestic investments. Investing in securities of non-U.S. companies which are
generally denominated in foreign currencies, and utilization of derivative
investment products denominated in, or the value of which is dependent upon
movements in the relative value of, a foreign currency, involve certain
considerations comprising both risk and opportunity not typically associated
with investing in U.S. companies. These considerations include changes in
exchange rates and exchange control regulations, political and social
instability, expropriation, imposition of foreign taxes, less liquid markets and
less available information than are generally the case in the United States,
higher transaction costs, less government supervision of exchanges, brokers and
issuers, difficulty in enforcing contractual obligations, lack of uniform
accounting and auditing standards and greater price volatility.
There is generally less publicly available information about foreign
companies comparable to reports and ratings that are published about companies
in the United States. Foreign issuers are subject to accounting and financial
standards and requirements that differ, in some cases significantly, from those
applicable to U.S. issuers. In particular, the assets and profits appearing on
the financial statements of a foreign issuer may not reflect its financial
position or results of operations in the way they would be reflected had the
financial statement been prepared in accordance with U.S. generally accepted
accounting principles. In addition, for an issuer that keeps accounting records
in local currency, inflation accounting rules in some of the countries in which
the Fund may invest require, for both tax and accounting purposes, that certain
assets and liabilities be restated on the issuer's balance sheet in order to
express items in terms of currency of constant purchasing power. Inflation
accounting may indirectly generate losses or profits. Consequently, financial
data may be materially affected by restatements for inflation and may not
accurately reflect the real condition of those issuers and securities markets.
Substantially less information is publicly available about certain non-U.S.
issuers than is available about U.S. issuers.
Foreign securities markets are generally not as developed or
efficient as those in the United States. While growing in volume, they usually
have substantially less volume than the New York Stock Exchange (the
"Exchange"), and securities of some foreign companies are less liquid and more
volatile than securities of comparable U.S. companies. Similarly, volume and
liquidity in most foreign bond markets is less than in the United States and, at
times, volatility of price can be greater than in the United States. Commissions
on foreign stock exchanges are often higher than negotiated commissions on U.S.
exchanges, although the Fund will endeavor to achieve the most favorable net
results on its portfolio transactions. There is generally less government
supervision and regulation of stock exchanges, brokers and listed companies than
in the United States.
Expropriation, confiscatory taxation, nationalization, political,
economic or social instability or other similar developments, such as military
coups, have occurred in the past in countries in which the Fund may invest and
could adversely affect the Fund's assets should these conditions or events
recur.
Foreign investment in the securities of companies in certain
countries is restricted or controlled to varying degrees. These restrictions or
controls may at times limit or preclude Fund investment in certain foreign
securities and increase the costs and expenses of the Fund. Certain countries in
which the Fund may invest require governmental approval prior to investments by
foreign persons, limit the amount of investment by foreign persons in a
particular issuer, limit the investment by foreign persons only to a specific
class of securities of an issuer that may have less advantageous rights than the
classes available for purchase by domiciliaries of the countries and/or impose
additional taxes on foreign investors.
Certain countries may require governmental approval for the
repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if a deterioration occurs in a
country's balance of payments, the country could impose temporary restrictions
on foreign capital remittances.
Income from certain investments held by the Fund could be reduced by
foreign income taxes, including withholding taxes. It is impossible to determine
the effective rate of foreign tax in advance. The Fund's NAV may also be
affected by changes in the rates or methods of taxation applicable to the Fund
or to entities in which the Fund has invested. The Adviser generally will
consider the cost of any taxes in determining whether to acquire any particular
investments, but can provide no assurance that the tax treatment of investments
held by the Fund will not be subject to change. A shareholder otherwise subject
to U.S. federal income taxes may, subject to certain limitations, be entitled to
claim a credit or deduction for U.S. federal income tax purposes for his or her
proportionate share of such foreign taxes paid by the Fund. See "United States
Federal Income Taxation of the Fund".
Investors should understand that the expenses of a fund investing in
foreign securities may be higher than investment companies investing only in
domestic securities since, among other things, the cost of maintaining the
custody of foreign securities is higher and the purchase and sale of portfolio
securities may be subject to higher transaction charges, such as stamp duties
and turnover taxes.
For many securities of foreign issuers, there are U.S.
Dollar-denominated ADRs that are traded in the United States on exchanges or
over-the-counter and for which market quotations are readily available. ADRs do
not lessen the foreign exchange risk inherent in investing in the securities of
foreign issuers. However, by investing in ADRs rather than directly in stock of
foreign issuers, the Fund can avoid currency risks which might occur during the
settlement period for either purchases or sales.
The Fund may purchase foreign bank obligations. In addition to the
risks described above that are generally applicable to foreign investments, the
investments that the Fund makes in obligations of foreign banks, branches or
subsidiaries may involve further risks, including differences between foreign
banks and U.S. banks in applicable accounting, auditing and financial reporting
standards, and the possible establishment of exchange controls or other foreign
government laws or restrictions applicable to the payment of certificates of
deposit or time deposits that may affect adversely the payment of principal and
interest on the securities and other investments held by the Fund.
Foreign Currency Fluctuations. The Fund may invest in securities
denominated in foreign currencies and a corresponding portion of the Fund's
revenues will be received in such currencies. The dollar equivalent of the
Fund's net assets and distributions will be adversely affected by reductions in
the value of certain foreign currencies relative to the U.S. Dollar. Such
changes will also affect the Fund's income.
Currency exchange rates may fluctuate significantly over short
periods of time causing, along with other factors, the Fund's NAV to fluctuate.
Currency exchange rates generally are determined by the forces of supply and
demand in the foreign exchange markets and the relative merits of investments in
different countries, actual or anticipated changes in interest rates and other
complex factors, as seen from an international perspective. Currency exchange
rates also can be affected unpredictably by the intervention of U.S. or foreign
governments or central banks, or the failure to intervene, or by currency
controls or political developments in the United States or abroad. To the extent
the Fund's total assets (adjusted to reflect the Fund's net position after
giving effect to currency transactions) is denominated or quoted in the
currencies of foreign countries, the Fund will be more susceptible to the risk
of adverse economic and political developments within those countries. The Fund
does not intend to enter into any type of transaction to hedge currency
fluctuations.
The Fund will incur costs in connection with conversions between
various currencies. The Fund may hold foreign currency received in connection
with investments when, in the judgment of the Adviser, it would be beneficial to
convert such currency into U.S. Dollars at a later date, based on anticipated
changes in the relevant exchange rate.
If the value of the foreign currencies in which the Fund receives
income falls relative to the U.S. Dollar between receipt of the income and the
making of Fund distributions, the Fund may be required to liquidate securities
in order to make distributions if the Fund has insufficient cash in U.S. Dollars
to meet the distribution requirements that the Fund must satisfy to qualify as a
regulated investment company for federal income tax purposes. Similarly, if the
value of a particular foreign currency declines between the time the Fund incurs
expenses in U.S. Dollars and the time cash expenses are paid, the amount of the
currency required to be converted into U.S. Dollars in order to pay expenses in
U.S. Dollars could be greater than the equivalent amount of such expenses in the
currency at the time they were incurred.
--------------------------------------------------------------------------------
INVESTMENT RESTRICTIONS
--------------------------------------------------------------------------------
Fundamental Investment Policies
-------------------------------
The following fundamental investment policies may not be changed
without approval by the vote of a majority of the Fund's outstanding voting
securities, which means the affirmative vote of (i) 67% or more of the shares of
the Fund represented at a meeting at which more than 50% of the outstanding
shares are present in person or by proxy, or (ii) more than 50% of the
outstanding shares of the Fund, whichever is less.
As a matter of fundamental policy, the Fund:
(a) may not concentrate investments in an industry, as
concentration may be defined under the 1940 Act or the rules and regulations
thereunder (as such statute, rules or regulations may be amended from time to
time) or by guidance regarding, interpretations of, or exemptive orders under,
the 1940 Act or the rules or regulations thereunder published by appropriate
regulatory authorities;
(b) may not issue any senior security (as that term is defined
in the 1940 Act) or borrow money, except to the extent permitted by the 1940 Act
or the rules and regulations thereunder (as such statute, rules or regulations
may be amended from time to time) or by guidance regarding, or interpretations
of, or exemptive orders under, the 1940 Act or the rules or regulations
thereunder published by appropriate regulatory authorities. For purposes of this
restriction, margin and collateral arrangements, including, for example, with
respect to permitted borrowings, options, futures contracts, options on futures
contracts and other derivatives such as swaps are not deemed to involve the
issuance of a senior security;
(c) may not make loans except through (i) the purchase of debt
obligations in accordance with its investment objective and policies; (ii) the
lending of portfolio securities; (iii) the use of repurchase agreements; or (iv)
the making of loans to affiliated funds as permitted under the 1940 Act, the
rules and regulations thereunder (as such statutes, rules or regulations may be
amended from time to time), or by guidance regarding, and interpretations of, or
exemptive orders under, the 1940 Act;
(d) may not purchase or sell real estate except that it may
dispose of real estate acquired as a result of the ownership of securities or
other instruments. This restriction does not prohibit the Fund from investing in
securities or other instruments backed by real estate or in securities of
companies engaged in the real estate business;
(e) may not engage in the purchase or sale of commodities or
commodities futures contracts or invest in oil, gas or other mineral exploration
or development programs, although the Fund may invest in securities issued by
such companies; and
(f) may not act as an underwriter of securities, except that
the Fund may acquire restricted securities under circumstances in which, if such
securities were sold, the Fund might be deemed to be an underwriter for purposes
of the Securities Act.
The Fund is a "non-diversified" investment company as defined in the
1940 Act, which means the Fund is not limited in the proportion of its assets
that may be invested in the securities of a single issuer. This policy may be
changed without a shareholder vote.
Non-Fundamental Investment Policies
-----------------------------------
The following is a description of certain operating policies that
the Fund has adopted but that are not fundamental and are subject to change
without shareholder approval:
(a) The Fund may not purchase securities on margin, except (i)
as otherwise provided under rules adopted by the SEC under the 1940 Act or by
guidance regarding the 1940 Act, or interpretations thereof, and (ii) that the
Fund may obtain such short-term credits as are necessary for the clearance of
portfolio transactions, and the Fund may make margin payments in connection with
futures contracts, options, forward contracts, swaps, caps, floors, collars and
other financial instruments.
(b) The Fund will not make short sales of securities or invest
in put or call options.
(c) The Fund will not invest more than 5% of the value of its
total assets in securities that cannot be readily resold to the public because
of legal or contractual restrictions or because there are no market quotations
readily available or in other "illiquid" securities (including non-negotiable
deposits with banks or repurchase agreements of a duration of more than seven
days). For purposes of this policy, illiquid securities do not include
securities eligible for resale pursuant to Rule 144A under the Securities Act
that have been determined to be liquid by the Fund's Board of Directors based
upon the trading markets for such securities.
--------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
--------------------------------------------------------------------------------
The Adviser
-----------
The Adviser, a Delaware limited partnership with principal offices
at 1345 Avenue of the Americas, New York, NY 10105, has been retained under an
investment advisory agreement (the "Advisory Agreement") to provide investment
advice and, in general, to conduct the management and investment program of the
Fund under the supervision of the Board. The Adviser is an investment adviser
registered under the Investment Advisers Act of 1940, as amended.
The Adviser is a leading global investment management firm
supervising client accounts with assets as of September 30, 2013, totaling
approximately $445 billion. The Adviser provides management services for many of
the largest U.S. public and private employee benefit plans, endowments,
foundations, public employee retirement funds, banks, insurance companies and
high net worth individuals worldwide. The Adviser is also one of the largest
mutual fund sponsors, with a diverse family of globally distributed mutual fund
portfolios. As one of the world's leading global investment management
organizations, the Adviser is able to compete for virtually any portfolio
assignment in any developed capital market in the world.
As of September 30, 2013, the direct ownership structure of the
Adviser, expressed as a percentage of general and limited partnership interests,
was as follows:
AXA and its subsidiaries 64.0%
AllianceBernstein Holding L.P. 34.5%
Unaffiliated holders 1.5%
------------
100.0%
============
AXA is a societe anonyme organized under the laws of France and the
holding company for an international group of insurance and related financial
services companies, through certain of its subsidiaries ("AXA and its
subsidiaries"). AllianceBernstein Holding L.P. ("Holding") is a Delaware limited
partnership, the units of which ("Holding Units") are traded publicly on the
Exchange under the ticker symbol "AB". As of September 30, 2013, AXA also owned
approximately 1.6% of the issued and outstanding assignments of beneficial
ownership of Holding Units.
AllianceBernstein Corporation (an indirect wholly-owned subsidiary
of AXA) is the general partner of both Holding and the Adviser.
AllianceBernstein Corporation owns 100,000 general partnership units in Holding
and a 1% general partnership interest in the Adviser. Including both the general
partnership and limited partnership interests in Holding and the Adviser, AXA
and its subsidiaries had an approximate 64.2% economic interest in the Adviser
as of September 30, 2013.
Advisory Agreement and Expenses
-------------------------------
The Adviser serves as investment manager and adviser of the Fund,
continuously furnishes an investment program for the Fund, and manages,
supervises and conducts the affairs of the Fund, subject to the Board's
oversight.
Under the Fund's Advisory Agreement, the Adviser furnishes advice
and recommendations with respect to the Fund's portfolio of securities and
investments, and provides persons satisfactory to the Board to act as officers
of the Fund. Such officers or employees may be employees of the Adviser or of
its affiliates.
The Adviser is, under the Fund's Advisory Agreement, responsible for
certain expenses incurred by the Fund, including, for example, office facilities
and certain administrative services, and any expenses incurred in promoting the
sale of shares of the Fund (other than the portion of the promotional expenses
borne by the Fund in accordance with an effective plan pursuant to Rule 12b-1
under the 1940 Act, and the costs of printing prospectuses of the Fund and other
reports to shareholders and fees related to registration with the SEC and with
state regulatory authorities).
The Fund has, under the Advisory Agreement, assumed the obligation
for payment of all of its other expenses. As to the obtaining of services other
than those specifically provided to the Fund by the Adviser, the Fund may employ
its own personnel. For such services, it also may utilize personnel employed by
the Adviser or its affiliates and, in such event, the services will be provided
to the Fund at cost and the payments therefore must be specifically approved by
the Board.
Effective as of [___________], the Fund has contractually agreed to
pay a monthly fee to the Adviser at an annualized rate of 1.00% of the Fund's
average daily net assets. The Adviser has not received advisory fees from the
Fund because the Fund has not yet commenced operations. The Adviser has
contractually agreed to waive its fee and bear certain expenses so that total
expenses (excluding Acquired Fund Fees and Expenses other than the advisory fees
of any AllianceBernstein Fund in which the Fund may invest, interest expense,
brokerage commissions and other transaction costs, taxes and extraordinary
expenses) do not exceed on an annual basis 1.53%, 2.23%, 1.73%, 1.48%, 1.23%,
1.23%, 1.48%, 1.23% and 1.23% of average daily net assets, respectively, for
Class A, Class C, Class R, Class K, Class I, Class Z, Class 1, Class 2 and
Advisor Class shares. This fee waiver and/or expense reimbursement agreement may
not be terminated before [____________], 2015.
Any material amendment to the Advisory Agreement must be approved by
the vote of a majority of the outstanding securities of the Fund and by the vote
of a majority of the Directors who are not interested persons of the Fund or the
Adviser. The Advisory Agreement is terminable without penalty on 60 days'
written notice by a vote of a majority of the outstanding voting securities of
the Fund, by a vote of a majority of the Directors, or by the Adviser on 60
days' written notice, and will automatically terminate in the event of its
assignment. The Advisory Agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence on the part of the Adviser, or of
reckless disregard of its obligations thereunder, the Adviser shall not be
liable for any action or failure to act in accordance with its duties
thereunder.
Certain other clients of the Adviser may have investment objectives
and policies similar to those of the Fund. The Adviser may, from time to time,
make recommendations which result in the purchase or sale of the particular
security by its other clients simultaneously with a purchase or sale thereof by
the Fund. If transactions on behalf of more than one client during the same
period increase the demand for securities being purchase or the supply of
securities being sold, there may be an adverse effect on price. It is the policy
of the Adviser to allocate advisory recommendations and the placing of orders in
a manner that is deemed equitable by the Adviser to the accounts involved,
including the Fund. When two or more of the Adviser's clients (including the
Fund) are purchasing or selling the same security on a given day through the
same broker or dealer, such transactions may be averaged as to price.
The Adviser may act as an investment adviser to other persons, firms
or corporations, including investment companies, and is the investment adviser
to AllianceBernstein Blended Style Series, Inc., AllianceBernstein Bond Fund,
Inc., AllianceBernstein Core Opportunities Fund, Inc., AllianceBernstein
Corporate Shares, AllianceBernstein Discovery Growth Fund, Inc.,
AllianceBernstein Equity Income Fund, Inc., AllianceBernstein Exchange Reserves,
AllianceBernstein Fixed-Income Shares, Inc., AllianceBernstein Global Bond Fund,
Inc., AllianceBernstein Global Real Estate Investment Fund, Inc.,
AllianceBernstein Global Risk Allocation Fund, Inc., AllianceBernstein Global
Thematic Growth Fund, Inc., AllianceBernstein Growth and Income Fund, Inc.,
AllianceBernstein High Income Fund, Inc., AllianceBernstein Institutional Funds,
Inc., AllianceBernstein International Growth Fund, Inc., AllianceBernstein Large
Cap Growth Fund, Inc., AllianceBernstein Municipal Income Fund, Inc.,
AllianceBernstein Municipal Income Fund II, AllianceBernstein Trust,
AllianceBernstein Unconstrained Bond Fund, Inc., AllianceBernstein Variable
Products Series Fund, Inc., Sanford C. Bernstein Fund, Inc., Sanford C.
Bernstein Fund II, Inc., The AllianceBernstein Pooling Portfolios and The
AllianceBernstein Portfolios, all registered open-end investment companies; and
to AllianceBernstein Global High Income Fund, Inc., AllianceBernstein Income
Fund, Inc., AllianceBernstein Multi-Manager Alternative Fund, AllianceBernstein
National Municipal Income Fund, Inc., Alliance California Municipal Income Fund,
Inc., and Alliance New York Municipal Income Fund, Inc., all registered
closed-end investment companies. The registered investment companies for which
the Adviser serves as investment adviser are referred to collectively below as
the "AllianceBernstein Fund Complex", while all of these investment companies,
except the Sanford C. Bernstein Fund, Inc., are referred to collectively below
as the "AllianceBernstein Funds".
Board of Directors Information
------------------------------
Certain information concerning the Directors is set forth below.
PORTFOLIOS
IN
ALLIANCE- OTHER PUBLIC
BERNSTEIN COMPANY
FUND DIRECTORSHIPS
COMPLEX HELD
NAME, ADDRESS,* AGE PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTOR IN
AND (YEAR FIRST DURING PAST FIVE YEARS BY THE PAST
ELECTED**) OR LONGER DIRECTOR FIVE YEARS
---------- --------- -------- ----------
INDEPENDENT DIRECTORS
Chairman of the Board
Marshall C. Turner, Jr., #, ^ Private Investor since 100 Xilinx, Inc.
72 prior to 2009. Interim (programmable logic
(2011) CEO of MEMC Electronic semi-conductors)
Materials, Inc. and MEMC Electronic
(semi-conductor and Materials, Inc.
solar cell substrates) (semi-conductor and
from November 2008 solar cell
until March 2009. He substrates) since
was Chairman and CEO of prior to 2009
Dupont Photomasks, Inc.
(components of
semi-conductor
manufacturing),
2003-2005, and
President and CEO,
2005-2006, after the
company was acquired
and renamed Toppan
Photomasks, Inc. He has
served as a director or
trustee of one or more
of the
AllianceBernstein Funds
since 1992.
John H. Dobkin, # Independent Consultant 100 None
71 since prior to 2009.
(2011) Formerly, President of
Save Venice, Inc.
(preservation
organization) from
2001-2002, Senior
Advisor from June
1999-June 2000 and
President of Historic
Hudson Valley (historic
preservation) from
December 1989-May 1999.
Previously, Director of
the National Academy of
Design. He has served
as a director or
trustee of various
AllianceBernstein Funds
since 1992.
Michael J. Downey, # Private Investor since 100 The Asia Pacific
70 prior to 2009. Formerly, Fund, Inc. since
(2011) managing partner of prior to 2009,
partner of Lexington Prospect Acquisition
Capital, LLC Corp. (financial
(investment advisory services) from 2007
firm) from December until 2009 and The
1997 until December Merger Fund since
2003. From 1987 until prior to 2009 until
1993, Chairman and CEO 2013
of Prudential Mutual
Fund Management,
director of the
Prudential mutual
funds, and member of
the Executive Committee
of Prudential
Securities Inc. He has
served as a director or
trustee of the
AllianceBernstein Funds
since 2005 and is a
director and chairman
of one other registered
investment company.
William H. Foulk, Jr., #, ## Investment Adviser and 100 None
81 an Independent
(2011) Consultant since prior
to 2009. Previously, he
was Senior Manager of
Barrett Associates,
Inc., a registered
investment adviser. He
was formerly Deputy
Comptroller and Chief
Investment Officer of
the State of New York
and, prior thereto,
Chief Investment
Officer of the New York
Bank for Savings. He
has served as a
director or trustee of
various
AllianceBernstein Funds
since 1983 was
Chairman of the
AllianceBernstein Funds
and of the Independent
Directors Committee of
such Funds since 2003
through December 2013.
D. James Guzy, # Chairman of the Board 100 PLX Technology
77 of PLX Technology (semi-conductors)
(2011) (semi-conductors) and since prior to 2009,
of SRC Computers Inc., Cirrus Logic
with which he has been Corporation
associated since prior (semi-conductors)
to 2009. He was a since prior to 2009
director of Intel until July 2011
Corporation
(semi-conductors) from
1969 until 2008, and
served as Chairman of
the Finance Committee
of such company for
several years until May
2008. He has served as
a director or trustee
of one or more of the
AllianceBernstein Funds
since 1982.
Nancy P. Jacklin, # Professorial Lecturer 100 None
65 at the Johns Hopkins
(2011) School of Advanced
International Studies
since 2008. Formerly,
U.S. Executive Director
of the International
Monetary Fund (December
2002-May 2006);
Partner, Clifford
Chance (1992-2002);
Sector Counsel,
International Banking
and Finance, and
Associate General
Counsel, Citicorp
(1985-1992); Assistant
General Counsel
(International),
Federal Reserve Board
of Governors
(1982-1985); and
Attorney Advisor, U.S.
Department of the
Treasury (1973-1982).
Member of the Bar of
the District of
Columbia and of New
York; and member of the
Council on Foreign
Relations. She has
served as a director or
trustee of the
AllianceBernstein Funds
since 2006.
Garry L. Moody, # Independent Consultant. 100 Greenbacker
61 Formerly, Partner, Renewable Energy
(2008) Deloitte & Touche LLP Company LLC,
(1995-2008) where he (renewable energy
held a number of senior and energy
positions, including efficiency projects)
Vice Chairman, and U.S. since August 2013
and Global Investment
Management Practice
Managing Partner;
President, Fidelity
Accounting and Custody
Services Company
(1993-1995); and
Partner, Ernst & Young
LLP (1975-1993), where
he served as the
National Director of
Mutual Fund Tax
Services and Managing
Partner of its Chicago
Office Tax department.
He is a member of both
the Governing Council
of the Independent
Directors Council
(IDC), an organization
of independent
directors of mutual
funds, and the Trustee
Advisory Board of
BoardIQ, a biweekly
publication focused on
issues and news
affecting directors of
mutual funds. He has
served as a director or
trustee, and as
Chairman of the Audit
Committee, of the
AllianceBernstein Funds
since 2008.
Earl D. Weiner, # Of Counsel, and Partner 100 None
74 prior to January 2008,
(2011) of the law firm
Sullivan & Cromwell LLP
and member of ABA
Federal Regulation of
Securities Committee
Task Force to draft
editions of the Fund
Director's Guidebook.
He has served as a
director or trustee of
the AllianceBernstein
Funds since 2007 and is
Chairman of the
Governance and
Nominating Committees
of the Funds.
INTERESTED DIRECTOR
Robert M. Keith, +, ++ Senior Vice President 100 None
53 of the Adviser++ and
(2011) the head of
AllianceBernstein
Investments, Inc.
("ABI")++ since July
2008; Director of ABI
and President of the
AllianceBernstein
Mutual Funds.
Previously, he served
as Executive Managing
Director of ABI from
December 2006 to June
2008. Prior to joining
ABI in 2006, Executive
Managing Director of
Bernstein Global Wealth
Management, and prior
thereto, Senior
Managing Director and
Global Head of Client
Service and Sales of
the Adviser's
institutional
investment management
business since 2004.
Prior thereto, he was
Managing Director and
Head of North American
Client Service and
Sales in the Adviser's
institutional
investment management
business, with which he
had been associated
since prior to 2004.
--------
* The address for each of the Fund's Directors is c/o AllianceBernstein
L.P., Attention: Philip L. Kirstein, 1345 Avenue of the Americas, New
York, NY 10105.
** There is no stated term of office for the Fund's Directors.
# Member of the Audit Committee, the Governance and Nominating Committee and
the Independent Directors Committee.
## Member of the Fair Value Pricing Committee.
+ Mr. Keith is an "interested person", as defined in Section 2(a)(19) of the
1940 Act, of the Fund due to his position as a Senior Vice President of
the Adviser.
++ The Adviser and ABI are affiliates of the Fund.
^ Mr. Turner became Chairman of the Board on January 1, 2014.
The business and affairs of the Fund are overseen by the Board.
Directors who are not "interested persons" of the Fund as defined in the 1940
Act, are referred to as "Independent Directors", and Directors who are
"interested persons" of the Fund are referred to as "Interested Directors".
Certain information concerning the Fund's governance structure and each Director
is set forth below.
Experience, Skills, Attributes, and Qualifications of the Fund's
Directors. The Governance and Nominating Committee of the Board, which is
composed of Independent Directors, reviews the experience, qualifications,
attributes and skills of potential candidates for nomination or election by the
Board, and conducts a similar review in connection with the proposed nomination
of current Directors for re-election by stockholders at any annual or special
meeting of stockholders. In evaluating a candidate for nomination or election as
a Director the Governance and Nominating Committee takes into account the
contribution that the candidate would be expected to make to the diverse mix of
experience, qualifications, attributes and skills that the Governance and
Nominating Committee believes contributes to good governance for the Fund.
Additional information concerning the Governance and Nominating Committee's
consideration of nominees appears in the description of the Committee below.
The Board believes that, collectively, the Directors have balanced
and diverse experience, qualifications, attributes, and skills, which allow the
Board to operate effectively in governing the Fund and protecting the interests
of stockholders. The Board has concluded that, based on each Director's
experience, qualifications, attributes or skills on an individual basis and in
combination with those of the other Directors, each Director is qualified and
should continue to serve as such.
In determining that a particular Director was and continues to be
qualified to serve as a Director, the Board has considered a variety of
criteria, none of which, in isolation, was controlling. In addition, the Board
has taken into account the actual service and commitment of each Director during
his or her tenure (including the Director's commitment and participation in
Board and committee meetings, as well as his or her current and prior leadership
of standing and ad hoc committees) in concluding that each should continue to
serve. Additional information about the specific experience, skills, attributes
and qualifications of each Director, which in each case led to the Board's
conclusion that the Director should serve (or continue to serve) as trustee or
director of the Fund, is provided in the table above and in the next paragraph.
Among other attributes and qualifications common to all Directors
are their ability to review critically, evaluate, question and discuss
information provided to them (including information requested by the Directors),
to interact effectively with the Adviser, other service providers, counsel and
the Fund's independent registered public accounting firm, and to exercise
effective business judgment in the performance of their duties as Directors. In
addition to his or her service as a Director of the Fund and other
AllianceBernstein Funds as noted in the table above: Mr. Dobkin has experience
as an executive of a number of organizations and served as Chairman of the Audit
Committee of many of the AllianceBernstein Funds from 2001 to 2008; Mr. Downey
has experience in the investment advisory business including as Chairman and
Chief Executive Officer of a large fund complex and as director of a number of
non-AllianceBernstein funds and as Chairman of a non-AllianceBernstein
closed-end fund; Mr. Foulk has experience in the investment advisory and
securities businesses, including as Deputy Comptroller and Chief Investment
Officer of the State of New York (where his responsibilities included bond
issuances, cash management and oversight of the New York Common Retirement
Fund), has served as Chairman of the AllianceBernstein Funds and of the
Independent Directors Committee since 2003, and is active in a number of mutual
fund related organizations and committees; Mr. Guzy has experience as a
corporate director including as Chairman of a public company and Chairman of the
Finance Committee of a large public technology company; Ms. Jacklin has
experience as a financial services regulator including as U.S. Executive
Director of the International Monetary Fund, which is responsible for ensuring
the stability of the international monetary system, and as a financial services
lawyer in private practice; Mr. Keith has experience as an executive of the
Adviser with responsibility for, among other things, the AllianceBernstein
Funds; Mr. Moody has experience as a certified public accountant including
experience as Vice Chairman and U.S. and Global Investment Management Practice
Partner for a major accounting firm, is a member of both the governing council
of an organization of independent directors of mutual funds, and the Trustee
Advisory Board of BoardIQ, a biweekly publication focused on issues and news
affecting directors of mutual funds, and has served as a director or trustee and
Chairman of the Audit Committee of the AllianceBernstein Funds since 2008; Mr.
Turner has experience as a director (including as Chairman and Chief Executive
Officer of a number of companies) and as a venture capital investor including
prior service as general partner of three institutional venture capital
partnerships; and Mr. Weiner has experience as a securities lawyer whose
practice includes registered investment companies and as Chairman, director or
trustee of a number of boards, and has served as Chairman of the Governance and
Nominating Committee of the AllianceBernstein Funds since 2007. The disclosure
herein of a director's experience, qualifications, attributes and skills does
not impose on such director any duties, obligations, or liability that are
greater than the duties, obligations and liability imposed on such director as a
member of the Board and any committee thereof in the absence of such experience,
qualifications, attributes and skills.
Board Structure and Oversight Function. The Board is responsible for
oversight of the Fund. The Fund has engaged the Adviser to manage the Fund on a
day-to-day basis. The Board is responsible for overseeing the Adviser and the
Fund's other service providers in the operations of the Fund in accordance with
the Fund's investment objective and policies and otherwise in accordance with
its prospectus, the requirements of the 1940 Act and other applicable Federal,
state and other securities and other laws, and the Fund's charter and bylaws.
The Board typically meets in-person at regularly scheduled meetings eight times
throughout the year. In addition, the Directors may meet in-person or by
telephone at special meetings or on an informal basis at other times. The
Independent Directors also regularly meet without the presence of any
representatives of management. As described below, the Board has established
four standing committees - the Audit, Governance and Nominating, Independent
Directors, and Fair Value Pricing Committees - and may establish ad hoc
committees or working groups from time to time, to assist the Board in
fulfilling its oversight responsibilities. Each committee is composed
exclusively of Independent Directors. The responsibilities of each committee,
including its oversight responsibilities, are described further below. The
Independent Directors have also engaged independent legal counsel, and may from
time to time engage consultants and other advisors, to assist them in performing
their oversight responsibilities.
An Independent Director serves as Chairman of the Board. The
Chairman's duties include setting the agenda for each Board meeting in
consultation with management, presiding at each Board meeting, meeting with
management between Board meetings, and facilitating communication and
coordination between the Independent Directors and management. The Directors
have determined that the Board's leadership by an Independent Director and its
committees composed exclusively of Independent Directors is appropriate because
they believe it sets the proper tone to the relationships between the Fund, on
the one hand, and the Adviser and other service providers, on the other, and
facilitates the exercise of the Board's independent judgment in evaluating and
managing the relationships. In addition, the Fund is required to have an
Independent Director as Chairman pursuant to certain 2003 regulatory settlements
involving the Adviser.
Risk Oversight. The Fund is subject to a number of risks, including
investment, compliance and operational risks. Day-to-day risk management with
respect to the Fund resides with the Adviser or other service providers
(depending on the nature of the risk), subject to supervision by the Adviser.
The Board has charged the Adviser and its affiliates with (i) identifying events
or circumstances the occurrence of which could have demonstrable and material
adverse effects on the Fund; (ii) to the extent appropriate, reasonable or
practicable, implementing processes and controls reasonably designed to lessen
the possibility that such events or circumstances occur or to mitigate the
effects of such events or circumstances if they do occur; and (iii) creating and
maintaining a system designed to evaluate continuously, and to revise as
appropriate, the processes and controls described in (i) and (ii) above.
Risk oversight forms part of the Board's general oversight of the
Fund's investment program and operations and is addressed as part of various
regular Board and committee activities. The Fund's investment management and
business affairs are carried out by or through the Adviser and other service
providers. Each of these persons has an independent interest in risk management
but the policies and the methods by which one or more risk management functions
are carried out may differ from the Fund's and each other's in the setting of
priorities, the resources available or the effectiveness of relevant controls.
Oversight of risk management is provided by the Board and the Audit Committee.
The Directors regularly receive reports from, among others, management
(including the Global Heads of Investment Risk and Trading Risk of the Adviser),
the Fund's Senior Officer (who is also the Fund's chief compliance officer), its
independent registered public accounting firm, counsel, and internal auditors
for the Adviser, as appropriate, regarding risks faced by the Fund and the
Adviser's risk management programs.
Not all risks that may affect the Fund can be identified, nor can
controls be developed to eliminate or mitigate their occurrence or effects. It
may not be practical or cost-effective to eliminate or mitigate certain risks,
the processes and controls employed to address certain risks may be limited in
their effectiveness, and some risks are simply beyond the reasonable control of
the Fund or the Adviser, its affiliates or other service providers. Moreover, it
is necessary to bear certain risks (such as investment-related risks) to achieve
the Fund's goals. As a result of the foregoing and other factors the Fund's
ability to manage risk is subject to substantial limitations.
Board Committees. The Board has four standing committees - an Audit
Committee, a Governance and Nominating Committee, a Fair Value Pricing Committee
and an Independent Directors Committee. The members of the Audit, Governance and
Nominating, Fair Value Pricing, and Independent Directors Committees are
identified above. The function of the Audit Committee is to assist the Board in
its oversight of the Fund's financial reporting process.
The function of the Governance and Nominating Committee includes the
nomination of persons to fill any vacancies or newly created positions on the
Board.
The Board has adopted a charter for its Governance and Nominating
Committee. Pursuant to the charter, the Committee assists the Board in carrying
out its responsibilities with respect to governance of the Fund and identifies,
evaluates, selects and nominates candidates for the Board. The Committee may
also set standards or qualifications for Directors and reviews at least annually
the performance of each Director, taking into account factors such as attendance
at meetings, adherence to Board policies, preparation for and participation at
meetings, commitment and contribution to the overall work of the Board and its
committees, and whether there are health or other reasons that might affect the
Director's ability to perform his or her duties. The Committee may consider
candidates as Directors submitted by the Fund's current Board members, officers,
the Adviser, stockholders and other appropriate sources.
The Governance and Nominating Committee will consider candidates for
nomination as a Director submitted by a shareholder or group of shareholders who
have beneficially owned at least 5% of the Fund's common stock or shares of
beneficial interest for at least two years prior to the time of submission and
who timely provide specified information about the candidates and the nominating
shareholder or group. To be timely for consideration by the Governance and
Nominating Committee, the submission, including all required information, must
be submitted in writing to the attention of the Secretary at the principal
executive offices of the Fund not less than 120 days before the date of the
proxy statement for the previous year's annual meeting of shareholders. If the
Fund did not hold an annual meeting of shareholders in the previous year, the
submission must be delivered or mailed and received within a reasonable amount
of time before the Fund begins to print and mail its proxy materials. Public
notice of such upcoming annual meeting of shareholders may be given in a
shareholder report or other mailing to shareholders or by other means deemed by
the Governance and Nominating Committee or the Board to be reasonably calculated
to inform shareholders.
Shareholders submitting a candidate for consideration by the
Governance and Nominating Committee must provide the following information to
the Governance and Nominating Committee: (i) a statement in writing setting
forth (A) the name, date of birth, business address and residence address of the
candidate; (B) any position or business relationship of the candidate, currently
or within the preceding five years, with the shareholder or an associated person
of the shareholder as defined below; (C) the class or series and number of all
shares of the Fund owned of record or beneficially by the candidate; (D) any
other information regarding the candidate that is required to be disclosed about
a nominee in a proxy statement or other filing required to be made in connection
with the solicitation of proxies for election of Directors pursuant to Section
20 of the 1940 Act and the rules and regulations promulgated thereunder; (E)
whether the shareholder believes that the candidate is or will be an "interested
person" of the Fund (as defined in the 1940 Act) and, if believed not to be an
"interested person", information regarding the candidate that will be sufficient
for the Fund to make such determination; and (F) information as to the
candidate's knowledge of the investment company industry, experience as a
director or senior officer of public companies, directorships on the boards of
other registered investment companies and educational background; (ii) the
written and signed consent of the candidate to be named as a nominee and to
serve as a Director if elected; (iii) the written and signed agreement of the
candidate to complete a directors' and officers' questionnaire if elected; (iv)
the shareholder's consent to be named as such by the Fund; (v) the class or
series and number of all shares of the Fund owned beneficially and of record by
the shareholder and any associated person of the shareholder and the dates on
which such shares were acquired, specifying the number of shares owned
beneficially but not of record by each, and stating the names of each as they
appear on the Fund's record books and the names of any nominee holders for each;
and (vi) a description of all arrangements or understandings between the
shareholder, the candidate and/or any other person or persons (including their
names) pursuant to which the recommendation is being made by the shareholder.
"Associated person of the shareholder" means any person who is required to be
identified under clause (vi) of this paragraph and any other person controlling,
controlled by or under common control with, directly or indirectly, (a) the
shareholder or (b) the associated person of the shareholder.
The Governance and Nominating Committee may require the shareholder
to furnish such other information as it may reasonably require or deem necessary
to verify any information furnished pursuant to the nominating procedures
described above or to determine the qualifications and eligibility of the
candidate proposed by the shareholder to serve on the Board. If the shareholder
fails to provide such other information in writing within seven days of receipt
of written request from the Governance and Nominating Committee, the
recommendation of such candidate as a nominee will be deemed not properly
submitted for consideration, and will not be considered, by the Committee.
The Governance and Nominating Committee will consider only one
candidate submitted by such a shareholder or group for nomination for election
at an annual meeting of shareholders. The Governance and Nominating Committee
will not consider self-nominated candidates. The Governance and Nominating
Committee will consider and evaluate candidates submitted by shareholders on the
basis of the same criteria as those used to consider and evaluate candidates
submitted from other sources. These criteria include the candidate's relevant
knowledge, experience, and expertise, the candidate's ability to carry out his
or her duties in the best interests of the Fund, and the candidate's ability to
qualify as an Independent Director. When assessing a candidate for nomination,
the Committee considers whether the individual's background, skills, and
experience will complement the background, skills, and experience of other
nominees and will contribute to the diversity of the Board.
The function of the Fair Value Pricing Committee is to consider, in
advance if possible, any fair valuation decision of the Adviser's Valuation
Committee relating to a security held by the Fund made under unique or highly
unusual circumstances not previously addressed by the Valuation Committee that
would result in a change in the Fund's NAV by more than $0.01 per share.
The function of the Independent Directors Committee is to consider
and take action on matters that the Board or Committee believes should be
addressed in executive session of the Independent Directors, such as review and
approval of the Advisory and Distribution Services Agreements.
The dollar range of the Fund's securities owned by each Director and
the aggregate dollar range of securities of funds in the AllianceBernstein Fund
Complex owned by each Director are set forth below.
AGGREGATE DOLLAR
DOLLAR RANGE RANGE OF EQUITY
OF EQUITY SECURITIES IN THE
SECURITIES IN ALLIANCEBERNSTEIN
THE FUND AS OF FUND COMPLEX AS OF
DECEMBER 31, 2013 DECEMBER 31, 2013
----------------- ------------------
John H. Dobkin None [Over $100,000]
Michael J. Downey None [Over $100,000]
William H. Foulk, Jr. None [Over $100,000]
D. James Guzy None [Over $100,000]
Nancy P. Jacklin None [Over $100,000]
Robert M. Keith* None [None]
Garry L. Moody None [Over $100,000]
Marshall C. Turner, Jr. None [Over $100,000]
Earl D. Weiner None [Over $100,000]
--------
* With respect to Mr. Keith, unvested interests in certain deferred
compensation plans, including the Partner Compensation Plan are not
included.
Officer Information
-------------------
Certain information concerning the Fund's officers is set forth
below.
NAME, ADDRESS,* POSITION(S) HELD PRINCIPAL OCCUPATION
AND AGE WITH FUND DURING PAST FIVE YEARS
------- ------------------------ ----------------------
Robert M. Keith, President and Chief See biography above.
53 Executive Officer
Philip L. Kirstein, Senior Vice President and Senior Vice President and
68 Independent Compliance Independent Compliance Officer
Officer of the funds in the
AllianceBernstein Fund Complex,
with which he has been
associated since October 2004.
Prior thereto, he was Of
Counsel to Kirkpatrick &
Lockhart, LLP from October 2003
to October 2004, and General
Counsel of Merrill Lynch
Investment Managers, L.P. since
prior to March 2003.
James Tierney, Vice President Senior Vice President and
47 Portfolio Manager of the
Adviser, with which he has been
associated since December 2013.
Prior thereto, he was Chief
Investment Officer of W.P.
Stewart and Co. Ltd. ("WPS")
(2010-2013) and Portfolio
Manager/Analyst and Senior Vice
President of WPS (2000-2010).
Emilie D. Wrapp, Secretary Senior Vice President,
57 Assistant General Counsel and
Assistant Secretary of ABI,**
with which she has been
associated since prior to 2009.
Joseph J. Mantineo, Treasurer and Chief Senior Vice President of
54 Financial Officer ABIS,** with which he has been
associated since prior to 2009.
Phyllis J. Clarke, Controller Vice President of ABIS,** with
52 which she has been associated
since prior to 2009.
--------
* 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 does not pay any fees to, or reimburse expenses of, its
Directors who are considered "interested persons" (as defined in Section
2(a)(19) of the 1940 Act) of the Fund. The estimated aggregate compensation that
will be paid to the Directors by the Fund for the fiscal period ending June 30,
2014, the aggregate compensation paid to each of the Directors during calendar
year 2013 by the AllianceBernstein Fund Complex, and the total number of
registered investment companies (and separate investment portfolios within the
companies) in the AllianceBernstein Fund Complex with respect to which each of
the Directors serves as a director or trustee, are set forth below. Neither the
Fund nor any other fund in the AllianceBernstein Fund Complex provides
compensation in the form of pension or retirement benefits to any of its
directors or trustees. Each of the Directors is a director or trustee of one or
more other registered investment companies in the AllianceBernstein Fund
Complex.
Total Number of Total Number of
Registered Investment
Investment Portfolios within
Companies in the the
Total AllianceBernstein AllianceBernstein
Compensation Fund Complex, Fund Complex,
from the Including the Including the Fund,
Aggregate AllianceBernstein Fund, as to which as to which the
Compensation Fund Complex, the Director is a Director is a
Name of Director from the Including the Director Director or
of the Fund Fund* Fund or Trustee Trustee
-------------- ----- ----- ---------- -------
John H. Dobkin $[___] [$252,000] 31 100
Michael J. Downey $[___] [$252,000] 31 100
William H. Foulk, Jr. $[___] [$477,000] 31 100
D. James Guzy $[___] [$252,000] 31 100
Nancy P. Jacklin $[___] [$252,000] 31 100
Robert M. Keith $[___] [$0] 31 100
Garry L. Moody $[___] [$280,000] 31 100
Marshall C. Turner, Jr. $[___] [$252,000] 31 100
Earl D. Weiner $[___] [$270,000] 31 100
* Estimated compensation that will be paid by the Fund during the fiscal
period ending June 30, 2014.
As of the date of this SAI, the Fund has not commenced operations,
and therefore the Directors and officers of the Fund did not own any of the
outstanding shares of the Fund.
Additional Information About the Fund's Portfolio Manager
---------------------------------------------------------
The management of, and investment decisions for, the Fund's
portfolio are made by Mr. James Tierney (the "Portfolio Manager"). For
additional information about the portfolio management of the Fund, the Proxy
Statement/Prospectus. As of the date of this SAI, the portfolio manager owned
none of the Fund's equity securities.
As of [____________], employees of the Adviser had approximately
[_________] in shares of all AllianceBernstein Mutual Funds (excluding
AllianceBernstein money market funds) through their interests in certain
deferred compensation plans, including the Partners Compensation Plan, including
both vested and unvested amounts.
The following tables provide information regarding registered
investment companies other than the Fund, other pooled investment vehicles and
other accounts over which the Portfolio Manager also has day-to-day management
responsibilities. The tables provide the numbers of such accounts, the total
assets in such accounts and the number of accounts and total assets whose fees
are based on performance. The information is provided as of [__________], 2014.
--------------------------------------------------------------------------------
REGISTERED INVESTMENT COMPANIES
(excluding the Fund)
--------------------------------------------------------------------------------
Total
Number of Assets of
Total Total Registered Registered
Number of Assets of Investment Investment
Registered Registered Companies Companies
Investment Investment Managed with Managed with
Companies Companies Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
--------------------------------------------------------------------------------
James Tierney [___] $[___________] [___] $[_________]
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
OTHER POOLED INVESTMENT VEHICLES
--------------------------------------------------------------------------------
Number of Total Assets
Total Other of Other
Number of Total Assets Pooled Pooled
Other of Other Investment Investment
Pooled Pooled Vehicles Vehicles
Investment Investment Managed with Managed with
Vehicles Vehicles Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
--------------------------------------------------------------------------------
James Tierney [___] $[___________] [___] $[_________]
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
OTHER ACCOUNTS
--------------------------------------------------------------------------------
Total
Number of Assets of
Total Other Other
Number of Accounts Accounts
Other Total Assets of Managed with Managed with
Accounts Other Accounts Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
--------------------------------------------------------------------------------
James Tierney [___] $[___________] [___] $[_________]
--------------------------------------------------------------------------------
Investment Professional Conflict of Interest Disclosure
-------------------------------------------------------
As an investment adviser and fiduciary, the Adviser owes its clients
and shareholders an undivided duty of loyalty. We recognize that conflicts of
interest are inherent in our business and accordingly have developed policies
and procedures (including oversight monitoring) reasonably designed to detect,
manage and mitigate the effects of actual or potential conflicts of interest in
the area of employee personal trading, managing multiple accounts for multiple
clients, including AllianceBernstein Mutual Funds, and allocating investment
opportunities. Investment professionals, including portfolio managers and
research analysts, are subject to the above-mentioned policies and oversight
monitoring to ensure that all clients are treated equitably. We place the
interests of our clients first and expect all of our employees to meet their
fiduciary duties.
Employee Personal Trading. The Adviser has adopted a Code of
Business Conduct and Ethics that is designed to detect and prevent conflicts of
interest when investment professionals and other personnel of the Adviser own,
buy or sell securities which may be owned by, or bought or sold for, clients.
Personal securities transactions by an employee may raise a potential conflict
of interest when an employee owns or trades in a security that is owned or
considered for purchase or sale by a client, or recommended for purchase or sale
by an employee to a client. Subject to the reporting requirements and other
limitations of its Code of Business Conduct and Ethics, the Adviser permits its
employees to engage in personal securities transactions, and also allows them to
acquire investments in certain funds managed by the Adviser. The Adviser's Code
of Business Conduct and Ethics requires disclosure of all personal accounts and
maintenance of brokerage accounts with designated broker-dealers approved by the
Adviser. The Code of Business Conduct and Ethics also requires preclearance of
all securities transactions (subject to certain exceptions, including
transactions in U.S. Treasuries and open-end mutual funds) and imposes a 90-day
holding period for securities purchased by employees to discourage short-term
trading.
Managing Multiple Accounts for Multiple Clients. The Adviser has
compliance policies and oversight monitoring in place to address conflicts of
interest relating to the management of multiple accounts for multiple clients.
Conflicts of interest may arise when an investment professional has
responsibilities for the investments of more than one account because the
investment professional may be unable to devote equal time and attention to each
account. The investment professional or investment professional teams for each
client may have responsibilities for managing all or a portion of the
investments of multiple accounts with a common investment strategy, including
other registered investment companies, unregistered investment vehicles, such as
hedge funds, pension plans, separate accounts, collective trusts and charitable
foundations. Among other things, the Adviser's policies and procedures provide
for the prompt dissemination to investment professionals of initial or changed
investment recommendations by analysts so that investment professionals are
better able to develop investment strategies for all accounts they manage. In
addition, investment decisions by investment professionals are reviewed for the
purpose of maintaining uniformity among similar accounts and ensuring that
accounts are treated equitably. As discussed further below under "Portfolio
Manager Compensation", investment professional compensation reflects a broad
contribution in multiple dimensions to long-term investment success for our
clients and is not generally tied specifically to the performance of any
particular client's account, nor is it generally tied directly to the level or
change in level of assets under management.
Allocating Investment Opportunities. The investment professionals at
the Adviser routinely are required to select and allocate investment
opportunities among accounts. The Adviser has adopted policies and procedures
intended to address conflicts of interest relating to the allocation of
investment opportunities. These policies and procedures are designed to ensure
that information relevant to investment decisions is disseminated promptly
within its portfolio management teams and investment opportunities are allocated
equitably among different clients. The policies and procedures require, among
other things, objective allocation for limited investment opportunities (e.g.,
on a rotational basis), and documentation and review of justifications for any
decisions to make investments only for select accounts or in a manner
disproportionate to the size of the account. Portfolio holdings, position sizes,
and industry and sector exposures tend to be similar across similar accounts,
which minimizes the potential for conflicts of interest relating to the
allocation of investment opportunities. Nevertheless, access to portfolio funds
or other investment opportunities may be allocated differently among accounts
due to the particular characteristics of an account, such as size of the
account, cash position, tax status, risk tolerance and investment restrictions
or for other reasons.
The Adviser's procedures are also designed to address potential
conflicts of interest that may arise when the Adviser has a particular financial
incentive, such as a performance-based management fee, relating to an account.
An investment professional may perceive that he or she has an incentive to
devote more time to developing and analyzing investment strategies and
opportunities or allocating securities preferentially to accounts for which the
Adviser could share in investment gains.
Portfolio Manager Compensation
------------------------------
The Adviser's compensation program for portfolio managers is
designed to align with clients' interests, emphasizing each portfolio manager's
ability to generate long-term investment success for the Adviser's clients,
including the Fund. The Adviser also strives to ensure that compensation is
competitive and effective in attracting and retaining the highest caliber
employees.
Portfolio managers receive a base salary, incentive compensation and
contributions to AllianceBernstein's 401(k) plan. Part of the annual incentive
compensation is generally paid in the form of a cash bonus, and part through an
award under the firm's Incentive Compensation Award Plan (ICAP). The ICAP awards
vest over a four-year period. Deferred awards are paid in the form of restricted
grants of the firm's Master Limited Partnership Units, and award recipients have
the ability to receive a portion of their awards in deferred cash. The amount of
contributions to the 401(k) plan is determined at the sole discretion of the
Adviser. On an annual basis, the Adviser endeavors to combine all of the
foregoing elements into a total compensation package that considers industry
compensation trends and is designed to retain its best talent.
The incentive portion of total compensation is determined by
quantitative and qualitative factors. Quantitative factors, which are weighted
more heavily, are driven by investment performance. Qualitative factors are
driven by contributions to the investment process and client success.
The quantitative component includes measures of absolute, relative
and risk-adjusted investment performance. Relative and risk-adjusted returns are
determined based on the benchmark in the Fund's prospectus and versus peers over
one-, three- and five-year calendar periods, with more weight given to
longer-time periods. Peer groups are chosen by Chief Investment Officers, who
consult with the product management team to identify products most similar to
our investment style and most relevant within the asset class. Portfolio
managers of the Fund do not receive any direct compensation based upon the
investment returns of any individual client account, and compensation is not
tied directly to the level or change in level of assets under management.
Among the qualitative components considered, the most important
include thought leadership, collaboration with other investment colleagues,
contributions to risk-adjusted returns of other portfolios in the firm, efforts
in mentoring and building a strong talent pool and being a good corporate
citizen. Other factors can play a role in determining portfolio managers'
compensation, such as the complexity of investment strategies managed, volume of
assets managed and experience.
The Adviser emphasizes four behavioral competencies--relentlessness,
ingenuity, team orientation and accountability--that support its mission to be
the most trusted advisor to its clients. Assessments of investment professionals
are formalized in a year-end review process that includes 360-degree feedback
from other professionals from across the investment teams and the Adviser.
--------------------------------------------------------------------------------
EXPENSES OF THE FUND
--------------------------------------------------------------------------------
Distribution Services Agreement
-------------------------------
The Fund has entered into a Distribution Services Agreement (the
"Agreement") with ABI, the Fund's principal underwriter to permit ABI to
distribute the Fund's shares and to permit the Fund to pay distribution services
fees to defray expenses associated with distribution of its Class A shares,
Class C shares, Class R shares, Class K shares and Class 1 shares in accordance
with a plan of distribution that is included in the Agreement and that has been
duly adopted and approved in accordance with Rule 12b-1 adopted by the SEC under
the 1940 Act (the "Plan").
In approving the Plan, the Directors determined that there was a
reasonable likelihood that the Plan would benefit the Fund and its shareholders.
The distribution services fee of a particular class will not be used to
subsidize the provision of distribution services with respect to any other
class.
The Adviser may, from time to time, and from its own funds or such
other resources as may be permitted by rules of the SEC make payments for
distribution services to ABI; the latter may in turn pay part or all of such
compensation to brokers or other persons for their distribution assistance.
The Plan will continue in effect with respect to the Fund and each
class of shares thereof for successive one-year periods provided that such
continuance is specifically approved at least annually by a majority of the
Independent Directors who have no direct or indirect financial interest in the
operation of the Plan or any agreement related thereto (the "Qualified
Directors") and by a vote of a majority of the entire Board at a meeting called
for that purpose.
All material amendments to the Plan will become effective only upon
approval as provided in the preceding paragraph; and the Plan may not be amended
in order to increase materially the costs that the Fund may bear pursuant to the
Plan without the approval of a majority of the holders of the outstanding voting
shares of the Fund or the class or classes of the Fund. The Agreement may be
terminated (a) by the Fund without penalty at any time by a majority vote of the
holders of the Fund's outstanding voting securities, voting separately by class,
or by a majority vote of the Qualified Directors or (b) by ABI. To terminate the
Plan or the Agreement, any party must give the other parties 60 days' written
notice; except that the Fund may terminate the Plan without giving prior notice
to ABI. The Agreement will terminate automatically in the event of its
assignment. The Plan is of a type known as a "reimbursement plan", which means
that it reimburses the distributor for the actual costs of services rendered.
In the event that the Plan is terminated by either party or not
continued with respect to the Class A, Class C, Class R, Class K or Class 1
shares, (i) no distribution services fees (other than current amounts accrued
but not yet paid) would be owed by the Fund to ABI with respect to that class,
and (ii) the Fund would not be obligated to pay ABI for any amounts expended
under the Agreement not previously recovered by ABI from distribution services
fees or through deferred sales charges in respect of shares of such class.
Distribution services fees are accrued daily and paid monthly and
are charged as expenses of the Fund as accrued. The distribution services fees
attributable to the Class C, Class R, Class K and Class 1 shares are designed to
permit an investor to purchase such shares through broker-dealers without the
assessment of an initial sales charge, and at the same time to permit ABI to
compensate broker-dealers in connection with the sale of such shares. In this
regard, the purpose and function of the combined contingent deferred sales
charge ("CDSC") and distribution services fees on the Class C shares and the
distribution services fees on the Class R, Class K and Class 1 shares are the
same as those of the initial sales charge and distribution services fee with
respect to the Class A shares in that in each case the sales charge and/or
distribution services fee provide for the financing of the distribution of the
relevant class of the Fund's shares.
With respect to Class A shares of the Fund, distribution expenses
accrued by ABI in one fiscal year may not be paid from distribution services
fees received from the Fund in subsequent fiscal years. ABI's compensation with
respect to Class C, Class R, Class K and Class 1 shares under the Plan of the
Fund is directly tied to the expenses incurred by ABI. Actual distribution
expenses for Class C shares, Class R shares, Class K shares and Class 1 shares
for any given year, however, will probably exceed the distribution services fee
payable under the Plan with respect to the class involved and, in the case of
Class C shares, payments received from CDSCs. The excess will be carried forward
by ABI and reimbursed from distribution services fees subsequently payable under
the Plan with respect to the class involved and, in the case of Class C shares,
payments subsequently received through CDSCs, so long as the Plan is in effect.
Transfer Agency Agreement
-------------------------
ABIS, an indirect wholly-owned subsidiary of the Adviser located
principally at 8000 IH 10 W, 4th Floor, San Antonio, Texas 78230, receives a
transfer agency fee per account holder of each of the Class A, Class C, Class 1,
Class 2 shares and Advisor Class shares of the Fund, plus reimbursement for
out-of-pocket expenses. The transfer agency fee with respect to the Class C
shares is higher than the transfer agency fee with respect to the other classes
of shares, reflecting the additional costs associated with the Class C CDSCs.
ABIS acts as the transfer agent for the Fund. ABIS, an indirect
wholly-owned subsidiary of the Adviser, registers the transfer, issuance and
redemption of Fund shares and disburses dividends and other distributions to
Fund shareholders.
Many Fund shares are owned by selected dealers or selected agents,
as defined below, financial intermediaries or other financial representatives
("financial intermediaries") for the benefit of their customers. In those cases,
the Fund often does not maintain an account for you. Thus, some or all of the
transfer agency functions for these accounts are performed by the financial
intermediaries. The Fund, ABI and/or the Adviser pays to these financial
intermediaries, including those that sell shares of the AllianceBernstein Mutual
Funds, fees for sub-transfer agency and related recordkeeping services in
amounts ranging up to $19 per customer fund account per annum. Retirement plans
may also hold Fund shares in the name of the plan, rather than the participant.
Plan recordkeepers, who may have affiliated financial intermediaries who sell
shares of the Fund, may be paid for each plan participant fund account in
amounts up to $19 per account per annum and/or up to 0.25% per annum of the
average daily assets held in the plan. To the extent any of these payments for
recordkeeping services, transfer agency services or retirement plan accounts are
made by the Fund, they are included in your prospectus in the Fund expense
tables under "Fees and Expenses of the Fund". In addition, financial
intermediaries may be affiliates of entities that receive compensation from the
Adviser or ABI for maintaining retirement plan "platforms" that facilitate
trading by affiliated and non-affiliated financial intermediaries and
recordkeeping for retirement plans.
Because financial intermediaries and plan recordkeepers may be paid
varying amounts per class for sub-transfer agency and related recordkeeping
services, the service requirements of which may also vary by class, this may
create an additional incentive for financial intermediaries and their financial
advisors to favor one fund complex over another or one class of shares over
another.
--------------------------------------------------------------------------------
PURCHASE OF SHARES
--------------------------------------------------------------------------------
The following information supplements that set forth in Proxy
Statement/Prospectus.
General
-------
Shares of the Fund are offered on a continuous basis at a price
equal to their NAV plus an initial sales charge at the time of purchase ("Class
A shares"), without any initial sales charge and, as long as the shares are held
for one year or more, without any CDSC ("Class C shares"), to group retirement
plans, as defined below, eligible to purchase Class R shares, without any
initial sales charge or CDSC ("Class R shares"), to group retirement plans
eligible to purchase Class K shares, without any initial sales charge or CDSC
("Class K shares"), to group retirement plans and certain investment advisory
clients of, and certain other persons associated with, the Adviser and its
affiliates eligible to purchase Class I shares, without any initial sales charge
or CDSC ("Class I shares"), to group retirement plans, as defined below,
eligible to purchase Class Z shares, without any initial sales charge or CDSC
("Class Z shares"), to private clients ("Clients") of Sanford C. Bernstein & Co.
LLC ("Bernstein") without any initial sales charge or CDSC (the "Class 1
shares"), to institutional clients of the Adviser and Bernstein Clients who have
at least $3 million in fixed-income assets under management with Bernstein
without any initial sales charge or CDSC (the "Class 2 shares"), or to investors
eligible to purchase Advisor Class shares, without any initial sales charge or
CDSC ("Advisor Class shares"), in each case as described below. All of the
classes of shares of the Fund, except Class I, Class Z, Advisor Class and Class
2 shares, are subject to Rule 12b-1 asset-based sales charges. Shares of the
Fund that are offered subject to a sales charge are offered through (i)
investment dealers that are members of the Financial Industry Regulatory
Authority and have entered into selected dealer agreements with ABI ("selected
dealers"), (ii) depository institutions and other financial intermediaries or
their affiliates, that have entered into selected agent agreements with ABI
("selected agents") and (iii) ABI.
Investors may purchase shares of the Fund either through financial
intermediaries or directly through ABI. A transaction, service, administrative
or other similar fee may be charged by your financial intermediary with respect
to the purchase, sale or exchange of shares made through the financial
intermediary. Such financial intermediaries may also impose requirements with
respect to the purchase, sale or exchange of shares that are different from, or
in addition to, those imposed by the Fund, including requirements as to the
classes of shares available through that financial intermediary and the minimum
initial and subsequent investment amounts. The Fund is not responsible for, and
has no control over, the decision of any financial intermediary to impose such
differing requirements. Sales personnel of financial intermediaries distributing
the Fund's shares may receive differing compensation for selling different
classes of shares.
In order to open your account, the Fund or your financial
intermediary is required to obtain certain information from you for
identification purposes. This information may include name, date of birth,
permanent residential address and social security/taxpayer identification
number. It will not be possible to establish your account without this
information. If the Fund or your financial intermediary is unable to verify the
information provided, your account may be closed and other appropriate action
may be taken as permitted by law.
Purchase of Shares
------------------
The Fund reserves the right to suspend the sale of its shares to the
public in response to conditions in the securities markets or for other reasons.
If the Fund suspends the sale of its shares, shareholders will not be able to
acquire its shares, including through an exchange.
The public offering price of shares of the Fund is its NAV, plus, in
the case of Class A shares, a sales charge. On each Fund business day on which a
purchase or redemption order is received by the Fund and trading in the types of
securities in which the Fund invests might materially affect the value of Fund
shares, the NAV is computed as of the Fund Closing Time, which is the close of
regular trading on each day the Exchange is open (ordinarily 4:00 p.m., Eastern
time, but sometimes earlier, as in the case of scheduled half-day trading or
unscheduled suspensions of trading) by dividing the value of the Fund's total
assets, less its liabilities, by the total number of its shares then
outstanding. A Fund business day is any day on which the Exchange is open for
trading.
The respective NAVs of the various classes of shares of the Fund are
expected to be substantially the same. However, the NAVs of the Class C and
Class R shares will generally be slightly lower than the NAVs of the Class A,
Class K, Class I, Class Z, Class 1, Class 2 and Advisor Class shares of the
Fund, as a result of the differential daily expense accruals of the higher
distribution and, in some cases, transfer agency fees applicable with respect to
those classes of shares.
The Fund will accept unconditional orders for its shares to be
executed at the public offering price equal to their NAV next determined (plus
applicable Class A sales charges), as described below. Orders received by ABIS
prior to the Fund Closing Time are priced at the NAV computed as of the Fund
Closing Time on that day (plus applicable Class A sales charges). In the case of
orders for purchase of shares placed through financial intermediaries, the
applicable public offering price will be the NAV so determined, but only if the
financial intermediary receives the order prior to the Fund Closing Time. The
financial intermediary is responsible for transmitting such orders by a
prescribed time to the Fund or its transfer agent. If the financial intermediary
fails to do so, the investor will not receive that day's NAV. If a financial
intermediary or ABIS receives an order after the Fund Closing Time, the price
received by the investor will be based on the NAV determined as of the Fund
Closing Time on the next business day.
The Fund may, at its sole option, accept securities as payment for
shares of the Fund, including from certain affiliates of the Fund in accordance
with the Fund's procedures, if the Adviser believes that the securities are
appropriate investments for the Fund. The securities are valued by the method
described under "Net Asset Value" below as of the date the Fund receives the
securities and corresponding documentation necessary to transfer the securities
to the Fund. This is a taxable transaction to the shareholder.
Following the initial purchase of Fund shares, a shareholder may
place orders to purchase additional shares by telephone if the shareholder has
completed the appropriate portion of the Mutual Fund Application or an "Autobuy"
application obtained by calling the "For Literature" telephone number shown on
the cover of this SAI. Except with respect to certain omnibus accounts,
telephone purchase orders with payment by electronic funds transfer may not
exceed $500,000. Payment for shares purchased by telephone can be made only by
electronic funds transfer from a bank account maintained by the shareholder at a
bank that is a member of the National Automated Clearing House Association
("NACHA"). Telephone purchase requests must be received before the Fund Closing
Time, on a Fund business day to receive that day's public offering price.
Telephone purchase requests received after the Fund Closing Time are
automatically placed the following Fund business day, and the applicable public
offering price will be the public offering price determined as of the Fund
Closing Time on such following business day.
Full and fractional shares are credited to a shareholder's account
in the amount of his or her subscription. As a convenience, and to avoid
unnecessary expense to the Fund, the Fund will not issue stock certificates
representing shares of the Fund. Ownership of the Fund's shares will be shown on
the books of the Fund's transfer agent.
Each class of shares in the Fund represents an interest in the same
portfolio of investments of the Fund, has the same rights and is identical in
all respects, except that (i) Class A shares bear the expense of the initial
sales charge (or CDSC, when applicable) and Class C shares bear the expense of
the CDSC, (ii) Class C and Class R shares each bear the expense of a higher
distribution services fee than those borne by Class A, Class K and Class 1
shares, and Class I shares, Class Z shares, Class 2 shares and Advisor Class
shares do not bear such a fee, (iii) Class C shares bear higher transfer agency
costs than that borne by the other classes of shares, and (iv) each of Class A,
Class C, Class R and Class K shares has exclusive voting rights with respect to
provisions of the Plan pursuant to which its distribution services fee is paid
and other matters for which separate class voting is appropriate under
applicable law. Each class has different exchange privileges and certain
different shareholder service options available.
The Directors have determined that currently no conflict of interest
exists between or among the classes of shares of the Fund. On an ongoing basis,
the Directors, pursuant to their fiduciary duties under the 1940 Act and state
law, will seek to ensure that no such conflict arises.
Frequent Purchases and Redemptions
----------------------------------
The Board has adopted policies and procedures designed to detect and
deter frequent purchases and redemptions of Fund shares or excessive or
short-term trading that may disadvantage long-term Fund shareholders. These
policies are described below. There is no guarantee that the Fund will be able
to detect excessive or short-term trading or to identify shareholders engaged in
such practices, particularly with respect to transactions in omnibus accounts.
Shareholders should be aware that application of these policies may have adverse
consequences, as described below, and should avoid frequent trading in Fund
shares through purchases, sales and exchanges of shares. The Fund reserves the
right to restrict, reject or cancel, without any prior notice, any purchase or
exchange order for any reason, including any purchase or exchange order accepted
by any shareholder's financial intermediary.
Risks Associated With Excessive Or Short-Term Trading Generally.
While the Fund will try to prevent market timing by utilizing the procedures
described below, these procedures may not be successful in identifying or
stopping excessive or short-term trading in all circumstances. By realizing
profits through short-term trading, shareholders that engage in rapid purchases
and sales or exchanges of the Fund's shares dilute the value of shares held by
long-term shareholders. Volatility resulting from excessive purchases and sales
or exchanges of Fund shares, especially involving large dollar amounts, may
disrupt efficient portfolio management and cause the Fund to sell shares at
inopportune times to raise cash to accommodate redemptions relating to
short-term trading activity. In particular, the Fund may have difficulty
implementing its long-term investment strategies if it is forced to maintain a
higher level of its assets in cash to accommodate significant short-term trading
activity. In addition, the Fund may incur increased administrative and other
expenses due to excessive or short-term trading, including increased brokerage
costs and realization of taxable capital gains.
Funds that may invest significantly in securities of foreign issuers
may be particularly susceptible to short-term trading strategies. This is
because securities of foreign issuers are typically traded on markets that close
well before the time the Fund calculates its NAV at 4:00 p.m., Eastern time,
which gives rise to the possibility that developments may have occurred in the
interim that would affect the value of these securities. The time zone
differences among international stock markets can allow a shareholder engaging
in a short-term trading strategy to exploit differences in Fund share prices
that are based on closing prices of securities of foreign issuers established
some time before the Fund calculates its own share price (referred to as "time
zone arbitrage"). The Fund has procedures, referred to as fair value pricing,
designed to adjust closing market prices of securities of foreign issuers to
reflect what is believed to be the fair value of those securities at the time
the Fund calculates its NAV. While there is no assurance, the Fund expects that
the use of fair value pricing, in addition to the short-term trading policies
discussed below, will significantly reduce a shareholder's ability to engage in
time zone arbitrage to the detriment of other Fund shareholders.
A shareholder engaging in a short-term trading strategy may also
target a fund irrespective of its investments in securities of foreign issuers.
Any fund that invests in securities that are, among other things, thinly traded,
traded infrequently or relatively illiquid has the risk that the current market
price for the securities may not accurately reflect current market values. A
shareholder may seek to engage in short-term trading to take advantage of these
pricing differences (referred to as "price arbitrage"). The Fund may be
adversely affected by price arbitrage trading strategies.
Policy Regarding Short-Term Trading. Purchases and exchanges of
shares of the Fund should be made for investment purposes only. The Fund seeks
to prevent patterns of excessive purchases and sales or exchanges of Fund shares
to the extent they are detected by the procedures described below, subject to
the Fund's ability to monitor purchase, sale and exchange activity. The Fund
reserves the right to modify this policy, including any surveillance or account
blocking procedures established from time to time to effectuate this policy, at
any time without notice.
o Transaction Surveillance Procedures. The Fund, through its agents, ABI and
ABIS, maintains surveillance procedures to detect excessive or short-term
trading in Fund shares. This surveillance process involves several
factors, which include scrutinizing transactions in Fund shares that
exceed certain monetary thresholds or numerical limits within a specified
period of time. Generally, more than two exchanges of Fund shares during
any 60-day period or purchases of shares followed by a sale within 60 days
will be identified by these surveillance procedures. For purposes of these
transaction surveillance procedures, the Fund may consider trading
activity in multiple accounts under common ownership, control or
influence. Trading activity identified by either, or a combination, of
these factors, or as a result of any other information available at the
time, will be evaluated to determine whether such activity might
constitute excessive or short-term trading. With respect to managed or
discretionary accounts for which the account owner gives his/her broker,
investment adviser or other third-party authority to buy and sell Fund
shares, the Fund may consider trades initiated by the account owner, such
as trades initiated in connection with bona fide cash management purposes,
separately in their analysis. These surveillance procedures may be
modified from time to time, as necessary or appropriate to improve the
detection of excessive or short-term trading or to address specific
circumstances.
o Account Blocking Procedures. If the Fund determines, in its sole
discretion, that a particular transaction or pattern of transactions
identified by the transaction surveillance procedures described above is
excessive or short-term trading in nature, the Fund will take remedial
action that may include issuing a warning, revoking certain
account-related privileges (such as the ability to place purchase, sale
and exchange orders over the internet or by phone) or prohibiting or
"blocking" future purchase or exchange activity. However, sales of Fund
shares back to the Fund or redemptions will continue to be permitted in
accordance with the terms of the Fund's current Prospectus. As a result,
unless the shareholder redeems his or her shares, which may have
consequences if the shares have declined in value, a CDSC is applicable or
adverse tax consequences may result, the shareholder may be "locked" into
an unsuitable investment. A blocked account will generally remain blocked
for 90 days. Subsequent detections of excessive or short-term trading may
result in an indefinite account block or an account block until the
account holder or the associated broker, dealer or other financial
intermediary provides evidence or assurance acceptable to the Fund that
the account holder did not or will not in the future engage in excessive
or short-term trading.
o Applications of Surveillance Procedures and Restrictions to Omnibus
Accounts. Omnibus account arrangements are common forms of holding shares
of the Fund, particularly among certain brokers, dealers and other
financial intermediaries, including sponsors of retirement plans and
variable insurance products. The Fund applies its surveillance procedures
to these omnibus account arrangements. As required by SEC rules, the Fund
has entered into agreements with all of its financial intermediaries that
require the financial intermediaries to provide the Fund, upon the request
of the Fund or its agents, with individual account level information about
their transactions. If the Fund detects excessive trading through its
monitoring of omnibus accounts, including trading at the individual
account level, the financial intermediaries will also execute instructions
from the Fund to take actions to curtail the activity, which may include
applying blocks to accounts to prohibit future purchases and exchanges of
Fund shares. For certain retirement plan accounts, the Fund may request
that the retirement plan or other intermediary revoke the relevant
participant's privilege to effect transactions in Fund shares via the
internet or telephone, in which case the relevant participant must submit
future transaction orders via the U.S. Postal Service (i.e., regular
mail).
Alternative Purchase Arrangements
---------------------------------
Classes A and C Shares. Class A and Class C shares have the
following alternative purchase arrangements: Class A shares are generally
offered with an initial sales charge and Class C shares are sold to investors
choosing the asset-based sales charge alternative. Special purchase arrangements
are available for group retirement plans. See "Alternative Purchase Arrangements
Group Retirement Plans and Tax-Deferred Accounts" below. "Group Retirement
Plans" are defined as 401(k) plans, 457 plans, employer-sponsored 403(b) plans,
profit sharing and money purchase pension plans, defined benefit plans, and
non-qualified deferred compensation plans where plan level or omnibus accounts
are held on the books of the Fund. See "Alternative Purchase Arrangements -
Group Retirement Plans and Tax-Deferred Accounts" below. These alternative
purchase arrangements permit an investor to choose the method of purchasing
shares that is most beneficial given the amount of the purchase, the length of
time the investor expects to hold the shares, and other circumstances. Investors
should consider whether, during the anticipated life of their investment in the
Fund the accumulated distribution services fee and CDSC on Class C shares would
be less than the initial sales charge and accumulated distribution services fee
on Class A shares purchased at the same time, and to what extent such
differential would be offset by the higher return of Class A shares. Class C
shares will normally not be suitable for the investor who qualifies to purchase
Class A shares at NAV. For this reason, ABI will reject any order for more than
$1,000,000 for Class C shares.
Class A shares are subject to a lower distribution services fee and,
accordingly, pay correspondingly higher dividends per share than Class C shares.
However, because initial sales charges are deducted at the time of purchase,
most investors purchasing Class A shares would not have all of their funds
invested initially and, therefore, would initially own fewer shares. Investors
not qualifying for reduced initial sales charges who expect to maintain their
investment for an extended period of time might consider purchasing Class A
shares because the accumulated continuing distribution charges on Class C shares
may exceed the initial sales charge on Class A shares during the life of the
investment. Again, however, such investors must weigh this consideration against
the fact that, because of such initial sales charges, not all of their funds
will be invested initially.
Other investors might determine, however, that it would be more
advantageous to purchase Class C shares in order to have all of their funds
invested initially, although remaining subject to higher continuing distribution
charges and, being subject to a CDSC for a one-year period. For example, based
on current fees and expenses, an investor subject to the 4.25% initial sales
charge on Class A shares would have to hold his or her investment approximately
seven years for the Class C distribution services fee to exceed the initial
sales charge plus the accumulated distribution services fee of Class A shares.
In this example, an investor intending to maintain his or her investment for a
longer period might consider purchasing Class A shares. This example does not
take into account the time value of money, which further reduces the impact of
the Class C distribution services fees on the investment, fluctuations in NAV or
the effect of different performance assumptions.
Class A Shares. The public offering price of Class A shares is the
NAV plus a sales charge, as set forth below.
Sales Charge
Discount or
As % As % Commission
of Net of the to Dealers or
Amount Public Agents of up to
Amount of Purchase Invested Offering Price % of Offering Price
------------------ -------- -------------- -------------------
Up to $100,000.............. 4.44% 4.25% 4.00%
$100,000 up to $250,000..... 3.36 3.25 3.00
$250,000 up to $500,000..... 2.30 2.25 2.00
$500,000 up to $1,000,000*.. 1.78 1.75 1.50
--------
* There is no initial sales charge on transactions of $1,000,000 or more.
All or a portion of the initial sales charge may be paid to your
financial representative. With respect to purchases of $1,000,000 or more, Class
A shares redeemed within one year of purchase may be subject to a CDSC of up to
1%. The CDSC on Class A shares will be waived on certain redemptions, as
described below under "-- Contingent Deferred Sales Charge". The Fund receives
the entire NAV of its Class A shares sold to investors. ABI's commission is the
sales charge shown in the Prospectus less any applicable discount or commission
"re-allowed" to selected dealers and agents. ABI will re-allow discounts to
selected dealers and agents in the amounts indicated in the table above. In this
regard, ABI may elect to re-allow the entire sales charge to selected dealers
and agents for all sales with respect to which orders are placed with ABI. A
selected dealer who receives a re-allowance in excess of 90% of such a sales
charge may be deemed to be an "underwriter" under the Securities Act.
No initial sales charge is imposed on Class A shares issued (i)
pursuant to the automatic reinvestment of income dividends or capital gains
distributions or (ii) in exchange for Class A shares of other "AllianceBernstein
Mutual Funds" (as that term is defined under "Combined Purchase Privilege"
below), except that an initial sales charge will be imposed on Class A shares
issued in exchange for Class A shares of AllianceBernstein Exchange Reserves
that were purchased for cash without the payment of an initial sales charge and
without being subject to a CDSC.
Commissions may be paid to selected dealers or agents who initiate
or are responsible for Class A share purchases by a single shareholder in excess
of $1,000,000 that are not subject to an initial sales charge at up to the
following rates: 1.00% on purchases up to $3,000,000; 0.75% on purchases over
$3,000,000 to $5,000,000; and 0.50% on purchases over $5, 000, 000. Commissions
are paid based on cumulative purchases by a shareholder over the life of an
account with no adjustments for redemptions, transfers or market declines.
In addition to the circumstances described above, certain types of
investors may be entitled to pay no initial sales charge in certain
circumstances described below.
Class A Shares--Sales at NAV. The Fund may sell its Class A shares
at NAV (i.e., without any initial sales charge) to certain categories of
investors including:
(i) investment management clients of the Adviser or its
affiliates, including clients and prospective clients of the
Adviser's AllianceBernstein Institutional Investment
Management Division;
(ii) officers, directors and present and full-time employees of
selected dealers or agents; or the spouse or domestic partner,
sibling, direct ancestor or direct descendant (collectively,
"Relatives") of any such person; or any trust, individual
retirement account or retirement plan account for the benefit
of any such person;
(iii) the Adviser, ABI, ABIS and their affiliates; certain employee
benefit plans for employees of the Adviser, ABI, ABIS and
their affiliates;
(iv) persons participating in a fee-based program, sponsored and
maintained by a broker-dealer or other financial intermediary
and approved by ABI, under which persons pay an asset-based
fee for services in the nature of investment advisory or
administrative services; or clients of broker-dealers or other
financial intermediaries approved by ABI who purchase Class A
shares for their own accounts through self-directed brokerage
accounts with the broker-dealers or financial intermediaries
that may or may not charge a transaction fee to its clients;
(v) certain retirement plan accounts as described under
"Alternative Purchase Arrangements--Group Retirement Plans and
Tax-Deferred Accounts"; and
(vi) current Class A shareholders of AllianceBernstein Mutual Funds
and investors who receive a "Fair Funds Distribution" (a
"Distribution") resulting from an SEC enforcement action
against the Adviser and current Class A shareholders of
AllianceBernstein Mutual Funds who receive a Distribution
resulting from any SEC enforcement action related to trading
in shares of AllianceBernstein Mutual Funds who, in each case,
purchase shares of an AllianceBernstein Mutual Fund from ABI
through deposit with ABI of the Distribution check.
Class C Shares. Investors may purchase Class C shares at the public
offering price equal to the NAV per share of the Class C shares on the date of
purchase without the imposition of a sales charge either at the time of purchase
or, as long as the shares are held for one year or more, upon redemption. Class
C shares are sold without an initial sales charge so that the Fund will receive
the full amount of the investor's purchase payment and, as long as the shares
are held for one year or more, without a CDSC so that the investor will receive
as proceeds upon redemption the entire NAV of his or her Class C shares. The
Class C distribution services fee enables the Fund to sell Class C shares
without either an initial sales charge or CDSC, as long as the shares are held
for one year or more. Class C shares do not convert to any other class of shares
of the Fund and incur higher distribution services fees and transfer agency
costs than Class A shares and Advisor Class shares, and will thus have a higher
expense ratio and pay correspondingly lower dividends than Class A shares and
Advisor Class shares.
Contingent Deferred Sales Charge. Class A share purchases of
$1,000,000 or more and Class C shares that, in either case, are redeemed within
one year of purchase will be subject to a CDSC of 1%, as are Class A share
purchases by certain group retirement plans (see "Alternative Purchase
Arrangements - Group Retirement Plans and Tax-Deferred Accounts" below). The
charge will be assessed on an amount equal to the lesser of the cost of the
shares being redeemed or their NAV at the time of redemption. Accordingly, no
sales charge will be imposed on increases in NAV above the initial purchase
price. In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions.
In determining the CDSC applicable to a redemption of Class C
shares, it will be assumed that the redemption is, first, of any shares that are
not subject to a CDSC (for example, because the shares were acquired upon the
reinvestment of dividends or distributions) and, second, of shares held longest
during the time they are subject to the sales charge. When shares acquired in an
exchange are redeemed, the applicable CDSC and conversion schedules will be the
schedules that applied at the time of the purchase of shares of the
corresponding class of the AllianceBernstein Mutual Fund originally purchased by
the shareholder. If you redeem your shares and directly invest the proceeds in
units of CollegeBoundfund, the CDSC will apply to the units of CollegeBoundfund.
The CDSC period begins with the date of your original purchase, not the date of
exchange for the other Class C shares, if applicable, or purchase of
CollegeBoundfund units.
Proceeds from the CDSC are paid to ABI and are used by ABI to defray
the expenses of ABI related to providing distribution-related services to the
Fund in connection with the sale of Fund shares, such as the payment of
compensation to selected dealers and agents for selling Fund shares. The
combination of the CDSC and the distribution services fee enables the Fund to
sell shares without a sales charge being deducted at the time of purchase.
The CDSC is waived on redemptions of shares (i) following the death
or disability, as defined in the Code, of a shareholder, (ii) to the extent that
the redemption represents a minimum required distribution from an individual
retirement account or other retirement plan to a shareholder who has attained
the age of 70 1/2, (iii) that had been purchased by present or former Directors
of the Funds, by the Relative of any such person, by any trust, individual
retirement account or retirement plan account for the benefit of any such person
or Relative, or by the estate of any such person or Relative, (iv) pursuant to,
and in accordance with, a systematic withdrawal plan (see "Sales Charge
Reduction Programs for Class A Shares - Systematic Withdrawal Plan" below), (v)
to the extent that the redemption is necessary to meet a plan participant's or
beneficiary's request for a distribution or loan from a group retirement plan or
to accommodate a plan participant's or beneficiary's direction to reallocate his
or her plan account among other investment alternatives available under a group
retirement plan, (vi) due to the complete termination of a trust upon the death
of the trustor/grantor, beneficiary or trustee but only if the trust termination
is specifically provided for in the trust document, or (vii) that had been
purchased with proceeds from a Distribution resulting from any SEC enforcement
action related to trading in shares of AllianceBernstein Mutual Funds through
deposit with ABI of the Distribution check. The CDSC is also waived for (i)
permitted exchanges of shares, (ii) holders of Class A shares who purchased
$1,000,000 or more of Class A shares where the participating broker or dealer
involved in the sale of such shares waived the commission it would normally
receive from ABI or (iii) Class C shares sold through programs offered by
financial intermediaries and approved by ABI where such programs offer only
shares that are not subject to a CDSC, where the financial intermediary
establishes a single omnibus account for each Fund or in the case of a group
retirement plan, a single account for each plan, and where no advance commission
is paid to any financial intermediary in connection with the purchase of such
shares.
Class R Shares. Class R shares are offered to certain group
retirement plans. Class R shares are not available to retail non-retirement
accounts, traditional or Roth IRAs, Coverdell Education Savings Accounts, SEPs,
SAR-SEPs, SIMPLE IRAs, individual 403(b) plans and to
AllianceBernstein-sponsored retirement products. Class R shares incur a .50%
distribution services fee and thus have a higher expense ratio and pay
correspondingly lower dividends than Class A, Class K and Class I shares.
Class K Shares. Class K shares are available at NAV to group
retirement plans. Class K shares are not available to retail non-retirement
accounts, traditional and ROTH IRAs, Coverdell Education Savings Accounts, SEPs,
SAR-SEPs, SIMPLE IRAs, individual 403(b) plans and AllianceBernstein-sponsored
retirement products. Class K shares do not have an initial sales charge or CDSC
but incur a .25% distribution services fee and (i) thus have a lower expense
ratio than Class R shares and pay correspondingly higher dividends than Class R
shares and (ii) have a higher expense ratio than Class I shares and pay
correspondingly lower dividends than Class I shares.
Class I Shares. Class I shares are available at NAV to group
retirement plans and to certain investment advisory clients of, and certain
other persons associated with, the Adviser and its affiliates. Class I shares
generally are not available to retail non-retirement accounts, traditional and
ROTH IRAs, Coverdell Education Savings Accounts, SEPs, SAR-SEPs, SIMPLE IRAs,
individual 403(b) plans and AllianceBernstein-sponsored retirement products.
Class I shares do not incur any distribution services fees and will thus have a
lower expense ratio and pay correspondingly higher dividends than Class R and
Class K shares.
Class Z Shares. Class Z shares are available at NAV, without an
initial sales charge, to 401(k) plans, 457 plans, employer-sponsored 403(b)
plans, profit-sharing and money purchase pension plans, defined benefit plans,
and non-qualified deferred compensation plans where plan level or omnibus
accounts are held on the books of the Fund ("group retirement plans").
Class Z shares are also available to certain
AllianceBernstein-sponsored group retirement plans. Class Z shares generally are
not available to retail non-retirement accounts, traditional and Roth IRAs,
Coverdell Education Savings Accounts, SEPs, SAR-SEPs, SIMPLE IRAs and individual
403(b) plans. Class Z shares are not currently available to group retirement
plans in the AllianceBernstein-sponsored programs known as the "Informed Choice"
programs.
Class Z shares do not incur any distribution services fees and will
thus have a lower expense ratio and pay correspondingly higher dividends than
Class R and Class K shares.
Class 1 Shares. Class 1 shares are offered only to Bernstein
Clients. Class 1 shares incur a .25% distribution services fee and thus have a
lower expense ratio and pay correspondingly higher dividends than Class A and
Class C shares.
Class 2 Shares. Class 2 shares are offered only to institutional
clients of the Adviser and Bernstein Clients who meet certain minimum
requirements for assets under management with Bernstein after giving effect to
their investment in the Fund. Class 2 shares do not incur any distribution
services fees and will thus have a lower expense ratio and pay correspondingly
higher dividends than Class A, Class C and Class 1 shares.
Advisor Class Shares. Advisor Class shares of the Fund may be
purchased and held solely (i) through accounts established under fee-based
programs, sponsored and maintained by registered broker-dealers or other
financial intermediaries and approved by ABI, (ii) through self-directed defined
contribution employee benefit plans (e.g., 401(k) plans) that purchase shares
directly without the involvement of a financial intermediary, (iii) officers and
present or former Directors or other investment companies managed by the
Adviser, officers, directors and present or retired full-time employees and
former employees (for subsequent investment in accounts established during the
course of their employment) of the Adviser, ABI, ABIS and their affiliates; or
the Relatives of any such person; or any trust, individual retirement account or
retirement plan account for the benefit of any such person; or (iv) by the
categories of investors described in clauses (i), (iii) and (iv) under "Class A
Shares - Sales at NAV". Generally, a fee-based program must charge an
asset-based or other similar fee and must invest at least $250,000 in Advisor
Class shares of the Fund in order to be approved by ABI for investment in
Advisor Class shares. A transaction fee may be charged by your financial
intermediary with respect to the purchase, sale or exchange of Advisor Class
shares made through such financial intermediary. Advisor Class shares do not
incur any distribution services fees, and will thus have a lower expense ratio
and pay correspondingly higher dividends than Class A, Class C, Class R, Class K
or Class 1 shares.
Alternative Purchase Arrangements--Group Retirement Plans and Tax-Deferred
Accounts
--------------------------------------------------------------------------
The Fund offers special distribution arrangements for group
retirement plans. However, plan sponsors, plan fiduciaries and other financial
intermediaries may establish requirements as to the purchase, sale or exchange
of shares of the Fund, including maximum and minimum initial investment
requirements, that are different from those described in this SAI. Group
retirement plans also may not offer all classes of shares of the Fund. In
addition, the Class A CDSC may be waived for investments made through certain
group retirement plans. Therefore, plan sponsors or fiduciaries may not adhere
to these share class eligibility standards as set forth in the Prospectuses and
this SAI. The Fund is not responsible for, and has no control over, the decision
of any plan sponsor or fiduciary to impose such differing requirements.
Class A Shares. Class A shares are available at NAV to all
AllianceBernstein-sponsored group retirement plans, regardless of size, and to
the AllianceBernstein Link, AllianceBernstein Individual 401(k) and
AllianceBernstein SIMPLE IRA plans with at least $250,000 in plan assets or 100
or more employees. Effective June 30, 2005, for purposes of determining whether
a SIMPLE IRA plan has at least $250,000 in plan assets, all of the SIMPLE IRAs
of an employer's employees are aggregated. ABI measures the asset levels and
number of employees in these plans once monthly. Therefore, if a plan that is
not eligible at the beginning of a month for purchases of Class A shares at NAV
meets the asset level or number of employees required for such eligibility later
in that month, all purchases by the plan will be subject to a sales charge until
the next monthly measurement of assets and employees. If a plan terminates the
Fund as an investment option within one year, then all plan purchases of Class A
shares will be subject to a 1%, 1-year CDSC on redemption. Class A shares are
also available at NAV to group retirement plans. The 1%, 1-year CDSC also
generally applies. However, the 1%, 1-year CDSC may be waived if the financial
intermediary agrees to waive all commissions or other compensation paid in
connection with the sale of such shares (typically up to a 1% advance payment
for sales of Class A shares at NAV) other than the service fee paid pursuant to
the Fund's plan.
Class C Shares. Class C shares are available to AllianceBernstein
Link, AllianceBernstein Individual 401(k) and AllianceBernstein SIMPLE IRA plans
with less than $250,000 in plan assets and less than 100 employees. Class C
shares are also available to group retirement plans with plan assets of less
than $1 million. If an AllianceBernstein Link, AllianceBernstein Individual
401(k) or AllianceBernstein SIMPLE IRA plan holding Class C shares becomes
eligible to purchase Class A shares at NAV, the plan sponsor or other
appropriate fiduciary of such plan may request ABI in writing to liquidate the
Class C shares and purchase Class A shares with the liquidation proceeds. Any
such liquidation and repurchase may not occur before the expiration of the
1-year period that begins on the date of the plan's last purchase of Class C
shares.
Class R Shares. Class R shares are available to certain group
retirement plans. Class R shares are not subject to a front-end sales charge or
CDSC, but are subject to a .50% distribution fee.
Class K Shares. Class K shares are available to certain group
retirement plans. Class K shares are not subject to a front-end sales charge or
CDSC, but are subject to a .25% distribution fee.
Class I Shares. Class I shares are available to certain group
retirement plans and certain institutional clients of the Adviser who invest at
least $2 million in the Fund. Class I shares are not subject to a front-end
sales charge, CDSC or distribution fee.
Class Z Shares. Class Z shares are available to certain group
retirement plans. Class Z shares are not subject to front-end sales charges or
CDSCs or distribution fees.
Choosing a Class of Shares for Group Retirement Plans. Plan
sponsors, plan fiduciaries and other financial intermediaries may establish
requirements as to the purchase, sale or exchange of shares of the Fund,
including maximum and minimum initial investment requirements, that are
different from those described in this SAI. Plan fiduciaries should consider how
these requirements differ from the Fund's share class eligibility criteria
before determining whether to invest.
Currently, the Fund makes its Class A shares available at NAV to
group retirement plans. Unless waived under the circumstances described above, a
1%, 1-year CDSC applies to the sale of Class A shares by a plan. Because Class K
shares have no CDSC and lower Rule 12b-1 distribution fees and Class I shares
and Class Z shares have no CDSC or Rule 12b-1 distribution fees, plans should
consider purchasing Class K, Class I or Class Z shares, if eligible, rather than
Class A shares.
In selecting among the Class A, Class K and Class R shares, plans
purchasing shares through a financial intermediary that is not willing to waive
advance commission payments (and therefore are not eligible for the waiver of
the 1%, 1-year CDSC applicable to Class A shares) should weigh the following:
o the Rule 12b-1 distribution fees (0.30%) and the 1%, 1-year CDSC
with respect to Class A shares;
o the higher Rule 12b-1 distribution fees (0.50%) and the absence of a
CDSC with respect to Class R shares; and
o the lower Rule 12b-1 distribution fees (0.25%) and the absence of a
CDSC with respect to Class K shares.
Because Class A and Class K shares have lower Rule 12b-1
distribution fees than Class R shares, plans should consider purchasing Class A
or Class K shares, if eligible, rather than Class R shares.
Sales Charge Reduction Programs for Class A Shares
--------------------------------------------------
The AllianceBernstein Mutual Funds offer shareholders various
programs through which shareholders may obtain reduced sales charges or
reductions in CDSC through participation in such programs. In order for
shareholders to take advantage of the reductions available through the combined
purchase privilege, rights of accumulation and letters of intent, the Fund must
be notified by the shareholder or his or her financial intermediary that they
qualify for such a reduction. If the Fund is not notified that a shareholder is
eligible for these reductions, the Fund will be unable to ensure that the
reduction is applied to the shareholder's account.
Combined Purchase Privilege. Shareholders may qualify for the sales
charge reductions by combining purchases of shares of the Fund (and/or any other
AllianceBernstein Mutual Fund) into a single "purchase". By combining such
purchases, shareholders may be able to take advantage of the quantity discounts
described under "Alternative Purchase Arrangements--Class A Shares". A
"purchase" means a single purchase or concurrent purchases of shares of the Fund
or any other AllianceBernstein Mutual Fund, including AllianceBernstein
Institutional Funds, by (i) an individual, his or her spouse or domestic
partner, or the individual's children under the age of 21 years purchasing
shares for his, her or their own account(s), including certain CollegeBoundfund
accounts; (ii) a trustee or other fiduciary purchasing shares for a single
trust, estate or single fiduciary account with one or more beneficiaries
involved; or (iii) the employee benefit plans of a single employer. The term
"purchase" also includes purchases by any "company", as the term is defined in
the 1940 Act, but does not include purchases by any such company that has not
been in existence for at least six months or that has no purpose other than the
purchase of shares of the Fund or shares of other registered investment
companies at a discount. The term "purchase" does not include purchases by any
group of individuals whose sole organizational nexus is that the participants
therein are credit card holders of a company, policy holders of an insurance
company, customers of either a bank or broker-dealer or clients of an investment
adviser.
Currently, the AllianceBernstein Mutual Funds include:
AllianceBernstein Blended Style Series, Inc.
-AllianceBernstein 2000 Retirement Strategy
-AllianceBernstein 2005 Retirement Strategy
-AllianceBernstein 2010 Retirement Strategy
-AllianceBernstein 2015 Retirement Strategy
-AllianceBernstein 2020 Retirement Strategy
-AllianceBernstein 2025 Retirement Strategy
-AllianceBernstein 2030 Retirement Strategy
-AllianceBernstein 2035 Retirement Strategy
-AllianceBernstein 2040 Retirement Strategy
-AllianceBernstein 2045 Retirement Strategy
-AllianceBernstein 2050 Retirement Strategy
-AllianceBernstein 2055 Retirement Strategy
AllianceBernstein Bond Fund, Inc.
-AllianceBernstein Bond Inflation Strategy
-AllianceBernstein Government Reserves Portfolio
-AllianceBernstein Intermediate Bond Portfolio
-AllianceBernstein Limited Duration High Income Portfolio
-AllianceBernstein Municipal Bond Inflation Strategy
-AllianceBernstein Real Asset Strategy
AllianceBernstein Cap Fund, Inc.
-AllianceBernstein Dynamic All Market Fund
-AllianceBernstein Emerging Markets Multi-Asset Portfolio
-AllianceBernstein International Discovery Equity Portfolio
-AllianceBernstein Market Neutral Strategy - Global
-AllianceBernstein Market Neutral Strategy - U.S.
-AllianceBernstein Select U.S. Equity Portfolio
-AllianceBernstein Select US Long/Short Portfolio
-AllianceBernstein Small Cap Growth Portfolio
AllianceBernstein Core Opportunities Fund, Inc.
-AllianceBernstein Discovery Growth Fund, Inc.
AllianceBernstein Equity Income Fund, Inc.
AllianceBernstein Exchange Reserves
AllianceBernstein Global Bond Fund, Inc.
AllianceBernstein Global Real Estate Investment Fund, Inc.
AllianceBernstein Global Risk Allocation Fund, Inc.
AllianceBernstein Global Thematic Growth Fund, Inc.
AllianceBernstein Growth and Income Fund, Inc.
AllianceBernstein High Income Fund, Inc.
AllianceBernstein International Growth Fund, Inc.
AllianceBernstein Large Cap Growth Fund, Inc.
AllianceBernstein Municipal Income Fund, Inc.
-California Portfolio
-National Portfolio
-New York Portfolio
-AllianceBernstein High Income Municipal Portfolio
AllianceBernstein Municipal Income Fund II
-Arizona Portfolio
-Massachusetts Portfolio
-Michigan Portfolio
-Minnesota Portfolio
-New Jersey Portfolio
-Ohio Portfolio
-Pennsylvania Portfolio
-Virginia Portfolio
AllianceBernstein Trust
AllianceBernstein Discovery Value Fund
-AllianceBernstein Global Value Fund
-AllianceBernstein International Value Fund
-AllianceBernstein Value Fund
AllianceBernstein Unconstrained Bond Fund, Inc.
The AllianceBernstein Portfolios
-AllianceBernstein Balanced Wealth Strategy
-AllianceBernstein Conservative Wealth Strategy
-AllianceBernstein Growth Fund
-AllianceBernstein Tax-Managed Balanced Wealth Strategy
-AllianceBernstein Tax-Managed Wealth Appreciation Strategy
-AllianceBernstein Tax-Managed Conservative Wealth Strategy
-AllianceBernstein Wealth Appreciation Strategy
Sanford C. Bernstein Fund, Inc.
-Intermediate California Municipal Portfolio
-Intermediate Diversified Municipal Portfolio
-Intermediate New York Municipal Portfolio
-International Portfolio
-Overlay A Portfolio
-Overlay B Portfolio
-Short Duration Portfolio
-Tax-Aware Overlay A Portfolio
-Tax-Aware Overlay B Portfolio
-Tax-Aware Overlay C Portfolio
-Tax-Aware Overlay N Portfolio
-AllianceBernstein Tax-Managed International Portfolio
Prospectuses for the AllianceBernstein Mutual Funds may be obtained
without charge by contacting ABIS at the address or the "For Literature"
telephone number shown on the front cover of this SAI or on the Internet at
www.AllianceBernstein.com.
Cumulative Quantity Discount (Right of Accumulation). An investor's
purchase of additional Class A shares of the Fund may be combined with the value
of the shareholder's existing accounts, thereby enabling the shareholder to take
advantage of the quantity discounts described under "Alternative Purchase
Arrangements--Class A Shares". In such cases, the applicable sales charge on the
newly purchased shares will be based on the total of:
(i) the investor's current purchase;
(ii) the higher of cost or NAV (at the close of business on the
previous day) of (a) all shares of the Fund held by the
investor and (b) all shares held by the investor of any other
AllianceBernstein Mutual Fund, including AllianceBernstein
Institutional Funds and certain CollegeBoundfund accounts for
which the investor, his or her spouse or domestic partner, or
child under the age of 21 is the participant; and
(iii) the higher of cost or NAV of all shares described in paragraph
(ii) owned by another shareholder eligible to combine his or
her purchase with that of the investor into a single
"purchase" (see above).
The initial sales charge you pay on each purchase of Class A shares
will take into account your accumulated holdings in all classes of shares of
AllianceBernstein Mutual Funds. Your accumulated holdings will be calculated as
(a) the value of your existing holdings as of the day prior to your additional
investment or (b) the amount you invested, including reinvested dividends but
excluding appreciation and less any amount of withdrawals, whichever is higher.
For example, if an investor owned shares of an AllianceBernstein
Mutual Fund that were purchased for $200,000 and were worth $190,000 at their
then current NAV and, subsequently, purchased Class A shares of the Fund worth
an additional $100,000, the initial sales charge for the $100,000 purchase would
be at the 2.25% rate applicable to a single $300,000 purchase of shares of the
Fund, rather than the 3.25% rate.
Letter of Intent. Class A investors may also obtain the quantity
discounts described under "Alternative Purchase Arrangements - Class A Shares"
by means of a written Letter of Intent, which expresses the investor's intention
to invest at least $100,000 in Class A shares of the Fund or any
AllianceBernstein Mutual Fund within 13 months. Each purchase of shares under a
Letter of Intent will be made at the public offering price or prices applicable
at the time of such purchase to a single transaction of the dollar amount
indicated in the Letter of Intent.
Investors qualifying for the Combined Purchase Privilege described
above may purchase shares of the AllianceBernstein Mutual Funds under a single
Letter of Intent. The AllianceBernstein Mutual Funds will use the higher of cost
or current NAV of the investor's existing investments and of those accounts with
which investments are combined via Combined Purchase Privileges toward the
fulfillment of the Letter of Intent. For example, if at the time an investor
signs a Letter of Intent to invest at least $100,000 in Class A shares of the
Fund, the investor and the investor's spouse or domestic partner each purchase
shares of the Fund worth $20,000 (for a total of $40,000), but the current NAV
of all applicable accounts is $45,000 at the time a $100,000 Letter of Intent is
initiated, it will only be necessary to invest a total of $55,000 during the
following 13 months in shares of the Fund or any other AllianceBernstein Mutual
Fund, to qualify for the 3.25% sales charge on the total amount being invested
(the sales charge applicable to an investment of $100,000).
The Letter of Intent is not a binding obligation upon the investor
to purchase the full amount indicated. The minimum initial investment under a
Letter of Intent is 5% of such amount. Shares purchased with the first 5% of
such amount will be held in escrow (while remaining registered in the name of
the investor) to secure payment of the higher sales charge applicable to the
shares actually purchased if the full amount indicated is not purchased, and
such escrowed shares will be involuntarily redeemed at their then NAV to pay the
additional sales charge, if necessary. Dividends on escrowed shares, whether
paid in cash or reinvested in additional Fund shares, are not subject to escrow.
When the full amount indicated has been purchased, the escrow will be released.
Investors wishing to enter into a Letter of Intent in conjunction
with their initial investment in Class A shares of the Fund can obtain a form of
Letter of Intent by contacting ABIS at the address or telephone numbers shown on
the cover of this SAI.
Reinstatement Privilege. A shareholder who has redeemed any or all
of his or her Class A shares may reinvest all or any portion of the proceeds
from that redemption in Class A shares of any AllianceBernstein Mutual Fund at
NAV without any sales charge, provided that (i) such reinvestment is made within
120 calendar days after the redemption or repurchase date. Shares are sold to a
reinvesting shareholder at the NAV next determined as described above. A
reinstatement pursuant to this privilege will not cancel the redemption or
repurchase transaction; therefore, any gain or loss so realized will be
recognized for federal income tax purposes except that no loss will be
recognized to the extent that the proceeds are reinvested in shares of the Fund
within 30 calendar days after the redemption or repurchase transaction.
Investors may exercise the reinstatement privilege by written request sent to
the Fund at the address shown on the cover of this SAI.
Dividend Reinvestment Program. Under the Fund's Dividend
Reinvestment Program, unless you specify otherwise, your dividends and
distributions will be automatically reinvested in the same class of shares of
the Fund without an initial sales charge or CDSC. If you elect to receive your
distributions in cash, you will only receive a check if the distribution is
equal to or exceeds $25.00. Distributions of less than $25.00 will automatically
be reinvested in Fund shares. To receive distributions of less than $25.00 in
cash, you must have bank instructions associated to your account so that
distributions can be delivered to you electronically via Electronic Funds
Transfer using the Automated Clearing House or "ACH". If you elect to receive
distributions by check, your distributions and all subsequent distributions may
nonetheless be reinvested in additional shares of the Fund under the following
circumstances:
(a) the postal service is unable to deliver your checks to your
address of record and the checks are returned to the Fund's transfer
agent as undeliverable; or
(b) your checks remain uncashed for nine months.
Additional shares of the Fund will be purchased at the then current
NAV. You should contact the Fund's transfer agent to change your distribution
option. Your request to do so must be received by the transfer agent before the
record date for a distribution in order to be effective for that distribution.
No interest will accrue on amounts represented by uncashed distribution checks.
Dividend Direction Plan. A shareholder who already maintains
accounts in more than one AllianceBernstein Mutual Fund may direct that income
dividends and/or capital gains paid by one AllianceBernstein Mutual Fund be
automatically reinvested, in any amount, without the payment of any sales or
service charges, in shares of the same class of the other AllianceBernstein
Mutual Fund(s). Further information can be obtained by contacting ABIS at the
address or the "For Literature" telephone number shown on the cover of this SAI.
Investors wishing to establish a dividend direction plan in connection with
their initial investment should complete the appropriate section of the Mutual
Fund Application. Current shareholders should contact ABIS to establish a
dividend direction plan.
Systematic Withdrawal Plan
--------------------------
General. Any shareholder who owns or purchases shares of the Fund
having a current NAV of at least $5,000 may establish a systematic withdrawal
plan under which the shareholder will periodically receive a payment in a stated
amount of not less than $50 on a selected date. The $5,000 account minimum does
not apply to a shareholder owning shares through an individual retirement
account or other retirement plan who has attained the age of 70 1/2 who wishes
to establish a systematic withdrawal plan to help satisfy a required minimum
distribution. For Class 1 and Class 2 shares, a systematic withdrawal plan is
available only to shareholders who own book-entry shares worth $25,000 or more.
Systematic withdrawal plan participants must elect to have their dividends and
distributions from the Fund automatically reinvested in additional shares of the
Fund.
Shares of the Fund owned by a participant in the Fund's systematic
withdrawal plan will be redeemed as necessary to meet withdrawal payments and
such payments will be subject to any taxes applicable to redemptions and, except
as discussed below with respect to Class A and Class C shares, any applicable
CDSC. Shares acquired with reinvested dividends and distributions will be
liquidated first to provide such withdrawal payments and thereafter other shares
will be liquidated to the extent necessary, and depending upon the amount
withdrawn, the investor's principal may be depleted. A systematic withdrawal
plan may be terminated at any time by the shareholder or the Fund.
Withdrawal payments will not automatically end when a shareholder's
account reaches a certain minimum level. Therefore, redemptions of shares under
the plan may reduce or even liquidate a shareholder's account and may subject
the shareholder to the Fund's involuntary redemption provisions. See "Redemption
and Repurchase of Shares--General". Purchases of additional shares concurrently
with withdrawals are undesirable because of sales charges applicable when
purchases are made. While an occasional lump-sum investment may be made by a
holder of Class A shares who is maintaining a systematic withdrawal plan, such
investment should normally be an amount equivalent to three times the annual
withdrawal or $5,000, whichever is less.
Payments under a systematic withdrawal plan may be made by check or
electronically via the Automated Clearing House ("ACH") network. Investors
wishing to establish a systematic withdrawal plan in conjunction with their
initial investment in shares of the Fund should complete the appropriate portion
of the Mutual Fund Application, while current Fund shareholders desiring to do
so can obtain an application form by contacting ABIS at the address or the "For
Literature" telephone number shown on the cover of this SAI.
CDSC Waiver for Class A Shares and Class C Shares. Under the
systematic withdrawal plan, up to 1% monthly, 2% bi-monthly or 3% quarterly of
the value at the time of redemption of the Class A or Class C shares in a
shareholder's account may be redeemed free of any CDSC.
With respect to Class A and Class C shares, shares held the longest
will be redeemed first and will count toward the foregoing limitations.
Redemptions in excess of those limitations will be subject to any otherwise
applicable CDSC.
Payments to Financial Advisors and Their Firms
----------------------------------------------
Financial intermediaries market and sell shares of the Fund. These
financial intermediaries employ financial advisors and receive compensation for
selling shares of the Fund. This compensation is paid from various sources,
including any sales charge, CDSC and/or Rule 12b-1 fee that you or the Fund may
pay. Your individual financial advisor may receive some or all of the amounts
paid to the financial intermediary that employs him or her.
In the case of Class A shares, all or a portion of the initial sales
charge that you pay may be paid by ABI to financial intermediaries selling Class
A shares. ABI may also pay these financial intermediaries a fee of up to 1% on
purchases of $1 million or more. Additionally, up to 100% of the Rule 12b-1 fees
applicable to Class A shares each year may be paid to financial intermediaries,
including your financial intermediary, that sell Class A shares.
In the case of Class C shares, ABI may pay, at the time of your
purchase, a commission to firms selling Class C shares in an amount equal to 1%
of your investment. Additionally, up to 100% of the Rule 12b-1 fee applicable to
Class C shares each year may be paid to financial intermediaries, including your
financial intermediary, that sell Class C shares.
In the case of Class R, Class K and Class 1 shares, up to 100% of
the Rule 12b-1 fee applicable to Class R, Class K and Class 1 shares each year
may be paid to financial intermediaries, including your financial intermediary,
that sell Class R, Class K and Class 1 shares.
In the case of Advisor Class shares, your financial advisor may
charge ongoing fees or transactional fees. ABI may pay a portion of "ticket" or
other transactional charges.
Your financial advisor's firm receives compensation from the Fund,
ABI and/or the Adviser in several ways from various sources, which include some
or all of the following:
o upfront sales commissions;
o Rule 12b-1 fees;
o additional distribution support;
o defrayal of costs for educational seminars and training; and
o payments related to providing sub-accounting or shareholder
servicing.
Other Payments for Distribution Services and Educational Support
----------------------------------------------------------------
In addition to the commissions paid to financial intermediaries at
the time of sale and the fees described under "Asset-Based Sales Charges or
Distribution and/or Service (Rule 12b-1) Fees", in your Prospectus, some or all
of which may be paid to financial intermediaries (and, in turn, to your
financial advisor), ABI, at its expense, currently provides additional payments
to firms that sell shares of the AllianceBernstein Mutual Funds. Although the
individual components may be higher and the total amount of payments made to
each qualifying firm in any given year may vary, the total amount paid to a
financial intermediary in connection with the sale of shares of the
AllianceBernstein Mutual Funds will generally not exceed the sum of (a) 0.25% of
the current year's fund sales by that firm and (b) 0.10% of average daily net
assets attributable to that firm over the year. These sums include payments to
reimburse directly or indirectly the costs incurred by these firms and their
employees in connection with educational seminars and training efforts about the
AllianceBernstein Mutual Funds for the firms' employees and/or their clients and
potential clients. The costs and expenses associated with these efforts may
include travel, lodging, entertainment and meals.
For 2013, ABI's additional payments to these firms for distribution
services and educational support related to the AllianceBernstein Mutual Funds
are expected to be approximately 0.05% of the average monthly assets of the
AllianceBernstein Mutual Funds, or approximately $21 million. In 2012, ABI paid
approximately 0.05% of the average monthly assets of the AllianceBernstein
Mutual Funds or approximately $19.0 million, for distribution services and
education support related to the AllianceBernstein Mutual Funds.
A number of factors are considered in determining the additional
payments, including each firm's AllianceBernstein Mutual Fund sales, assets and
redemption rates, and the willingness and ability of the firm to give ABI access
to its financial advisors for educational and marketing purposes. In some cases,
firms will include the AllianceBernstein Mutual Funds on a "preferred list".
ABI's goal is to make the financial advisors who interact with current and
prospective investors and shareholders more knowledgeable about the
AllianceBernstein Mutual Funds so that they can provide suitable information and
advice about the funds and related investor services.
The Fund and ABI also make payments for sub-accounting or
shareholder servicing to financial intermediaries that sell AllianceBernstein
Mutual Fund shares. Please see "Expenses of the Fund - Transfer Agency
Agreement" above. To the extent that these expenses are paid by the Fund, they
are included in "Other Expenses" under "Fees and Expenses of the Fund - Annual
Fund Operating Expenses" in the Proxy Statement/Prospectus.
If one mutual fund sponsor makes greater distribution assistance
payments than another, your financial advisor and his or her firm may have an
incentive to recommend one fund complex over another. Similarly, if your
financial advisor or his or her firm receives more distribution assistance for
one share class versus another, then they may have an incentive to recommend
that class.
Please speak with your financial advisor to learn more about the
total amounts paid to your financial advisor and his or her firm by the Fund,
the Adviser, ABI and by sponsors of other mutual funds he or she may recommend
to you. You should also consult disclosures made by your financial advisor at
the time of purchase.
ABI anticipates that the firms that will receive additional payments
for distribution services and/or educational support include:
Advisor Group, Inc.
Ameriprise Financial Services
AXA Advisors
Cadaret, Grant & Co.
CCO Investment Services Corp.
Chase Investment Services
Citigroup Global Markets, Inc.
Commonwealth Financial Network
Donegal Securities
Financial Network Investment Company
LPL Financial
Merrill Lynch
Morgan Stanley
Multi-Financial Securities Corporation
Northwestern Mutual Investment Services
PrimeVest Financial Services
Raymond James
RBC Wealth Management
Robert W. Baird
UBS Financial Services
Wells Fargo Advisors
ABI expects that additional firms may be added to this list from
time to time.
Although the Fund may use brokers and dealers who sell shares of the
Fund to effect portfolio transactions, the Fund does not consider the sale of
AllianceBernstein Mutual Fund shares as a factor when selecting brokers or
dealers to effect portfolio transactions.
--------------------------------------------------------------------------------
REDEMPTION AND REPURCHASE OF SHARES
--------------------------------------------------------------------------------
The following information supplements that set forth in the Proxy
Statement/Prospectus. If you are an Advisor Class shareholder through an account
established under a fee-based program your fee-based program may impose
requirements with respect to the purchase, sale or exchange of Advisor Class
shares of the Fund that are different from those described herein. Similarly, if
you are a shareholder through a group retirement plan, your plan may impose
requirements with respect to the purchase, sale or exchange of shares of the
Fund that are different from those described herein. A transaction fee may be
charged by your financial intermediary with respect to the purchase, sale or
exchange of Advisor Class shares made through such financial intermediary. The
Fund has authorized one or more brokers to receive on its behalf purchase and
redemption orders. Such brokers are authorized to designate other intermediaries
to receive purchase and redemption orders on the Fund's behalf. In such cases,
orders will receive the NAV next computed after such order is properly received
by the authorized broker or designee and accepted by the Fund.
Redemption
----------
Subject only to the limitations described below, the Charter of the
Company requires that the Fund redeem the shares tendered to it, as described
below, at a redemption price equal to their NAV as next computed following the
receipt of shares tendered for redemption in proper form. Except for any CDSC
which may be applicable to Class A or Class C shares, there is no redemption
charge. Payment of the redemption price normally will be made within seven days
after the Fund's receipt of such tender for redemption. If a shareholder is in
doubt about what documents are required by his or her fee-based program or
employee benefit plan, the shareholder should contact his or her financial
intermediary.
The right of redemption may not be suspended or the date of payment
upon redemption postponed for more than seven days after shares are tendered for
redemption, except for any period during which the Exchange is closed (other
than customary weekend and holiday closings) or during which the SEC determines
that trading thereon is restricted, or for any period during which an emergency
(as determined by the SEC) exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable or as a result of which it
is not reasonably practicable for the Fund fairly to determine the value of its
net assets, or for such other periods as the SEC may by order permit for the
protection of security holders of the Fund.
Payment of the redemption price normally will be made in cash but
may be made, at the option of the Fund, in kind. No interest will accrue on
uncashed redemption checks. The value of a shareholder's shares on redemption or
repurchase may be more or less than the cost of such shares to the shareholder,
depending upon the market value of the Fund's portfolio securities at the time
of such redemption or repurchase. Redemption proceeds on Class A and Class C
shares will reflect the deduction of the CDSC, if any. Payment received by a
shareholder upon redemption or repurchase of his or her shares, assuming the
shares constitute capital assets in his or her hands, will result in long-term
or short-term capital gain (or loss) depending upon the shareholder's holding
period and basis in respect of the shares redeemed.
To redeem shares of the Fund by mail, the registered owner or owners
should forward a letter to the Fund containing a request for redemption. The
Fund may require the signature or signatures on the letter to be Medallion
Signature Guaranteed. Please contact ABIS to confirm whether a Medallion
Signature Guarantee is needed.
Telephone Redemption - Payment by Electronic Funds Transfer. Each
Fund shareholder is entitled to request redemption with payment by electronic
funds transfer by telephone at (800) 221-5672 if the shareholder has completed
the appropriate portion of the Mutual Fund Application or, if an existing
shareholder has not completed this portion, by an "Autosell" application
obtained from ABIS (except for certain omnibus accounts). A telephone redemption
request for payment by electronic funds transfer may not exceed $100,000, and
must be made before the Fund Closing Time, on a Fund business day as defined
above. Proceeds of telephone redemptions will be sent by electronic funds
transfer to a shareholder's designated bank account at a bank selected by the
shareholder that is a member of the NACHA.
Telephone Redemption - Payment by Check. Each Fund shareholder is
eligible to request redemption with payment by check of Fund shares by telephone
at (800) 221-5672 before the Fund Closing Time, on a Fund business day in an
amount not exceeding $100,000. Proceeds of such redemptions are remitted by
check to the shareholder's address of record. A shareholder otherwise eligible
for telephone redemption by check may cancel the privilege by written
instruction to ABIS, or by checking the appropriate box on the Mutual Fund
Application.
Telephone Redemptions--General. During periods of drastic economic,
market or other developments, such as Hurricane Sandy in 2012, it is possible
that shareholders would have difficulty in reaching ABIS by telephone (although
no such difficulty was apparent at any time in connection with the attacks). If
a shareholder were to experience such difficulty, the shareholder should issue
written instructions to ABIS at the address shown on the cover of this SAI. The
Fund reserves the right to suspend or terminate its telephone redemption service
at any time without notice. Telephone redemption is not available with respect
to shares (i) held in nominee or "street name" accounts, (ii) held by a
shareholder who has changed his or her address of record within the preceding 30
calendar days or (iii) held in any retirement plan account. Neither the Fund,
the Adviser, ABI nor ABIS will be responsible for the authenticity of telephone
requests for redemptions that the Fund reasonably believes to be genuine. The
Fund will employ reasonable procedures in order to verify that telephone
requests for redemptions are genuine, including, among others, recording such
telephone instructions and causing written confirmations of the resulting
transactions to be sent to shareholders. If the Fund did not employ such
procedures, it could be liable for losses arising from unauthorized or
fraudulent telephone instructions. Financial intermediaries may charge a
commission for handling telephone requests for redemptions.
The Fund may redeem shares through ABI or financial intermediaries.
The redemption price will be the NAV next determined after ABI receives the
request (less the CDSC, if any, with respect to the Class A and Class C shares),
except that requests placed through financial intermediaries before the Fund
Closing Time will be executed at the NAV determined as of the Fund Closing Time
on that day if received by ABI prior to its close of business on that day
(normally 5:00 p.m., Eastern time). The financial intermediary is responsible
for transmitting the request to ABI by 5:00 p.m., Eastern Time, (certain
financial intermediaries may enter into operating agreements permitting them to
transmit purchase and redemption information that was received prior to the
close of business to ABI after 5:00 p.m., Eastern time, and receive that day's
NAV). If the financial intermediary fails to do so, the shareholder's right to
receive that day's closing price must be settled between the shareholder and
that financial intermediary. A shareholder may offer shares of the Fund to ABI
either directly or through a financial intermediary. Neither the Fund nor ABI
charges a fee or commission in connection with the redemption of shares (except
for the CDSC, if any, with respect to Class A and Class C shares). Normally, if
shares of the Fund are offered through a financial intermediary, the redemption
is settled by the shareholder as an ordinary transaction with or through that
financial intermediary, who may charge the shareholder for this service. The
redemption of shares of the Fund as described above with respect to financial
intermediaries is a voluntary service of the Fund and the Fund may suspend or
terminate this practice at any time.
Automatic Sale
--------------
Class 1 Shares. Under certain circumstances, Bernstein may redeem
your Class 1 shares of the Fund without your consent. Maintaining small
shareholder accounts is costly. Accordingly, if you make a sale that reduces the
value of your account to less than $1,000, Bernstein may, on at least 60 days'
prior written notice, sell your remaining Class 1 shares in the Fund and close
your account. Bernstein will not close your account if you increase your account
balance to $1,000 during the 60-day notice period.
Class 2 Shares. Under certain circumstances, Bernstein may redeem
your Class 2 shares of the Fund without your consent. Maintaining small
shareholder accounts is costly. Accordingly, if you make a sale that reduces the
value of your account to less than $250,000, Bernstein may, on at least 60 days'
prior written notice, sell your remaining Class 2 shares in the Fund and close
your account. Bernstein will not close your account if you increase your account
balance to $250,000 during the 60 day notice period.
Account Closure
---------------
The Fund reserves the right to close out an account that has
remained below $1,000 for 90 days, except for Class 1 and Class 2 shares as
described below. No CDSC will be deducted from the proceeds of this redemption.
In the case of a redemption or repurchase of shares of the Fund recently
purchased by check, redemption proceeds will not be made available until the
Fund is reasonably assured that the check has cleared, normally up to 15
calendar days following the purchase date.
--------------------------------------------------------------------------------
SHAREHOLDER SERVICES
--------------------------------------------------------------------------------
The following information supplements that set forth in the Proxy
Statement/Prospectus. The shareholder services set forth below are applicable to
all classes of shares unless otherwise indicated. If you are an Advisor Class
shareholder through an account established under a fee-based program or a
shareholder in a group retirement plan, your fee-based program or retirement
plan may impose requirements with respect to the purchase, sale or exchange of
shares of the Fund that are different from those described herein.
Automatic Investment Program
----------------------------
Investors may purchase shares of the Fund through an automatic
investment program utilizing electronic funds transfer drawn on the investor's
own bank account. Under such a program, pre-authorized monthly drafts for a
fixed amount are used to purchase shares through the financial intermediary
designated by the investor at the public offering price next determined after
ABI receives the proceeds from the investor's bank. The monthly drafts must be
in minimum amounts of either $50 or $200, depending on the investor's initial
purchase. If an investor makes an initial purchase of at least $2,500, the
minimum monthly amount for pre-authorized drafts is $50. If an investor makes an
initial purchase of less than $2,500, the minimum monthly amount for
pre-authorized drafts is $200 and the investor must commit to a monthly
investment of at least $200 until the investor's account balance is $2,500 or
more. In electronic form, drafts can be made on or about a date each month
selected by the shareholder. Investors wishing to establish an automatic
investment program in connection with their initial investment should complete
the appropriate portion of the Mutual Fund Application. Current shareholders
should contact ABIS at the address or telephone numbers shown on the cover of
this SAI to establish an automatic investment program.
Exchange Privilege
------------------
You may exchange your investment in the Fund for shares of the same
class of other AllianceBernstein Mutual Funds (including AllianceBernstein
Exchange Reserves, a money market fund managed by the Adviser) if the other
AllianceBernstein Mutual Fund in which you wish to invest offers shares of the
same class. In addition, (i) present officers and full-time employees of the
Adviser, (ii) present directors or trustees of any AllianceBernstein Mutual
Fund, (iii) certain employee benefit plans for employees of the Adviser, ABI,
ABIS and their affiliates and (iv) persons participating in a fee-based program,
sponsored and maintained by a registered broker-dealer or other financial
intermediary and approved by ABI, under which such persons pay an asset-based
fee for a service in the nature of investment advisory or administrative service
may, on a tax-free basis, exchange Class A or Class C shares of the Fund for
Advisor Class shares of the Fund. Exchanges of shares are made at the NAV next
determined and without sales or service charges. Exchanges may be made by
telephone or written request. In order to receive a day's NAV, ABIS must receive
and confirm a telephone exchange request by the Fund Closing Time, on that day.
Shares will continue to age without regard to exchanges for purpose
of determining the CDSC, if any, upon redemption. When redemption occurs, the
CDSC applicable to the shares of the AllianceBernstein Mutual Fund you
originally purchased for cash is applied.
Please read carefully the prospectus of the AllianceBernstein Mutual
Fund into which you are exchanging before submitting the request. Call ABIS at
(800) 221-5672 to exchange shares. Except with respect to exchanges of Class A
or Class C shares of the Fund for Advisor Class shares of the Fund, exchanges of
shares as described above in this section are taxable transactions for federal
income tax purposes. The exchange service may be modified, restricted or
terminated on 60 days' written notice.
All exchanges are subject to the minimum investment requirements and
any other applicable terms set forth in the prospectus for the AllianceBernstein
Mutual Fund whose shares are being acquired. An exchange is effected through the
redemption of the shares tendered for exchange and the purchase of shares being
acquired at their respective NAVs as next determined following receipt by the
AllianceBernstein Mutual Fund whose shares are being exchanged of (i) proper
instructions and all necessary supporting documents as described in such fund's
prospectus, or (ii) a telephone request for such exchange in accordance with the
procedures set forth in the following paragraph. Exchanges of shares of
AllianceBernstein Mutual Funds will generally result in the realization of a
capital gain or loss for federal income tax purposes.
Each Fund shareholder and the shareholder's financial intermediary
are authorized to make telephone requests for exchanges unless ABIS receives
written instruction to the contrary from the shareholder, or the shareholder
declines the privilege by checking the appropriate box on the Mutual Fund
Application. Shares acquired pursuant to a telephone request for exchange will
be held under the same account registration as the shares redeemed through such
exchange.
Eligible shareholders desiring to make an exchange should telephone
ABIS with their account number and other details of the exchange, at (800)
221-5672 before the Fund Closing Time, on a Fund business day as defined above.
Telephone requests for exchange received before the Fund Closing Time, on a Fund
business day will be processed as of the close of business on that day. During
periods of drastic economic, market or other developments, such as the terrorist
attacks on September 11, 2001, it is possible that shareholders would have
difficulty in reaching ABIS by telephone (although no such difficulty was
apparent at any time in connection with the attacks). If a shareholder were to
experience such difficulty, the shareholder should issue written instructions to
ABIS at the address shown on the cover of this SAI.
A shareholder may elect to initiate a monthly "Auto Exchange"
whereby a specified dollar amount's worth of his or her Fund shares (minimum
$25) is automatically exchanged for shares of another AllianceBernstein Mutual
Fund.
None of the AllianceBernstein Mutual Funds, the Adviser, ABI or ABIS
will be responsible for the authenticity of telephone requests for exchanges
that the Fund reasonably believes to be genuine. The Fund will employ reasonable
procedures in order to verify that telephone requests for exchanges are genuine,
including, among others, recording such telephone instructions and causing
written confirmations of the resulting transactions to be sent to shareholders.
If the Fund did not employ such procedures, it could be liable for losses
arising from unauthorized or fraudulent telephone instructions. Financial
intermediaries may charge a commission for handling telephone requests for
exchanges.
The exchange privilege is available only in states where shares of
the AllianceBernstein Mutual Fund being acquired may be legally sold. Each
AllianceBernstein Mutual Fund reserves the right, at any time on 60 days' notice
to its shareholders to reject any order to acquire its shares through exchange
or otherwise, to modify, restrict or terminate the exchange privilege.
Statements and Reports
----------------------
Each shareholder of the Fund receives semi-annual and annual reports
which include a portfolio of investments, financial statements and, in the case
of the annual report, the report of the Fund's independent registered public
accounting firm, Ernst & Young LLP, as well as a confirmation of each purchase
and redemption. By contacting his or her financial intermediary or ABIS, a
shareholder can arrange for copies of his or her account statements to be sent
to another person.
--------------------------------------------------------------------------------
NET ASSET VALUE
--------------------------------------------------------------------------------
The NAV of the Fund is computed at the next close of regular trading
on each day the Exchange is open (ordinarily 4:00 p.m., Eastern time, but
sometimes earlier, as in the case of scheduled half-day trading or unscheduled
suspensions of trading) following receipt of a purchase or redemption order by
the Fund on each Fund business day on which such an order is received and on
such other days as the Board deems appropriate or necessary in order to comply
with Rule 22c-1 under the 1940 Act. The Fund's NAV is calculated by dividing the
value of the Fund's total assets, less its liabilities, by the total number of
its shares then outstanding. A business day is any weekday on which the Exchange
is open for trading.
Portfolio securities are valued at current market value or at fair
value as determined in accordance with applicable rules under the 1940 Act and
the Fund's pricing policies and procedures (the "Pricing Policies") established
by and under the general supervision of the Board. The Board has delegated to
the Adviser, subject to the Board's continuing oversight, certain of its duties
with respect to the Pricing Policies. The Adviser has established a Valuation
Committee, which operates under policies and procedures approved by the Boards,
to value a Fund's assets on behalf of the Fund.
Whenever possible, securities are valued based on market information
on the business day as of which the value is being determined as follows:
(a) a security listed on the Exchange, or on another national or
foreign exchange (other than securities listed on the NASDAQ Stock Exchange
("NASDAQ")), is valued at the last sale price reflected on the consolidated tape
at the close of the exchange. If there has been no sale on the relevant business
day, the security is valued at the last traded price from the previous day. On
the following day, the security is valued in good faith at fair value by, or in
accordance with procedures approved by, the Board;
(b) a security traded on NASDAQ is valued at the NASDAQ Official
Closing Price;
(c) a security traded on more than one exchange is valued in
accordance with paragraph (a) above by reference to the principal exchange on
which securities are traded;
(d) a listed or OTC put or call option is valued at the mid level
between the current bid and asked prices (for options or futures contracts, see
item (e)). If neither a current bid or a current ask price is available, the
Adviser will have discretion to determine the best valuation (e.g., last trade
price) and then bring the issue to the Valuation Committee the next day;
(e) an open futures contract and any option thereon is valued at the
closing settlement price or, in the absence of such a price, the most recent
quoted bid price. If there are no quotations available for the relevant business
day, the security is valued at the last available closing settlement price;
(f) a listed right is valued at the last traded price provided by
approved vendors. If there has been no sale on the relevant business day, the
right is valued at the last traded price from the previous day. On the following
day, the security is valued in good faith at fair value. For an unlisted right,
the calculation used in determining a value is the price of the reference
security minus the subscription price multiplied by the terms of the right.
There may be some instances when the subscription price is greater than the
referenced security right. In such instances, the right would be valued as
worthless;
(g) a listed warrant is valued at the last traded price provided by
approved vendors. If there is no sale on the relevant business day, the warrant
is valued at the last traded price from the previous day. On the following day,
the security is valued in good faith at fair value. All unlisted warrants are
valued in good faith at fair value. Once a warrant has expired, it will no
longer be valued;
(h) preferred securities are valued based on prices received from
approved vendors that use last trade data for listed preferreds and evaluated
bid prices for non-listed preferreds, as well as for listed preferreds when
there is no trade activity;
(i) a U.S. Government security and any other debt instrument having
60 days or less remaining until maturity generally is valued at amortized cost
if its original maturity was 60 days or less, or by amortizing its fair value as
of the 61st day prior to maturity if the original term to maturity exceeded 60
days, unless in either case the Adviser determines, in accordance with
procedures established by the Board, that this method does not represent fair
value. The Adviser is responsible for monitoring whether any circumstances have
occurred that indicate that the use of amortized cost method for any security is
not appropriate due to such factors as, but not limited to, an impairment of the
creditworthiness of the issuer or material changes in interest rates;
(j) a fixed-income security is typically valued on the basis of bid
prices provided by an approved pricing vendor when the Adviser believes that
such prices reflect the fair market value of the security. In certain markets,
the market convention may be to use the mid price between bid and offer.
Fixed-income securities may be valued on the basis of mid prices when the
approved pricing vendor normally provides mid prices, reflecting the conventions
of the particular markets. The prices provided by a pricing vendor may take into
account many factors, including institutional size trading in similar groups of
securities and any developments related to specific securities. If the Adviser
determines that an appropriate pricing vendor does not exist for a security in a
market that typically values such securities on the basis of a bid price or
prices for a security are not available from a pricing source, the security is
valued on the basis of a quoted bid price or spread over the applicable yield
curve (a bid spread) by a broker/dealer in such security. The second highest
price will be utilized whenever two or more quoted bid prices are obtained. If
an appropriate pricing vendor does not exist for a security in a market where
convention is to use the mid price, the security is valued on the basis of a
quoted mid price by a broker-dealer in such security. The second highest price
will be utilized whenever two or more quoted mid prices are obtained;
(k) a mortgage-backed or asset-backed security is valued on the
basis of bid prices obtained from pricing vendors or bid prices obtained from
multiple major broker-dealers in the security when the Adviser believes that
these prices reflect the market value of the security. In cases in which
broker-dealer quotes are obtained, the Adviser has procedures for using changes
in market yields or spreads to adjust, on a daily basis, a recently obtained
quoted bid price on a security. The second highest price will be utilized
whenever two or more quoted bid prices are obtained;
(l) bank loans are valued on the basis of bid prices provided by a
pricing vendor;
(m) bridge loans are valued at the outstanding loan amount unless it
is determined by the Valuation Committee that any particular bridge loan should
be valued at something other than outstanding loan amount. This may occur, due
to, for example, a significant change in the high-yield market and/or a
significant change in the status of any particular issuer or issuers of bridge
loans;
(n) whole loans: residential and commercial mortgage whose loans and
whole loan pools are market priced by an approved vendor;
(o) forward and spot currency pricing is provided by an approved
vendor. The rate provided by the approved vendor is a mid price for forward and
spot rates. In most instances whenever both an "onshore" rate and an "offshore"
(i.e., non deliverable forward "NDF") rate is available, the Adviser will use
the offshore (NDF) rate. NDF contracts are used for currencies where it is
difficult (and sometimes impossible) to take actual delivery of the currency;
(p) swap pricing: Various approved external vendors are used to
obtain pricing information and analysis. This information is placed into various
pricing models (depending on the type of derivative) to devise a price for each
investment. These pricing models are monitored/reviewed on an ongoing basis by
the Adviser;
(q) interest rate caps and floors are valued at the present value of
the agreements, which is provided by approved vendors; and
(r) open-end mutual funds are valued at the closing NAV per share
and closed-end funds and exchange-traded funds are valued at the closing market
price per share.
The Fund values its securities at their current market value
determined on the basis of market quotations as set forth above or, if market
quotations are not readily available or are unreliable, at "fair value" as
determined in accordance with procedures established by and under the general
supervision of the Board. When the Fund uses fair value pricing, it may take
into account any factors it deems appropriate. The Fund may determine fair value
based upon developments related to a specific security, current valuations of
foreign stock indices (as reflected in U.S. futures markets) and/or U.S. sector
or broader stock market indices. The prices of securities used by the Fund to
calculate its NAV may differ from quoted or published prices for the same
securities. Fair value pricing involves subjective judgments and it is possible
that the fair value determined for a security is materially different than the
value that could be realized upon the sale of that security.
The Fund expects to use fair value pricing for securities primarily
traded on U.S. exchanges only under very limited circumstances, such as the
early closing of the exchange on which a security is traded or suspension of
trading in the security. The Fund may use fair value pricing more frequently for
securities primarily traded in non-U.S. markets because, among other things,
most foreign markets close well before the Fund values its securities at 4:00
p.m., Eastern time. The earlier close of these foreign markets gives rise to the
possibility that significant events, including broad market moves, may have
occurred in the interim. The Fund believes that foreign security values may be
affected by events that occur after the close of foreign securities markets. To
account for this, the Fund may frequently value many of its foreign equity
securities using fair value prices based on third party vendor modeling tools to
the extent available.
Subject to their oversight, the Directors have delegated
responsibility for valuing the Fund's assets to the Adviser. The Adviser has
established a Valuation Committee, which operates under the policies and
procedures approved by the Directors, to value the Fund's assets on behalf of
the Fund. The Valuation Committee values Fund assets as described above.
The Board may suspend the determination of the Fund's NAV (and the
offering and sales of shares), subject to the rules of the SEC and other
governmental rules and regulations, at a time when: (1) the Exchange is closed,
other than customary weekend and holiday closings, (2) an emergency exists as a
result of which it is not reasonably practicable for the Fund to dispose of
securities owned by it or to determine fairly the value of its net assets, or
(3) for the protection of shareholders, the SEC by order permits a suspension of
the right of redemption or a postponement of the date of payment on redemption.
For purposes of determining the Fund's NAV per share, all assets and
liabilities initially expressed in a foreign currency will be converted into
U.S. Dollars at the mean of the current bid and asked prices of such currency
against the U.S. Dollar last quoted by a major bank that is a regular
participant in the relevant foreign exchange market or on the basis of a pricing
service that takes into account the quotes provided by a number of such major
banks. If such quotations are not available as of the close of the Exchange, the
rate of exchange will be determined in good faith by, or under the direction of,
the Board.
The assets attributable to each class of shares are invested
together in a single portfolio for the Fund. The NAV of each class will be
determined separately by subtracting the liabilities allocated to that class
from the assets belonging to that class in conformance with the provisions of a
plan adopted by the Fund in accordance with Rule 18f-3 under the 1940 Act.
--------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
--------------------------------------------------------------------------------
Dividends paid by the Fund, if any, with respect to Class A, Class
C, Class R, Class K, Class I, Class Z and Advisor Class shares will be
calculated in the same manner at the same time on the same day and will be in
the same amount, except that the distribution services fee applicable to a class
of shares (if any), and the transfer agency costs relating to a class of shares,
will be borne exclusively by the class to which they relate.
The following summary addresses only the principal U.S. federal
income tax considerations pertinent to the Fund and to shareholders of the Fund.
This summary does not address the U.S. federal income tax consequences of owning
shares to all categories of investors, some of which may be subject to special
rules. This summary is based upon the advice of counsel for the Fund and upon
current law and interpretations thereof. No confirmation has been obtained from
the relevant tax authorities. There is no assurance that the applicable laws and
interpretations will not change.
In view of the individual nature of tax consequences, each
shareholder is advised to consult the shareholder's own tax adviser with respect
to the specific tax consequences of being a shareholder of the Fund, including
the effect and applicability of federal, state, local, foreign and other tax
laws and the effects of changes therein.
United States Federal Income Taxation of Dividends and Distributions
--------------------------------------------------------------------
General
-------
The Fund intends for each taxable year to qualify to be taxed as a
"regulated investment company" under the Code. To so qualify, the Fund must,
among other things, (i) derive at least 90% of its gross income in each taxable
year from dividends, interest, payments with respect to securities loans, gains
from the sale or other disposition of stock, securities or foreign currency,
certain other income (including, but not limited to, gains from options, futures
or forward contracts) derived with respect to its business of investing in
stock, securities or currency or net income derived from interests in certain
qualified publicly traded partnerships; and (ii) diversify its holdings so that,
at the end of each quarter of its taxable year, the following two conditions are
met: (a) at least 50% of the value of the Fund's assets is represented by cash,
cash items, U.S. Government securities, securities of other regulated investment
companies and other securities with respect to which the Fund's investment is
limited, in respect of any one issuer, to an amount not greater than 5% of the
value of the Fund's assets and to not more than 10% of the outstanding voting
securities of such issuer and (b) not more than 25% of the value of the Fund's
assets is invested in securities of any one issuer (other than U.S. Government
securities or securities of other regulated investment companies), securities
(other than securities of other regulated investment companies) of any two or
more issuers which the Fund controls and which are engaged in the same or
similar trades or businesses or related trades or businesses, or securities of
one or more qualified publicly traded partnerships.
If the Fund qualifies as a regulated investment company for any
taxable year and makes timely distributions to its shareholders of 90% or more
of its investment company taxable income for that year (calculated without
regard to its net capital gain, i.e., the excess of its net long-term capital
gain over its net short-term capital loss) it will not be subject to federal
income tax on the portion of its taxable income for the year (including any net
capital gain) that it distributes to shareholders.
The Fund will also avoid the 4% federal excise tax that would
otherwise apply to certain undistributed income for a given calendar year if it
makes timely distributions to the shareholders equal to at least the sum of (i)
98% of its ordinary income for that year, (ii) 98.2% of its capital gain net
income for the twelve-month period ending on October 31 that year or, if later
during the calendar year, the last day of the Fund's taxable year (i.e.,
November 30 or December 31) if the Fund so elects, and (iii) any ordinary income
or capital gain net income from the preceding calendar year that was not
distributed during that year. Special rules apply to foreign currency gains and
certain income derived from passive foreign investment companies for which the
Fund has made a "mark-to-market" election. For this purpose, income or gain
retained by the Fund that is subject to corporate income tax will be considered
to have been distributed by the Fund during such year. For federal income and
excise tax purposes, dividends declared and payable to shareholders of record as
of a date in October, November or December of a given year but actually paid
during the immediately following January will be treated as if paid by the Fund
on December 31 of such earlier calendar year, and will be taxable to these
shareholders in the year declared, and not in the year in which the shareholders
actually receive the dividend.
The information set forth in the Proxy Statement/Prospectus and the
following discussion relate solely to the significant U.S. federal income taxes
on dividends and distributions by the Fund and assume that the Fund qualifies to
be taxed as a regulated investment company. An investor should consult his or
her own tax advisor with respect to the specific tax consequences of being a
shareholder in the Fund, including the effect and applicability of federal,
state, local and foreign tax laws to his or her own particular situation and the
possible effects of changes therein.
Dividends and Distributions
---------------------------
The Fund intends to make timely distributions of the Fund's taxable
income (including any net capital gain) so that the Fund will not be subject to
federal income and excise taxes. Income dividends and capital gains
distributions are paid annually, generally in December. Dividends of the Fund's
net ordinary income and distributions of any net realized short-term capital
gain are taxable to shareholders as ordinary income. The investment objective of
the Fund is such that only a small portion, if any, of the Fund's distributions
is expected to qualify for the dividends-received deduction for corporate
shareholders.
Some or all of the distributions from the Fund may be treated as
"qualified dividend income", taxable to individuals, trusts and estates at the
reduced tax rates applicable to long-term capital gains. A distribution from the
Fund will be treated as qualified dividend income to the extent that it is
comprised of dividend income received by the Fund from taxable domestic
corporations and certain qualified foreign corporations, and provided that the
Fund meets certain holding period and other requirements with respect to the
security paying the dividend. In addition, the shareholder must meet certain
holding period requirements with respect to the shares of the Fund in order to
take advantage of this preferential tax rate. To the extent distributions from
the Fund are attributable to other sources, such as taxable interest or
short-term capital gains, dividends paid by the Fund will not be eligible for
the lower rates. The Fund will notify shareholders as to how much of the Fund's
distributions, if any, would qualify for the reduced tax rate, assuming that the
shareholder also satisfies the holding period requirements.
Distributions of net capital gain are taxable as long-term capital
gain, regardless of how long a shareholder has held shares in the Fund. Any
dividend or distribution received by a shareholder on shares of the Fund will
have the effect of reducing the NAV of such shares by the amount of such
dividend or distribution. Furthermore, a dividend or distribution made shortly
after the purchase of such shares by a shareholder, although in effect a return
of capital to that particular shareholder, would be taxable to him or her as
described above. Dividends are taxable in the manner discussed regardless of
whether they are paid to the shareholder in cash or are reinvested in additional
shares of the Fund.
After the end of the calendar year, the Fund will notify
shareholders of the federal income tax status of any distributions made by the
Fund to shareholders during such year.
Sales and Redemptions. Any gain or loss arising from a sale or
redemption of Fund shares generally will be capital gain or loss if the Fund
shares are held as a capital asset, and will be long-term capital gain or loss
if the shareholder has held such shares for more than one year at the time of
the sale or redemption; otherwise it will be short-term capital gain or loss. If
a shareholder has held shares in the Fund for six months or less and during that
period has received a distribution of net capital gain, any loss recognized by
the shareholder on the sale of those shares during the six-month period will be
treated as a long-term capital loss to the extent of the distribution. In
determining the holding period of such shares for this purpose, any period
during which a shareholder's risk of loss is offset by means of options, short
sales or similar transactions is not counted.
Any loss realized by a shareholder on a sale or exchange of shares
of the Fund will be disallowed to the extent the shares disposed of are
reacquired within a period of 61 days beginning 30 days before and ending 30
days after the shares are sold or exchanged. For this purpose, acquisitions
pursuant to the Dividend Reinvestment Plan would constitute a reacquisition if
made within the period. If a loss is disallowed, then such loss will be
reflected in an upward adjustment to the basis of the shares acquired.
Cost Basis Reporting. As part of the Energy Improvement and
Extension Act of 2008, mutual funds are required to report to the Internal
Revenue Service the "cost basis" of shares acquired by a shareholder on or after
January 1, 2014 ("covered shares") and subsequently redeemed. These requirements
do not apply to investments through a tax-deferred arrangement, such as a 401(k)
plan or an individual retirement plan. The "cost basis" of a share is generally
its purchase price adjusted for dividends, return of capital, and other
corporate actions. Cost basis is used to determine whether a sale of the shares
results in a gain or loss. The amount of gain or loss recognized by a
shareholder on the sale or redemption of shares is generally the difference
between the cost basis of such shares and their sale price. If you redeem
covered shares during any year, then the Fund will report the cost basis of such
covered shares to the IRS and you on Form 1099-B along with the gross proceeds
received on the redemption, the gain or loss realized on such redemption and the
holding period of the redeemed shares.
Your cost basis in your covered shares is permitted to be calculated
using any one of three alternative methods: Average Cost, First In-First Out
(FIFO) and Specific Share Identification. You may elect which method you want to
use by notifying the Fund. This election may be revoked or changed by you at any
time up to the date of your first redemption of covered shares. If you do not
affirmatively elect a cost basis method then the Fund's default cost basis
calculation method, which is currently the Average Cost method - will be applied
to your account(s). The default method will also be applied to all new accounts
established unless otherwise requested.
If you hold Fund shares through a broker (or another nominee),
please contact that broker (nominee) with respect to the reporting of cost basis
and available elections for your account.
You are encouraged to consult your tax advisor regarding the
application of the new cost basis reporting rules and, in particular, which cost
basis calculation method you should elect.
Qualified Plans. A dividend or capital gains distribution with
respect to shares of the Fund held by a tax-deferred or qualified plan, such as
an individual retirement account, section 403(b)(7) retirement plan or corporate
pension or profit-sharing plan, generally will not be taxable to the plan.
Distributions from such plans will be taxable to individual participants under
applicable tax rules without regard to the character of the income earned by the
qualified plan.
Backup Withholding. Any distributions and redemption proceeds
payable to a shareholder may be subject to "backup withholding" tax (currently
at a rate of 28%) if such shareholder fails to provide the Fund with his or her
correct taxpayer identification number, fails to make required certifications,
or is notified by the IRS that he or she is subject to backup withholding.
Corporate shareholders and certain other shareholders specified in the Code are
exempt from such backup withholding. Backup withholding is not an additional
tax; any amounts so withheld may be credited against a shareholder's U.S.
federal income tax liability or refunded by filing a refund claim with the IRS,
provided that the required information is furnished to the IRS.
Foreign Income Taxes. Investment income received by the Fund from
sources within foreign countries may be subject to foreign income taxes,
including taxes withheld at the source. The United States has entered into tax
treaties with many foreign countries which entitle the Fund to a reduced rate of
such taxes or exemption from taxes on such income. It is impossible to determine
the effective rate of foreign tax in advance since the amount of the Fund's
assets to be invested within various countries is not known.
If more than 50% of the value of the Fund's total assets at the
close of its taxable year consists of the stock or securities of foreign
corporations, the Fund may elect to "pass through" to the Fund's shareholders
the amount of foreign income taxes paid by the Fund. Pursuant to such election,
shareholders would be required: (i) to include in gross income (in addition to
taxable dividends actually received), their respective pro-rata shares of
foreign taxes paid by the Fund; (ii) treat their pro rata share of such foreign
taxes as having been paid by them; and (iii) either to deduct their pro rata
share of foreign taxes in computing their taxable income, or to use it as a
foreign tax credit against federal income taxes (but not both). No deduction for
foreign taxes could be claimed by a shareholder who does not itemize deductions.
In addition, certain shareholders may be subject to rules which limit their
ability to fully deduct, or claim a credit for, their pro rata share of the
foreign taxes paid by the Fund. A shareholder's foreign tax credit with respect
to a dividend received from the Fund will be disallowed unless the shareholder
holds shares in the Fund on the ex-dividend date and for at least 15 other days
during the 30-day period beginning 15 days prior to the ex-dividend date.
Each shareholder will be notified within 60 days after the close of
each taxable year of the Fund whether the foreign taxes paid by the Fund will
"pass through" for that year, and, if so, the amount of each shareholder's
pro-rata share (by country) of (i) the foreign taxes paid, and (ii) the Fund's
gross income from foreign sources. Shareholders who are not liable for federal
income taxes, such as retirement plans qualified under section 401 of the Code,
will not be affected by any such "pass through" of foreign taxes.
The federal income tax status of each year's distributions by the
Fund will be reported to shareholders and to the IRS. The foregoing is only a
general description of the treatment of foreign taxes under the United States
federal income tax laws. Because the availability of a foreign tax credit or
deduction will depend on the particular circumstances of each shareholder,
potential investors are advised to consult their own tax advisers.
United States Federal Income Taxation of the Fund
-------------------------------------------------
The following discussion relates to certain significant U.S. federal
income tax consequences to the Fund with respect to the determination of its
"investment company taxable income" each year. This discussion assumes that the
Fund will be taxed as a regulated investment company for each of its taxable
years.
Options, Futures Contracts, and Forward Foreign Currency Contracts.
Certain listed options, regulated futures contracts, and forward foreign
currency contracts are considered "section 1256 contracts" for federal income
tax purposes. Section 1256 contracts held by the Fund at the end of each taxable
year will be "marked to market" and treated for federal income tax purposes as
though sold for fair market value on the last business day of such taxable year.
Gain or loss realized by the Fund on section 1256 contracts other than forward
foreign currency contracts will be considered 60% long-term and 40% short-term
capital gain or loss. Gain or loss realized by the Fund on forward foreign
currency contracts will be treated as section 988 gain or loss and will
therefore be characterized as ordinary income or loss and will increase or
decrease the amount of the Fund's net investment income available to be
distributed to shareholders as ordinary income, as described above. The Fund can
elect to exempt its section 1256 contracts which are part of a "mixed straddle"
(as described below) from the application of section 1256.
Gain or loss realized by the Fund on the lapse or sale of put and
call options on foreign currencies which are traded over-the-counter or on
certain foreign exchanges will be treated as section 988 gain or loss and will
therefore be characterized as ordinary income or loss and will increase or
decrease the amount of the Fund's net investment income available to be
distributed to shareholders as ordinary income, as described above. The amount
of such gain or loss shall be determined by subtracting the amount paid, if any,
for or with respect to the option (including any amount paid by the Fund upon
termination of an option written by the Fund) from the amount received, if any,
for or with respect to the option (including any amount received by the Fund
upon termination of an option held by the Fund). In general, if the Fund
exercises such an option on a foreign currency, or if such an option that the
Fund has written is exercised, gain or loss on the option will be recognized in
the same manner as if the Fund had sold the option (or paid another person to
assume the Fund's obligation to make delivery under the option) on the date on
which the option is exercised, for the fair market value of the option. The
foregoing rules will also apply to other put and call options which have as
their underlying property foreign currency and which are traded over-the-counter
or on certain foreign exchanges to the extent gain or loss with respect to such
options is attributable to fluctuations in foreign currency exchange rates.
Tax Straddles. Any option, futures contract or other position
entered into or held by the Fund in conjunction with any other position held by
the Fund may constitute a "straddle" for federal income tax purposes. A straddle
of which at least one, but not all, the positions are section 1256 contracts may
constitute a "mixed straddle". In general, straddles are subject to certain
rules that may affect the character and timing of the Fund's gains and losses
with respect to straddle positions by requiring, among other things, that (i)
loss realized on disposition of one position of a straddle not be recognized to
the extent that the Fund has unrealized gains with respect to the other position
in such straddle; (ii) the Fund's holding period in straddle positions be
suspended while the straddle exists (possibly resulting in gain being treated as
short-term capital gain rather than long-term capital gain); (iii) losses
recognized with respect to certain straddle positions which are part of a mixed
straddle and which are non-section 1256 positions be treated as 60% long-term
and 40% short-term capital loss; (iv) losses recognized with respect to certain
straddle positions which would otherwise constitute short-term capital losses be
treated as long-term capital losses; and (v) the deduction of interest and
carrying charges attributable to certain straddle positions may be deferred.
Various elections are available to the Fund which may mitigate the effects of
the straddle rules, particularly with respect to mixed straddles. In general,
the straddle rules described above do not apply to any straddles held by the
Fund all of the offsetting positions of which consist of section 1256 contracts.
Currency Fluctuations -- "Section 988" Gains or Losses. Under the
Code, gains or losses attributable to fluctuations in exchange rates which occur
between the time the Fund accrues interest or other receivables or accrues
expenses or other liabilities denominated in a foreign currency and the time the
Fund actually collects such receivables or pays such liabilities are treated as
ordinary income or ordinary loss. Similarly, gains or losses from the
disposition of foreign currencies, from the disposition of debt securities
denominated in a foreign currency, or from the disposition of a forward contract
denominated in a foreign currency which are attributable to fluctuations in the
value of the foreign currency between the date of acquisition of the asset and
the date of disposition also are treated as ordinary income or loss. These gains
or losses, referred to under the Code as "section 988" gains or losses, increase
or decrease the amount of the Fund's investment company taxable income available
to be distributed to its shareholders as ordinary income, rather than increasing
or decreasing the amount of the Fund's net capital gain. Because section 988
losses reduce the amount of ordinary dividends the Fund will be allowed to
distribute for a taxable year, such section 988 losses may result in all or a
portion of prior dividend distributions for such year being recharacterized as a
non-taxable return of capital to shareholders, rather than as an ordinary
dividend, reducing each shareholder's basis in his or her Fund shares. To the
extent that such distributions exceed such shareholder's basis, each will be
treated as a gain from the sale of shares.
Other Taxes
-----------
The Fund may be subject to other state and local taxes.
Taxation of Foreign Stockholders
--------------------------------
Taxation of a shareholder who, under the Code, is a nonresident
alien individual, foreign trust or estate, foreign corporation or foreign
partnership ("foreign shareholder"), depends on whether the income from the Fund
is "effectively connected" with a U.S. trade or business carried on by the
foreign shareholder.
If the income from the Fund is not effectively connected with the
foreign shareholder's U.S. trade or business, then, except as discussed below,
distributions of the Fund attributable to ordinary income and short-term capital
gain paid to a foreign shareholder by the Fund will be subject to U.S.
withholding tax at the rate of 30% (or lower treaty rate) upon the gross amount
of the distribution. However, distributions of the Fund attributable to
short-term capital gains and U.S. source portfolio interest income paid during
taxable years of the Fund beginning before January 1, 2012 will not be subject
to this withholding tax.
A foreign shareholder generally would be exempt from federal income
tax on distributions of the Fund attributable to net long-term capital gain and
on gain realized from the sale or redemption of shares of the Fund. Special
rules apply in the case of a shareholder that is a foreign trust or foreign
partnership.
If the income from the Fund is effectively connected with a foreign
shareholder's U.S. trade or business, then ordinary income distributions,
capital gain distributions, and any gain realized upon the sale of shares of the
Fund will be subject to federal income tax at the rates applicable to U.S.
citizens or U.S. corporations.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein.
The tax rules of other countries with respect to an investment in
the Fund can differ from the federal income taxation rules described above.
These foreign rules are not discussed herein. Foreign shareholders are urged to
consult their own tax advisors as to the consequences of foreign tax rules with
respect to an investment in the Fund.
--------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS
--------------------------------------------------------------------------------
Subject to the general oversight of the Board, the Adviser is
responsible for the investment decisions and the placing of orders for portfolio
transactions for the Fund. The Adviser determines the broker or dealer to be
used in each specific transaction with the objective of negotiating a
combination of the most favorable commission (for transactions on which a
commission is payable) and the best price obtainable on each transaction
(generally defined as "best execution"). The Fund does not consider sales of
shares of the Fund or other investment companies managed by the Adviser as a
factor in the selection of brokers and dealers to effect portfolio transactions
and has adopted a policy and procedures reasonably designed to preclude such
consideration.
When consistent with the objective of obtaining best execution,
brokerage may be directed to persons or firms supplying investment information
to the Adviser. In these cases, the transaction cost charged by the executing
broker may be greater than that which another broker may charge if the Fund
determines in good faith that the amount of such transaction cost is reasonable
in relation to the value of the brokerage, research and statistical services
provided by the executing broker.
Neither the Fund nor the Adviser has entered into agreements or
understandings with any brokers regarding the placement of securities
transactions because of research services they provide. To the extent that such
persons or firms supply investment information to the Adviser for use in
rendering investment advice to the Fund, such information may be supplied at no
cost to the Adviser and, therefore, may have the effect of reducing the expenses
of the Adviser in rendering advice to the Fund. While it is impracticable to
place an actual dollar value on such investment information, its receipt by the
Adviser probably does not reduce the overall expenses of the Adviser to any
material extent.
The investment information provided to the Adviser is of the type
described in Section 28(e)(3) of the Securities Exchange Act of 1934 and is
designed to augment the Adviser's own internal research and investment strategy
capabilities. Research services furnished by brokers through which the Fund
effects securities transactions are used by the Adviser in carrying out its
investment management responsibilities with respect to all its client accounts.
Research services furnished by broker-dealers as a result of the placement of
Fund brokerage could be useful and of value to the Adviser in servicing its
other clients as well as the Fund; but, on the other hand, certain research
services obtained by the Adviser as a result of the placement of portfolio
brokerage of other clients could be useful and of value to it in servicing the
Fund.
The Fund may deal in some instances in securities that are not
listed on a national stock exchange but are traded in the over-the-counter
market. The Fund may also purchase listed securities through the third market,
i.e., from a dealer that is not a member of the exchange on which a security is
listed. Where transactions are executed in the over-the-counter market or third
market, the Fund will seek to deal with the primary market makers; but when
necessary in order to obtain the best price and execution, it will utilize the
services of others. In all cases, the Fund will attempt to negotiate best
execution.
Investment decisions for the Fund are made independently from those
for other investment companies and other advisory accounts managed by the
Adviser. It may happen, on occasion, that the same security is held in the
portfolio of the Fund and one or more of such other companies or accounts.
Simultaneous transactions are likely when several funds or accounts are managed
by the same Adviser, particularly when a security is suitable for the investment
objectives of more than one of such companies or accounts. When two or more
companies or accounts managed by the Adviser are simultaneously engaged in the
purchase or sale of the same security, the transactions are allocated to the
respective companies or accounts both as to amount and price, in accordance with
a method deemed equitable to each company or account. In some cases this system
may adversely affect the price paid or received by the Fund or the size of the
position obtainable for the Fund.
Allocations are made by the officers of the Fund or of the Adviser.
Purchases and sales of portfolio securities are determined by the Adviser and
are placed with broker-dealers by the order department of the Adviser.
Many of the Fund's portfolio transactions in equity securities will
occur on foreign stock exchanges. Transactions on stock exchanges involve the
payment of brokerage commissions. On many foreign stock exchanges these
commissions are fixed. Securities traded in foreign over-the-counter markets
(including most fixed-income securities) are purchased from and sold to dealers
acting as principal. Over-the-counter transactions generally do not involve the
payment of a stated commission, but the price usually includes an undisclosed
commission or markup. The prices of underwritten offerings, however, generally
include a stated underwriter's discount. The Adviser expects to effect the bulk
of its transactions in securities of companies based in foreign countries
through brokers, dealers or underwriters located in such countries. U.S.
Government or other U.S. securities constituting permissible investments will be
purchased and sold through U.S. brokers, dealers or underwriters.
The Fund may, from time to time, place orders for the purchase or
sale of securities (including listed call options) with SCB & Co., an affiliate
of the Adviser (the "Affiliated Broker"). In such instances the placement of
orders with such broker would be consistent with the Fund's objective of
obtaining best execution and would not be dependent upon the fact that the
Affiliated Broker is an affiliate of the Adviser. With respect to orders placed
with the Affiliated Broker for execution on a national securities exchange,
commissions received must conform to Section 17(e)(2)(A) of the 1940 Act and
Rule 17e-1 thereunder, which permit an affiliated person of a registered
investment company (such as the Fund), or any affiliated person of such person,
to receive a brokerage commission from such registered investment company
provided that such commission is reasonable and fair compared to the commissions
received by other brokers in connection with comparable transactions involving
similar securities during a comparable period of time.
Disclosure of Portfolio Holdings
--------------------------------
The Fund believes that the ideas of the Adviser's investment staff
should benefit the Fund and its shareholders, and does not want to afford
speculators an opportunity to profit by anticipating Fund trading strategies or
using Fund information for stock picking. However, the Fund also believes that
knowledge of the Fund's portfolio holdings can assist shareholders in monitoring
their investment, making asset allocation decisions, and evaluating portfolio
management techniques.
The Adviser has adopted, on behalf of the Fund, policies and
procedures relating to disclosure of the Fund's portfolio securities. The
policies and procedures relating to disclosure of the Fund's portfolio
securities are designed to allow disclosure of portfolio holdings information
where necessary to the Fund's operation or useful to the Fund's shareholders
without compromising the integrity or performance of the Fund. Except when there
are legitimate business purposes for selective disclosure and other conditions
(designed to protect the Fund and its shareholders) are met, the Fund does not
provide or permit others to provide information about the Fund's portfolio
holdings on a selective basis.
The Fund includes portfolio holdings information as required in
regulatory filings and shareholder reports, discloses portfolio holdings
information as required by federal or state securities laws and may disclose
portfolio holdings information in response to requests by governmental
authorities. In addition, the Adviser may post portfolio holdings information on
the Adviser's website (www.AllianceBernstein.com). The Adviser generally posts
on the website a complete schedule of the Fund's portfolio securities, generally
as of the last day of each calendar month, approximately 30 days after the end
of that month. This posted information generally remains accessible on the
website for three months. For each portfolio security, the posted information
includes its name, the number of shares held by the Fund, the market value of
the Fund's holdings, and the percentage of the Fund's assets represented by the
portfolio security. In addition to the schedule of portfolio holdings, the
Adviser posts information about the number of securities the Fund holds, a
summary of the Fund's top ten holdings (including name and the percentage of the
Fund's assets invested in each holding), and a percentage breakdown of the
Fund's investments by credit risk or securities type, as applicable,
approximately 45 days after the end of the month. The day after portfolio
holdings information is publicly available on the website, it may be mailed,
e-mailed or otherwise transmitted to any person.
The Adviser may distribute or authorize the distribution of
information about the Fund's portfolio holdings that is not publicly available,
on the website or otherwise, to the Adviser's employees and affiliates that
provide services to the Fund. In addition, the Adviser may distribute or
authorize distribution of information about the Fund's portfolio holdings that
is not publicly available, on the website or otherwise, (i) to the Fund's
service providers who require access to the information in order to fulfill
their contractual duties relating to the Fund (including, without limitation,
pricing services and proxy voting services), (ii) to facilitate the review of
the Fund by rating agencies, (iii) for the purpose of due diligence regarding a
merger or acquisition, or (iv) for the purpose of effecting in-kind redemption
of securities to facilitate orderly redemption of portfolio assets and minimal
impact on remaining Fund shareholders. The Adviser does not expect to disclose
information about the Fund's portfolio holdings to individual or institutional
investors in the Fund or to intermediaries that distribute the Fund's shares
without making such information public as described herein. Information may be
disclosed with any frequency and any lag, as appropriate.
Before any non-public disclosure of information about the Fund's
portfolio holdings is permitted, however, the Adviser's Chief Compliance Officer
(or his designee) must determine that the Fund has a legitimate business purpose
for providing the portfolio holdings information, that the disclosure is in the
best interests of the Fund's shareholders, and that the recipient agrees or has
a duty to keep the information confidential and agrees not to trade directly or
indirectly based on the information or to use the information to form a specific
recommendation about whether to invest in the Fund or any other security. Under
no circumstances may the Adviser or its affiliates receive any consideration or
compensation for disclosing the information.
The Adviser has established procedures to ensure that the Fund's
portfolio holdings information is only disclosed in accordance with these
policies. Only the Adviser's Chief Compliance Officer (or his designee) may
approve the disclosure, and then only if he or she and a designated senior
officer in the Adviser's product management group determines that the disclosure
serves a legitimate business purpose of the Fund and is in the best interest of
the Fund's shareholders. The Adviser's Chief Compliance Officer (or his
designee) approves disclosure only after considering the anticipated benefits
and costs to the Fund and its shareholders, the purpose of the disclosure, any
conflicts of interest between the interests of the Fund and its shareholders and
the interests of the Adviser or any of its affiliates, and whether the
disclosure is consistent with the policies and procedures governing disclosure.
Only someone approved by the Adviser's Chief Compliance Officer (or his
designee) may make approved disclosures of portfolio holdings information to
authorized recipients. The Adviser reserves the right to request certifications
from senior officers of authorized recipients that the recipient is using the
portfolio holdings information only in a manner consistent with the Adviser's
policy and any applicable confidentiality agreement. The Adviser's Chief
Compliance Officer or another member of the compliance team reports all
arrangements to disclose portfolio holdings information to the Board on a
quarterly basis. If the Board determines that disclosure was inappropriate, the
Adviser will promptly terminate the disclosure arrangement.
In accordance with these procedures, each of the following third
parties have been approved to receive information concerning the Fund's
portfolio holdings: (i) the Fund's independent registered public accounting
firm, for use in providing audit opinions; (ii) RR Donnelley Financial, Data
Communique International and, from time to time, other financial printers, for
the purpose of preparing Fund regulatory filings; (iii) the Fund's custodian in
connection with its custody of the Fund's assets; (iv) Institutional Shareholder
Services, Inc, for proxy voting services; and (v) data aggregators, such as
Vestek. Information may be provided to these parties at any time with no time
lag. Each of these parties is contractually and ethically prohibited from
sharing the Fund's portfolio holdings information unless specifically
authorized.
--------------------------------------------------------------------------------
GENERAL INFORMATION
--------------------------------------------------------------------------------
The Fund is a series of AllianceBernstein Cap Fund, Inc., a Maryland
corporation. The Fund was organized in 2013 under the name "AllianceBernstein
Concentrated Growth Fund".
The Board is authorized to reclassify and issue any unissued shares
to any number of additional series and classes without shareholder approval.
Accordingly, the Board may create additional series of shares in the future, for
reasons such as the desire to establish one or more additional portfolios of the
Fund with different investment objectives, policies or restrictions. Any
issuance of shares of another series would be governed by the 1940 Act and the
laws of the State of Maryland.
It is anticipated that annual shareholder meetings will not be held;
shareholder meetings will be held only when required by federal or state law or
in accordance with an undertaking by the Adviser to the SEC. Shareholders have
available certain procedures for the removal of Directors.
A shareholder will be entitled to share pro rata with other holders
of the same class of shares all dividends and distributions arising from the
Fund's assets and, upon redeeming shares, will receive the then current NAV of
the Fund represented by the redeemed shares less any applicable CDSC. The Fund
is empowered to establish, without shareholder approval, additional portfolios
and additional classes of shares within the Fund. If an additional portfolio or
an additional class within the Fund were established, each share of the
portfolio or class would normally be entitled to one vote for all purposes.
Generally, shares of each portfolio and class would vote together as a single
class on matters, such as the election of Directors, that affect each portfolio
and class in substantially the same manner. As to matters affecting each
portfolio differently, such as approval of the Advisory Agreement and changes in
investment policy, shares of each portfolio would vote as separate series.
Each class of shares of the Fund represents an interest in the same
portfolio of investments and has the same rights and is identical in all
respects, except that each class of shares bears its own Rule 12b-1 fees (if
any) and transfer agency expenses. Each class of shares of the Fund votes
separately with respect to the Fund's Rule 12b-1 distribution plan and other
matters for which separate class voting is appropriate under applicable law.
Shares are freely transferable, are entitled to dividends as determined by the
Directors and, in liquidation of the Fund, are entitled to receive the net
assets of the Fund.
Principal Holders
-----------------
No shareholders owned of record or beneficially, 5% or more of a
class of outstanding shares of the Fund as of the date of this SAI.
Custodian and Accounting Agent
------------------------------
State Street Bank and Trust Company ("State Street"), One Lincoln
Street, Boston, MA 02111, acts as the Fund's custodian for the assets of the
Fund but plays no part in deciding on the purchase or sale of portfolio
securities. Subject to the supervision of the Fund's Directors, State Street may
enter into subcustodial agreements for the holding of the Fund's foreign
securities.
Principal Underwriter
---------------------
ABI, an indirect wholly-owned subsidiary of the Adviser, located at
1345 Avenue of the Americas, New York, NY 10105, is the principal underwriter of
shares of the Fund, and as such may solicit orders from the public to purchase
shares of the Fund. Under the Distribution Services Agreement, the Fund has
agreed to indemnify ABI, in the absence of its willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations thereunder, against
certain civil liabilities, including liabilities under the Securities Act.
Counsel
-------
Legal matters in connection with the issuance of the shares of the
Fund offered hereby will be passed upon by Seward & Kissel LLP, New York, NY
10004.
Independent Registered Public Accounting Firm
---------------------------------------------
Ernst & Young LLP, 5 Times Square, New York, NY 10036, has been
appointed as the independent registered public accounting firm for the Fund.
Code of Ethics and Proxy Voting Policies and Procedures
-------------------------------------------------------
The Fund, the Adviser and ABI have each adopted codes of ethics
pursuant to Rule 17j-1 of the 1940 Act. These codes of ethics permit personnel
subject to the codes to invest in securities, including securities that may be
purchased or held by the Fund.
The Fund has adopted the Adviser's proxy voting policies and
procedures. The Adviser's proxy voting policies and procedures are attached as
Appendix A.
Additional Information
----------------------
Shareholder inquiries may be directed to the shareholder's financial
intermediary or to ABIS at the address or telephone numbers shown on the front
cover of this SAI. This SAI does not contain all the information set forth in
the Registration Statement filed by the Fund with the SEC under the Securities
Act. Copies of the Registration Statement may be obtained at a reasonable charge
from the SEC or may be examined, without charge, at the offices of the SEC in
Washington, D.C. or on the Internet at www.AllianceBernstein.com.
--------------------------------------------------------------------------------
FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
--------------------------------------------------------------------------------
The Financial Statements of the Fund are not available because the
Fund has not yet commenced operations.
--------------------------------------------------------------------------------
APPENDIX A:
STATEMENT OF POLICIES AND
PROCEDURES FOR PROXY VOTING
--------------------------------------------------------------------------------
1. Introduction
As a registered investment adviser, AllianceBernstein L.P. ("AllianceBernstein",
"we" or "us") has a fiduciary duty to act solely in the best interests of our
clients. We recognize that this duty requires us to vote client securities in a
timely manner and make voting decisions that are intended to maximize long-term
shareholder value. Generally, our clients' objective is to maximize the
financial return of their portfolios within appropriate risk parameters. We have
long recognized that environmental, social and governance ("ESG") issues can
impact the performance of investment portfolios. Accordingly, we have sought to
integrate ESG factors into our investment process to the extent that the
integration of such factors is consistent with our fiduciary duty to help our
clients achieve their investment objectives and protect their economic
interests. For additional information regarding our ESG policies and practices,
please refer to our firm's Statement of Policy Regarding Responsible Investment.
We consider ourselves shareholder advocates and take this responsibility very
seriously. Consistent with our commitments, we will disclose our clients' voting
records only to them and as required by mutual fund vote disclosure regulations.
In addition, our Proxy Committee may, after careful consideration, choose to
respond to surveys so long as doing so does not compromise confidential voting.
This statement is intended to comply with Rule 206(4)-6 of the Investment
Advisers Act of 1940. It sets forth our policies and procedures for voting
proxies for our discretionary investment advisory clients, including investment
companies registered under the Investment Company Act of 1940. This statement
applies to AllianceBernstein's investment groups investing on behalf of clients
in both U.S. and non-U.S. securities.
2. Proxy Policies
Our proxy voting policies are principle-based rather than rules-based. We adhere
to a core set of principles that are described in this Statement and in our
Proxy Voting Manual. We assess each proxy proposal in light of those principles.
Our proxy voting "litmus test" will always be what we view as most likely to
maximize long-term shareholder value. We believe that authority and
accountability for setting and executing corporate policies, goals and
compensation should generally rest with the board of directors and senior
management. In return, we support strong investor rights that allow shareholders
to hold directors and management accountable if they fail to act in the best
interests of shareholders. In addition, if we determine that ESG issues that
arise with respect to an issuer's past, current or anticipated behaviors are, or
are reasonably likely to become, material to its future earnings, we address
these concerns in our proxy voting and engagement.
This statement is designed to be responsive to the wide range of proxy voting
subjects that can have a significant effect on the investment value of the
securities held in our clients' accounts. These policies are not exhaustive due
to the variety of proxy voting issues that we may be required to consider.
AllianceBernstein reserves the right to depart from these guidelines in order to
make voting decisions that are in our clients' best interests. In reviewing
proxy issues, we will apply the following general policies:
2.1. Corporate Governance
We recognize the importance of good corporate governance in our proxy voting
policies and engagement practices in ensuring that management and the board of
directors fulfill their obligations to shareholders. We favor proposals
promoting transparency and accountability within a company. We support the
appointment of a majority of independent directors on boards and key committees.
Because we believe that good corporate governance requires shareholders to have
a meaningful voice in the affairs of the company, we generally will support
shareholder proposals which request that companies amend their by-laws to
provide that director nominees be elected by an affirmative vote of a majority
of the votes cast. Furthermore, we have written to the SEC in support of
shareholder access to corporate proxy statements under specified conditions with
the goal of serving the best interests of all shareholders.
2.2. Elections of Directors
Unless there is a proxy fight for seats on the Board or we determine that there
are other compelling reasons to oppose directors, we will vote in favor of the
management proposed slate of directors. That said, we believe that directors
have a duty to respond to shareholder actions that have received significant
shareholder support. Therefore, we may vote against directors (or withhold votes
for directors where plurality voting applies) who fail to act on key issues such
as failure to implement proposals to declassify the board, failure to implement
a majority vote requirement, failure to submit a rights plan to a shareholder
vote or failure to act on tender offers where a majority of shareholders have
tendered their shares. In addition, we will vote against directors who fail to
attend at least seventy-five percent of board meetings within a given year
without a reasonable excuse, and we may abstain or vote against directors of
non-U.S. issuers where there is insufficient information about the nominees
disclosed in the proxy statement. Also, we will generally not oppose directors
who meet the definition of independence promulgated by the primary exchange on
which the company's shares are traded or set forth in the code we determine to
be best practice in the country where the subject company is domiciled. Finally,
because we believe that cumulative voting in single shareholder class structures
provides a disproportionately large voice to minority shareholders in the
affairs of a company, we will generally vote against such proposals and vote for
management proposals seeking to eliminate cumulative voting. However, in dual
class structures (such as A&B shares) where the shareholders with a majority
economic interest have a minority voting interest, we will generally vote in
favor of cumulative voting.
2.3. Appointment of Auditors
AllianceBernstein believes that the company is in the best position to choose
its auditors, so we will generally support management's recommendation. However,
we recognize that there are inherent conflicts when a company's independent
auditor performs substantial non-audit services for the company. The
Sarbanes-Oxley Act of 2002 prohibits certain categories of services by auditors
to U.S. issuers, making this issue less prevalent in the U.S. Nevertheless, in
reviewing a proposed auditor, we will consider the fees paid for non-audit
services relative to total fees and whether there are other reasons for us to
question the independence or performance of the auditors.
2.4. Changes in Legal and Capital Structure
Changes in a company's charter, articles of incorporation or by-laws are often
technical and administrative in nature. Absent a compelling reason to the
contrary, AllianceBernstein will cast its votes in accordance with management's
recommendations on such proposals. However, we will review and analyze on a
case-by-case basis any non-routine proposals that are likely to affect the
structure and operation of the company or have a material economic effect on the
company. For example, we will generally support proposals to increase authorized
common stock when it is necessary to implement a stock split, aid in a
restructuring or acquisition, or provide a sufficient number of shares for an
employee savings plan, stock option plan or executive compensation plan.
However, a satisfactory explanation of a company's intentions must be disclosed
in the proxy statement for proposals requesting an increase of greater than 100%
of the shares outstanding. We will oppose increases in authorized common stock
where there is evidence that the shares will be used to implement a poison pill
or another form of anti-takeover device. We will support shareholder proposals
that seek to eliminate dual class voting structures.
2.5. Corporate Restructurings, Mergers and Acquisitions
AllianceBernstein believes proxy votes dealing with corporate reorganizations
are an extension of the investment decision. Accordingly, we will analyze such
proposals on a case-by-case basis, weighing heavily the views of our research
analysts that cover the company and our investment professionals managing the
portfolios in which the stock is held.
2.6. Proposals Affecting Shareholder Rights
AllianceBernstein believes that certain fundamental rights of shareholders must
be protected. We will generally vote in favor of proposals that give
shareholders a greater voice in the affairs of the company and oppose any
measure that seeks to limit those rights. However, when analyzing such proposals
we will weigh the financial impact of the proposal against the impairment of
shareholder rights.
2.7. Anti-Takeover Measures
AllianceBernstein believes that measures that impede corporate transactions
(such as takeovers) or entrench management not only infringe on the rights of
shareholders but may also have a detrimental effect on the value of the company.
Therefore, we will generally oppose proposals, regardless of whether they are
advanced by management or shareholders, when their purpose or effect is to
entrench management or excessively or inappropriately dilute shareholder
ownership. Conversely, we support proposals that would restrict or otherwise
eliminate anti-takeover or anti-shareholder measures that have already been
adopted by corporate issuers. For example, we will support shareholder proposals
that seek to require the company to submit a shareholder rights plan to a
shareholder vote. We will evaluate, on a case-by-case basis, proposals to
completely redeem or eliminate such plans. Furthermore, we will generally oppose
proposals put forward by management (including the authorization of blank check
preferred stock, classified boards and supermajority vote requirements) that
appear to be anti-shareholder or intended as management entrenchment mechanisms.
2.8. Executive Compensation
AllianceBernstein believes that company management and the compensation
committee of the board of directors should, within reason, be given latitude to
determine the types and mix of compensation and benefits offered to company
employees. Whether proposed by a shareholder or management, we will review
proposals relating to executive compensation plans on a case-by-case basis to
ensure that the long-term interests of management and shareholders are properly
aligned. In general, we will analyze the proposed plan to ensure that
shareholder equity will not be excessively diluted taking into account shares
available for grant under the proposed plan as well as other existing plans. We
generally will oppose plans that allow stock options to be granted with below
market value exercise prices on the date of issuance or permit re-pricing of
underwater stock options without shareholder approval. Other factors such as the
company's performance and industry practice will generally be factored into our
analysis. In markets where remuneration reports or advisory votes on executive
compensation are not required for all companies, we will generally support
shareholder proposals asking the board to adopt a policy (i.e., "say on pay")
that the company's shareholders be given the opportunity to vote on an advisory
resolution to approve the compensation practices of the company. Although "say
on pay" votes are by nature only broad indications of shareholder views, they do
lead to more compensation-related dialogue between management and shareholders
and help ensure that management and shareholders meet their common objective:
maximizing the value of the company. In markets where votes to approve
remuneration reports or advisory votes on executive compensation are required,
we review the compensation practices on a case-by-case basis. With respect to
companies that have received assistance through government programs such as
TARP, we will generally oppose shareholder proposals that seek to impose greater
executive compensation restrictions on subject companies than are required under
the applicable program because such restrictions could create a competitive
disadvantage for the subject company. We believe the U.S. Securities and
Exchange Commission ("SEC") took appropriate steps to ensure more complete and
transparent disclosure of executive compensation when it issued modified
executive compensation and corporate governance disclosure rules in 2006 and
February 2010. Therefore, while we will consider them on a case-by-case basis,
we generally vote against shareholder proposals seeking additional disclosure of
executive and director compensation, including proposals that seek to specify
the measurement of performance-based compensation, if the company is subject to
SEC rules. We will support requiring a shareholder vote on management proposals
to provide severance packages that exceed 2.99 times the sum of an executive
officer's base salary plus bonus that are triggered by a change in control.
Finally, we will support shareholder proposals requiring a company to expense
compensatory employee stock options (to the extent the jurisdiction in which the
company operates does not already require it) because we view this form of
compensation as a significant corporate expense that should be appropriately
accounted for.
2.9. ESG
We are appointed by our clients as an investment manager with a fiduciary
responsibility to help them achieve their investment objectives over the long
term. Generally, our clients' objective is to maximize the financial return of
their portfolios within appropriate risk parameters. We have long recognized
that ESG issues can impact the performance of investment portfolios.
Accordingly, we have sought to integrate ESG factors into our investment and
proxy voting processes to the extent that the integration of such factors is
consistent with our fiduciary duty to help our clients achieve their investment
objectives and protect their economic interests. For additional information
regarding our approach to incorporating ESG issues in our investment and
decision-making processes, please refer to our RI Policy, which is attached to
this Statement as an Exhibit.
Shareholder proposals relating to environmental, social (including political)
and governance issues often raise complex and controversial issues that may have
both a financial and non-financial effect on the company. And while we recognize
that the effect of certain policies on a company may be difficult to quantify,
we believe it is clear that they do affect the company's long-term performance.
Our position in evaluating these proposals is founded on the principle that we
are a fiduciary. As such, we carefully consider any factors that we believe
could affect a company's long-term investment performance (including ESG issues)
in the course of our extensive fundamental, company-specific research and
engagement, which we rely on in making our investment and proxy voting
decisions. Maximizing long-term shareholder value is our overriding concern when
evaluating these matters, so we consider the impact of these proposals on the
future earnings of the company. In so doing, we will balance the assumed cost to
a company of implementing one or more shareholder proposals against the positive
effects we believe implementing the proposal may have on long-term shareholder
value.
3. Proxy Voting Procedures
3.1. Engagement
In evaluating proxy issues and determining our votes, we welcome and seek out
the points of view of various parties. Internally, the Proxy Committee may
consult chief investment officers, directors of research, research analysts
across our value and growth equity platforms, portfolio managers in whose
managed accounts a stock is held and/or other Investment Policy Group members.
Externally, the Proxy Committee may consult company management, company
directors, interest groups, shareholder activists and research providers. If we
believe an ESG issue is, or is reasonably likely to become, material, we engage
a company's management to discuss the relevant issues.
3.2. Conflicts of Interest
AllianceBernstein recognizes that there may be a potential conflict of interest
when we vote a proxy solicited by an issuer whose retirement plan we manage or
administer, who distributes AllianceBernstein-sponsored mutual funds, or with
whom we have, or one of our employees has, a business or personal relationship
that may affect (or may be reasonably viewed as affecting) how we vote on the
issuer's proxy. Similarly, AllianceBernstein may have a potentially material
conflict of interest when deciding how to vote on a proposal sponsored or
supported by a shareholder group that is a client. We believe that centralized
management of proxy voting, oversight by the Proxy Committee and adherence to
these policies ensures that proxies are voted based solely on our clients' best
interests. Additionally, we have implemented procedures to ensure that our votes
are not the product of a material conflict of interest, including: (i) on an
annual basis, the Proxy Committee taking reasonable steps to evaluate (A) the
nature of AllianceBernstein's and our employees' material business and personal
relationships (and those of our affiliates) with any company whose equity
securities are held in client accounts and (B) any client that has sponsored or
has a material interest in a proposal upon which we will be eligible to vote;
(ii) requiring anyone involved in the decision making process to disclose to the
Chair of the Proxy Committee any potential conflict that he or she is aware of
(including personal relationships) and any contact that he or she has had with
any interested party regarding a proxy vote; (iii) prohibiting employees
involved in the decision making process or vote administration from revealing
how we intend to vote on a proposal in order to reduce any attempted influence
from interested parties; and (iv) where a material conflict of interests exists,
reviewing our proposed vote by applying a series of objective tests and, where
necessary, considering the views of third party research services to ensure that
our voting decision is consistent with our clients' best interests.
Because under certain circumstances AllianceBernstein considers the
recommendation of third party research services, the Proxy Committee takes
reasonable steps to verify that any third party research service is, in fact,
independent taking into account all of the relevant facts and circumstances.
This includes reviewing the third party research service's conflict management
procedures and ascertaining, among other things, whether the third party
research service (i) has the capacity and competency to adequately analyze proxy
issues, and (ii) can make recommendations in an impartial manner and in the best
interests of our clients.
3.3. Proxies of Certain Non-U.S. Issuers
Proxy voting in certain countries requires "share blocking." Shareholders
wishing to vote their proxies must deposit their shares shortly before the date
of the meeting with a designated depositary. During this blocking period, shares
that will be voted at the meeting cannot be sold until the meeting has taken
place and the shares are returned to the clients' custodian banks. Absent
compelling reasons to the contrary, AllianceBernstein believes that the benefit
to the client of exercising the vote is outweighed by the cost of voting (i.e.,
not being able to sell the shares during this period). Accordingly, if share
blocking is required we generally choose not to vote those shares.
AllianceBernstein seeks to vote all proxies for securities held in client
accounts for which we have proxy voting authority. However, in non-US markets,
administrative issues beyond our control may at times prevent AllianceBernstein
from voting such proxies. For example, AllianceBernstein may receive meeting
notices after the cut-off date for voting or without sufficient time to fully
consider the proxy. As another example, certain markets require periodic
renewals of powers of attorney that local agents must have from our clients
prior to implementing AllianceBernstein's voting instructions.
3.4. Loaned Securities
Many clients of AllianceBernstein have entered into securities lending
arrangements with agent lenders to generate additional revenue.
AllianceBernstein will not be able to vote securities that are on loan under
these types of arrangements. However, under rare circumstances, for voting
issues that may have a significant impact on the investment, we may request that
clients recall securities that are on loan if we determine that the benefit of
voting outweighs the costs and lost revenue to the client or fund and the
administrative burden of retrieving the securities.
3.5. Proxy Committee
We have formed a Proxy Committee, which includes investment professionals from
both our growth and value equities teams, which is directly involved in the
decision-making process to ensure that our votes are guided by the investment
professionals who are most familiar with a given company. The Proxy Committee
establishes general proxy policies for AllianceBernstein and considers specific
proxy voting matters as necessary. The Proxy Committee periodically reviews
these policies and new types of environmental, social and governance issues, and
decides how we should vote on proposals not covered by these policies. When a
proxy vote cannot be clearly decided by an application of our stated policy, the
Proxy Committee will evaluate the proposal. In addition, the Proxy Committee, in
conjunction with the analyst that covers the company, may contact corporate
management, interested shareholder groups and others as necessary to discuss
proxy issues.
Different investment philosophies may occasionally result in different
conclusions being drawn regarding certain proposals and, in turn, may result in
the Proxy Committee making different voting decisions on the same proposal for
value and growth holdings. Nevertheless, the Proxy Committee always votes
proxies with the goal of maximizing the value of the securities in client
portfolios.
It is the responsibility of the Proxy Committee to evaluate and maintain proxy
voting procedures and guidelines, to evaluate proposals and issues not covered
by these guidelines, to evaluate proxies where we face a potential conflict of
interest (as discussed in section 3.2), to consider changes in policy and to
review the Proxy Voting Statement and the Proxy Voting Manual no less frequently
than annually. In addition, the Proxy Committee meets as necessary to address
special situations.
Members of the Proxy Committee include senior investment personnel and
representatives of the Legal and Compliance Department. The Proxy Committee is
chaired by Linda Giuliano, Senior Vice President and Chief Administrative
Officer-Equities.
Proxy Committee
---------------
Vincent DuPont: SVP-Equities
Linda Giuliano: SVP-Equities
Stephen Grillo: VP-Equities
David Lesser: VP-Legal
Mark Manley: SVP-Legal
Andrew Weiner: SVP-Equities
3.6. Proxy Voting Records
You may obtain information regarding how the Fund voted proxies relating to
portfolio securities during the most recent 12-month period ended June 30,
without charge. Simply visit AllianceBernstein's web site at
www.alliancebernstein.com, go to the Securities and Exchange Commission's web
site at www.sec.gov or call AllianceBernstein at (800) 227-4618.
Exhibit
Statement of Policy Regarding
Responsible Investment
Principles for Responsible Investment,
ESG, and Socially Responsible Investment
1. Introduction
AllianceBernstein L.P. ("AllianceBernstein" or "we") is appointed by our clients
as an investment manager with a fiduciary responsibility to help them achieve
their investment objectives over the long term. Generally, our clients'
objective is to maximize the financial return of their portfolios within
appropriate risk parameters. AllianceBernstein has long recognized that
environmental, social and governance ("ESG") issues can impact the performance
of investment portfolios. Accordingly, we have sought to integrate ESG factors
into our investment process to the extent that the integration of such factors
is consistent with our fiduciary duty to help our clients achieve their
investment objectives and protect their economic interests.
Our policy draws a distinction between how the Principles for Responsible
Investment ("PRI" or "Principles"), and Socially Responsible Investing ("SRI")
incorporate ESG factors. PRI is based on the premise that, because ESG issues
can affect investment performance, appropriate consideration of ESG issues and
engagement regarding them is firmly within the bounds of a mainstream investment
manager's fiduciary duties to its clients. Furthermore, PRI is intended to be
applied only in ways that are consistent with those mainstream fiduciary duties.
SRI, which refers to a spectrum of investment strategies that seek to integrate
ethical, moral, sustainability and other non-financial factors into the
investment process, generally involves exclusion and/or divestment, as well as
investment guidelines that restrict investments. AllianceBernstein may accept
such guideline restrictions upon client request.
2. Approach to ESG
Our long-standing policy has been to include ESG factors in our extensive
fundamental research and consider them carefully when we believe they are
material to our forecasts and investment decisions. If we determine that these
aspects of an issuer's past, current or anticipated behavior are material to its
future expected returns, we address these concerns in our forecasts, research
reviews, investment decisions and engagement. In addition, we have
well-developed proxy voting policies that incorporate ESG issues and engagement.
3. Commitment to the PRI
In recent years, we have gained greater clarity on how the PRI initiative, based
on information from PRI Advisory Council members and from other signatories,
provides a framework for incorporating ESG factors into investment research and
decision-making. Furthermore, our industry has become, over time, more aware of
the importance of ESG factors. We acknowledge these developments and seek to
refine what has been our process in this area.
After careful consideration, we determined that becoming a PRI signatory would
enhance our current ESG practices and align with our fiduciary duties to our
clients as a mainstream investment manager. Accordingly, we became a signatory,
effective November 1, 2011.
In signing the PRI, AllianceBernstein as an investment manager publicly commits
to adopt and implement all six Principles, where consistent with our fiduciary
responsibilities, and to make progress over time on implementation of the
Principles.
The six Principles are:
1. We will incorporate ESG issues into investment research and decision-making
processes. AllianceBernstein Examples: ESG issues are included in the research
analysis process. In some cases, external service providers of ESG-related tools
are utilized; we have conducted proxy voting training and will have continued
and expanded training for investment professionals to incorporate ESG issues
into investment analysis and decision-making processes across our firm.
2. We will be active owners and incorporate ESG issues into our ownership
policies and practices.
AllianceBernstein Examples: We are active owners through our proxy voting
process (for additional information, please refer to our Statement of Policies
and Procedures for Proxy Voting Manual); we engage issuers on ESG matters in our
investment research process (we define "engagement" as discussions with
management about ESG issues when they are, or we believe they are reasonably
likely to become, material).
3. We will seek appropriate disclosure on ESG issues by the entities in which we
invest.
AllianceBernstein Examples: Generally, we support transparency regarding ESG
issues when we conclude the disclosure is reasonable. Similarly, in proxy
voting, we will support shareholder initiatives and resolutions promoting ESG
disclosure when we conclude the disclosure is reasonable.
4. We will promote acceptance and implementation of the Principles within the
investment industry.
AllianceBernstein Examples: By signing the PRI, we have taken an important first
step in promoting acceptance and implementation of the six Principles within our
industry.
5. We will work together to enhance our effectiveness in implementing the
Principles.
AllianceBernstein Examples: We will engage with clients and participate in
forums with other PRI signatories to better understand how the PRI are applied
in our respective businesses. As a PRI signatory, we have access to information,
tools and other signatories to help ensure that we are effective in our
endeavors to implement the PRI.
6. We will report on our activities and progress towards implementing the
Principles. AllianceBernstein Examples: We will respond to the 2012 PRI
questionnaire and disclose PRI scores from the questionnaire in response to
inquiries from clients and in requests for proposals; we will provide examples
as requested concerning active ownership activities (voting, engagement or
policy dialogue).
4. RI Committee
Our firm's RI Committee provides AllianceBernstein stakeholders, including
employees, clients, prospects, consultants and service providers alike, with a
resource within our firm on which they can rely for information regarding our
approach to ESG issues and how those issues are incorporated in different ways
by the PRI and SRI. Additionally, the RI Committee is responsible for assisting
AllianceBernstein personnel to further implement our firm's RI policies and
practices, and, over time, to make progress on implementing all six Principles.
The RI Committee has a diverse membership, including senior representatives from
investments, distribution/sales and legal. The Committee is chaired by Linda
Giuliano, Senior Vice President and Chief Administrative Officer-Equities.
If you have questions or desire additional information about this Policy, we
encourage you to contact the RI Committee at RIinquiries@alliancebernstein.com
or reach out to a Committee member:
Erin Bigley: SVP-Fixed Income, New York
Alex Chaloff: SVP-Private Client, Los Angeles
Nicholas Davidson: SVP-Value, London
Kathy Fisher: SVP-Private Client, New York
Linda Giuliano: SVP-Equities, New York
Christopher Kotowicz: VP-Growth, Chicago
David Lesser: VP-Legal, New York
Mark Manley: SVP-Legal, New York
Takuji Oya: VP-Growth, Japan
Guy Prochilo: SVP-Institutional Investments, New York
Nitish Sharma: VP-Institutional Investments, Australia
Liz Smith: SVP-Institutional Investments, New York
Willem Van Gijzen: VP-Institutional Investments, Netherlands
PART C
OTHER INFORMATION
ITEM 15. Indemnification.
It is the Registrant's policy to indemnify its directors and officers,
employees and other agents to the maximum extent permitted by Section 2-418 of
the General Corporation Law of the State of Maryland, which is incorporated by
reference herein, and as set forth in Article NINTH of Registrant's Articles of
Restatement of Articles of Incorporation, filed as Exhibit (a) in response to
Item 28 of the Registrant's Registration Statement on Form N-1A (File Nos.
2-29901 and 811-01716), filed with the Securities and Exchange Commission on
June 3, 2011, Article IX of the Registrant's Amended and Restated By-Laws filed
as Exhibit (b) in response to Item 28 of the Registrant's Registration Statement
on Form N-1A (File Nos. 2-29901 and 811-01716), filed with the Securities and
Exchange Commission on August 30, 2006 and Section 10 of the Distribution
Services Agreement filed as Exhibit (e)(1) in response to Item 28 of the
Registrant's Registration Statement on Form N-1A (File Nos. 2-29901 and
811-01716), filed with the Securities and Exchange Commission on January 30,
1998., all as set forth below. The liability of the Registrant's directors and
officers is dealt with in Article NINTH of Registrant's articles of Restatement
of Articles of Incorporation, as set forth below. The Adviser's liability for
any loss suffered by the Registrant or its shareholders is set forth in Section
4 of the Investment Advisory Contract filed as Exhibit (d) in response to Item
28 of the Registrant's Registration Statement on Form N-1A (File Nos. 2-29901
and 811-01716), filed with the Securities and Exchange Commission on February
28, 2013, as set forth below.
Article NINTH of the Registrant's Articles of Restatement of Articles of
Incorporation reads as follows:
NINTH: (a) To the fullest extent that limitations on the liability of
directors and officers are permitted by the Maryland General Corporation Law, no
director or officer of the Corporation shall have any liability to the
Corporation or its stockholders for damages. This limitation on liability
applies to events occurring at the time a person serves as a director or officer
of the Corporation whether or not such person is a director or officer at the
time of any proceeding in which liability is asserted.
(b) The Corporation shall indemnify and advance expenses to its currently
acting and its former directors to the fullest extent that indemnification of
directors is permitted by the Maryland General Corporation Law. The Corporation
shall indemnify and advance expenses to its officers to the same extent as its
directors and to such further extent as is consistent with the law. The Board of
Directors may by By-Law, resolution or agreement make further provisions for
indemnification of directors, officers, employees and agents to the fullest
extent permitted by the Maryland General Corporation Law.
(c) No provision of this Article shall be effective to protect or purport
to protect any director or officer of the Corporation against any liability to
the Corporation or its security holders to which he would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
(d) References to the Maryland General Corporation Law in this Article are
to the law as from time to time amended. No further amendment to the Articles of
Incorporation of the Corporation shall effect any right of any person under this
Article based on any event, omission or proceeding prior to such amendment.
ARTICLE IX of the Registrant's Amended and Restated By-Laws reads as
follows:
To the maximum extent permitted by Maryland law in effect from time to
time, the Corporation shall indemnify and, without requiring a preliminary
determination of the ultimate entitlement to indemnification, shall pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(a) any individual who is a present or former director or officer of the
Corporation and who is made or threatened to be made a party to the proceeding
by reason of his or her service in any such capacity or (b) any individual who,
while a director or officer of the Corporation and at the request of the
Corporation, serves or has served as a director, officer, partner or trustee of
another corporation, real estate investment trust, partnership, joint venture,
trust, employee benefit plan or other enterprise and who is made or threatened
to be made a party to the proceeding by reason of his or her service in any such
capacity. The Corporation may, with the approval of its Board of Directors or
any duly authorized committee thereof, provide such indemnification and advance
for expenses to a person who served a predecessor of the Corporation in any of
the capacities described in (a) or (b) above and to any employee or agent of the
Corporation or a predecessor of the Corporation. The termination of any claim,
action, suit or other proceeding involving any person, by judgment, settlement
(whether with or without court approval) or conviction or upon a plea of guilty
or nolo contendere, or its equivalent, shall not create a presumption that such
person did not meet the standards of conduct required for indemnification or
payment of expenses to be required or permitted under Maryland law, these Bylaws
or the Charter. Any indemnification or advance of expenses made pursuant to this
Article shall be subject to applicable requirements of the 1940 Act. The
indemnification and payment of expenses provided in these Bylaws shall not be
deemed exclusive of or limit in any way other rights to which any person seeking
indemnification or payment of expenses may be or may become entitled under any
bylaw, regulation, insurance, agreement or otherwise.
Neither the amendment nor repeal of this Article, nor the adoption or
amendment of any other provision of the Bylaws or Charter inconsistent with this
Article, shall apply to or affect in any respect the applicability of the
preceding paragraph with respect to any act or failure to act which occurred
prior to such amendment, repeal or adoption.
The Investment Advisory Contract between the Registrant and
AllianceBernstein L.P. provides that AllianceBernstein L.P. will not be liable
under such agreements for any mistake of judgment or in any event whatsoever,
except for lack of good faith, and that nothing therein shall be deemed to
protect, or purport to protect, AllianceBernstein L.P. against any liability to
Registrant or its security holders to which it would otherwise be subject by
reason of reckless disregard of its obligations and duties thereunder.
The Distribution Services Agreement between the Registrant and
AllianceBernstein Investments, Inc. ("ABI") provides that Registrant will
indemnify, defend and hold ABI and any person who controls it within the meaning
of Section 15 of the Securities Act of 1933, as amended (the "Securities Act"),
free and harmless from and against any and all claims, demands, liabilities and
expenses which ABI or any such controlling person may incur arising out of or
based upon any alleged untrue statement of a material fact contained in
Registrant's registration statement, Prospectus or Statement of Additional
Information or arising out of, or based upon any alleged omission to state a
material fact required to be stated in any one of the foregoing or necessary to
make the statements in any one of the foregoing not misleading, provided that
nothing therein shall be so construed as to protect ABI against any liability to
the Registrant or its security holders to which it would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence with the
performance of its duties thereunder, or by reason of reckless disregard of its
obligation and duties thereunder.
The foregoing summaries are qualified by the entire text of
Registrant's articles of Restatement of Articles of Incorporation, Amended and
Restated By-Laws, the Investment Advisory Contact between the Registrant and
AllianceBernstein L.P. and the Distribution Services Agreement between the
Registrant and ABI.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
In accordance with Release No. IC-11330 (September 2, 1980), the
Registrant will indemnify its directors, officers, investment adviser and
principal underwriters only if (1) a final decision on the merits was issued by
the court or other body before whom the proceeding was brought that the person
to be indemnified (the "indemnitee") was not liable by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office ("disabling conduct") or (2) a reasonable
determination is made, based upon a review of the facts, that the indemnitee was
not liable by reason of disabling conduct, by (a) the vote of a majority of a
quorum of the directors who are neither "interested persons" of the Registrant
as defined in section 2(a)(19) of the Investment Company Act of 1940 nor parties
to the proceeding ("disinterested, non-party directors"), or (b) an independent
legal counsel in a written opinion. The Registrant will advance attorneys fees
or other expenses incurred by its directors, officers, investment adviser or
principal underwriters in defending a proceeding, upon the undertaking by or on
behalf of the indemnitee to repay the advance unless it is ultimately determined
that he is entitled to indemnification and, as a condition to the advance, (1)
the indemnitee shall provide a security for his undertaking, (2) the Registrant
shall be insured against losses arising by reason of any lawful advances, or (3)
a majority of a quorum of disinterested, non-party directors of the Registrant,
or an independent legal counsel in a written opinion, shall determine, based on
a review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the indemnitee ultimately will be found
entitled to indemnification.
ITEM 16. Exhibits
(1) (a) Articles of Amendment and Restatement of Articles of
Incorporation of Registrant, dated May 11, 2011 and filed May
16, 2011 - Incorporated by reference to Exhibit (a) to
Post-Effective Amendment No. 96 of Registrant's Registration
Statement on Form N-1A (File Nos. 2-29901 and 811-01716),
filed with the Securities and Exchange Commission on June 3,
2011.
(b) Articles Supplementary to Articles of Incorporation of
Registrant, dated June 15, 2011 and filed June 17, 2011 -
Incorporated by reference to Exhibit (a)(2) to Post-Effective
Amendment No. 97 of Registrant's Registration Statement on
Form N-1A (File Nos. 2-29901 and 811-01716), filed with the
Securities and Exchange Commission on June 17, 2011.
(c) Articles Supplementary to Articles of Incorporation of
Registrant, dated September 21, 2011 and filed September 21,
2011 - Incorporated by reference to Exhibit (a)(3) to
Post-Effective Amendment No. 105 of Registrant's Registration
Statement on Form N-1A (File Nos. 2-29901 and 811-01716),
filed with the Securities and Exchange Commission on September
22, 2011.
(d) Articles Supplementary to Articles of Incorporation of
Registrant, dated August 5, 2011 and filed August 8, 2011 -
Incorporated by reference to Exhibit (a)(4) to Post-Effective
Amendment No. 106 of Registrant's Registration Statement on
Form N-1A (File Nos. 2-29901 and 811-01716), filed with the
Securities and Exchange Commission on September 23, 2011.
(e) Articles Supplementary to Articles of Incorporation of
Registrant, dated November 30, 2011 and filed December 27,
2011 - Incorporated by reference to Exhibit (a)(5) to
Post-Effective Amendment No. 117 of Registrant's Registration
Statement on Form N-1A (File Nos. 2-29901 and 811-01716),
filed with the Securities and Exchange Commission on June 29,
2012.
(f) Articles Supplementary to Articles of Incorporation of
Registrant, dated November 21, 2012 and filed November 21,
2012 - Incorporated by reference to Exhibit (a)(5) to
Post-Effective Amendment No. 130 to Registrant's Registration
Statement on Form N-1A (File Nos. 2-29901 and 811-01716),
filed with the Securities and Exchange Commission on December
11, 2012.
(g) Articles Supplementary to Articles of Incorporation of
Registrant, dated November 19, 2013 and filed November 20,
2013 - Filed herewith.
(2) Amended and Restated By-Laws of Registrant - Incorporated by
reference to Exhibit (b) to Post-Effective Amendment No. 81 of
Registrant's Registration Statement on Form N-1A (File Nos. 2-29901
and 811-01716), filed with the Securities and Exchange Commission on
August 30, 2006.
(3) Voting Trust Agreements. - Not applicable.
(4) Form of Plan of Acquisition and Liquidation - filed as Appendix A to
the Proxy Statement/Prospectus.
(5) Instruments defining the rights of holders of the securities being
registered - Not applicable.
(6) Investment Advisory Contract between the Registrant and
AllianceBernstein L.P., dated July 22, 1992, as amended September 7,
2004, December 15, 2004, December 23, 2009, August 2, 2010, October
26, 2010, July 6, 2011, August 31, 2011, December 8, 2011, December
15, 2011, September 27, 2012 and December 12, 2012 - Incorporated by
reference to Exhibit (d) to Post-Effective Amendment No. 132 to
Registrant's Registration Statement on Form N-1A (File Nos. 2-29901
and 811-01716), filed with the Securities and Exchange Commission on
February 28, 2013.
(7) (a) Distribution Services Agreement between the Registrant and
AllianceBernstein Investments, Inc. (formerly known as
Alliance Fund Distributors, Inc.), dated July 22, 1992 -
Incorporated by reference to Exhibit 6(a) to Post-Effective
Amendment No. 63 of Registrant's Registration Statement on
Form N-1A (File Nos. 2-29901 and 811-01716), filed with the
Securities and Exchange Commission on January 30, 1998.
(b) Amendment to Distribution Services Agreement between the
Registrant and AllianceBernstein Investments, Inc. (formerly
known as Alliance Fund Distributors, Inc.) dated July 19, 1996
- Incorporated by reference to Exhibit 6 to Post-Effective
Amendment No. 61 of Registrant's Registration Statement on
Form N-1A (File Nos. 2-29901 and 811-01716), filed with the
Securities and Exchange Commission on February 3, 1997.
(c) Form of Amendment to Distribution Services Agreement between
the Registrant and AllianceBernstein Investments, Inc.
(formerly known as Alliance Fund Distributors, Inc.), dated
March 1, 2005 - Incorporated by reference to Exhibit (e)(3) to
Post-Effective Amendment No. 79 of Registrant's Registration
Statement on Form N-1A (File Nos. 2-29901 and 811-01716),
filed with the Securities and Exchange Commission on February
28, 2005.
(d) Form of Amendment to Distribution Services Agreement between
the Registrant and AllianceBernstein Investments, Inc., dated
June 14, 2006 - Incorporated by reference to Exhibit (e)(4) to
Post-Effective Amendment No. 82 of Registrant's Registration
Statement on Form N-1A (File Nos. 2-29901 and 811-01716),
filed with the Securities and Exchange Commission on October
31, 2006.
(e) Distribution Services Agreement between the Registrant and
AllianceBernstein Investments, Inc. (formerly known as
Alliance Fund Distributors, Inc.), dated July 22, 1992, as
amended as of April 30, 1993 - Incorporated by reference to
Exhibit (e)(5) to Post-Effective Amendment No. 86 of
Registrant's Registration Statement on Form N-1A (File Nos.
2-29901 and 811-01716), filed with the Securities and Exchange
Commission on October 6, 2009.
(f) Form of Amendment to Distribution Services Agreement, dated as
of August 4, 2011 between Registrant and AllianceBernstein
Investments, Inc. - Incorporated by reference to Exhibit
(e)(6) to Post-Effective Amendment No. 117 of Registrant's
Registration Statement on Form N-1A (File Nos. 2-29901 and
811-01716), filed with the Securities and Exchange Commission
on June 29, 2012.
(g) Form of Selected Dealer Agreement between AllianceBernstein
Investments, Inc. and selected dealers offering shares of the
Registrant - Incorporated by reference to Exhibit (e)(6) to
Post-Effective Amendment No. 39 of the Registration Statement
on Form N-1A of AllianceBernstein Large Cap Growth Fund, Inc.
(File Nos. 33-49530 and 811-06730), filed with the Securities
and Exchange Commission on October 15, 2009.
(h) Form of Selected Agent Agreement between AllianceBernstein
Investments, Inc. (formerly known as AllianceBernstein
Investment Research Management, Inc.) and selected agents
making available shares of the Registrant - Incorporated by
reference to Exhibit (e)(4) to Post-Effective Amendment No. 34
of the Registration Statement on Form N-1A of
AllianceBernstein Municipal Income Fund, Inc. (File Nos.
33-7812 and 811-04791), filed with the Securities and Exchange
Commission on January 28, 2005.
(i) Selected Dealer Agreement between AllianceBernstein
Investments, Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated making available shares of the Registrant
effective April 30, 2009 - Incorporated by reference to
Exhibit (e)(8) to Post-Effective Amendment No. 39 of the
Registration Statement on Form N-1A of AllianceBernstein Large
Cap Growth Fund, Inc. (File Nos. 33-49530 and 811-06730),
filed with the Securities and Exchange Commission on October
15, 2009.
(j) Load Fund Operating Agreement between AllianceBernstein
Investments, Inc. and Charles Schwab & Co., Inc. making
available shares of the Registrant, dated as of June 1, 2007 -
Incorporated by reference to Exhibit (e)(9) to Post-Effective
Amendment No. 39 of the Registration Statement on Form N-1A of
AllianceBernstein Large Cap Growth Fund, Inc. (File Nos.
33-49530 and 811-06730), filed with the Securities and
Exchange Commission on October 15, 2009.
(k) Cooperation Agreement between AllianceBernstein Investments,
Inc. (formerly known as AllianceBernstein Research Management,
Inc.) and UBS AG, dated November 1, 2005 - Incorporated by
reference to Exhibit (e)(10) to Post-Effective Amendment No.
39 of the Registration Statement on Form N-1A of
AllianceBernstein Large Cap Growth Fund, Inc. (File Nos.
33-49530 and 811-06730), filed with the Securities and
Exchange Commission on October 15, 2009.
(8) Bonus, profit sharing, pension or other similar contracts or
arrangements. - Not Applicable.
(9) (a) Master Custodian Agreement between the Registrant and State
Street Bank and Trust Company, effective August 3, 2009 -
Incorporated by reference to Exhibit (g) to Post-Effective
Amendment No. 51 of the Registration Statement on Form N-1A of
AllianceBernstein Variable Products Series Fund, Inc. (File
Nos. 33-18647 and 811-05398), filed with the Securities and
Exchange Commission on April 29, 2010.
(b) Amendment to Master Custodian Agreement between the Registrant
and State Street Bank and Trust Company, regarding the
AllianceBernstein International Discovery Equity Portfolio,
effective October 15, 2010 - Incorporated by reference to
Exhibit (g)(2) to Post-Effective Amendment No. 92 of
Registrant's Registration Statement on Form N-1A (File Nos.
2-29901 and 811-01716), filed with the Securities and Exchange
Commission on October 25, 2010.
(c) Form of Novation and Amendment Agreement to Custodian
Agreement dated, as of September 14, 2009 between the
Registrant, on behalf of AllianceBernstein Emerging Markets
Multi-Asset Portfolio, AllianceBernstein Dynamic All Market
Fund and AllianceBernstein Dynamic All Market Plus Fund, and
Brown Brothers Harriman & Co. - Incorporated by reference to
Exhibit (g)(3) to Post-Effective Amendment No. 117 of
Registrant's Registration Statement on Form N-1A (File Nos.
2-29901 and 811-01716), filed with the Securities and Exchange
Commission on June 29, 2012.
(d) Form of Novation and Amendment Agreement to Custodian
Agreement dated, as of December 5, 2011 between the
Registrant, on behalf of AllianceBernstein Emerging Markets
Multi-Asset Portfolio, AllianceBernstein Dynamic All Market
Fund, AllianceBernstein Dynamic All Market Plus Fund and
AllianceBernstein Select US Equity Portfolio, and Brown
Brothers Harriman & Co. - Incorporated by reference to Exhibit
(g)(4) to Post-Effective Amendment No. 117 of Registrant's
Registration Statement on Form N-1A (File Nos. 2-29901 and
811-01716), filed with the Securities and Exchange Commission
on June 29, 2012.
(e) Form of Amendment to Master Custodian Agreement between the
Registrant and State Street Bank and Trust Company, regarding
the AllianceBernstein International Focus 40 Portfolio,
effective July 1, 2011 - Incorporated by reference to Exhibit
(g)(5) to Post-Effective Amendment No. 119 of Registrant's
Registration Statement on Form N-1A (File Nos. 2-29901 and
811-01716), filed with the Securities and Exchange Commission
on July 30, 2012.
(f) Form of Amendment to Master Custodian Agreement between the
Registrant and State Street Bank and Trust Company, regarding
the AllianceBernstein Emerging Markets Equity Portfolio, dated
October 12, 2012 - Incorporated by reference to Exhibit (g)(6)
to Post-Effective Amendment No. 122 of Registrant's
Registration Statement on Form N-1A (File Nos. 2-29901 and
811-01716), filed with the Securities and Exchange Commission
on October 12, 2012.
(g) Form of Amendment to Master Custodian Agreement between the
Registrant and State Street Bank and Trust Company, regarding
the AllianceBernstein Select US Long/Short Portfolio, dated
December 6, 2012 - Incorporated by reference to Exhibit (g)(7)
to Post-Effective Amendment No. 130 to Registrant's
Registration Statement on Form N-1A (File Nos. 2-29901 and
811-01716), filed with the Securities and Exchange Commission
on December 11, 2012.
(10) (a) Rule 12b-1 Plan - See Exhibit (7)(a) hereto.
(b) Amended and Restated Rule 18f-3 Plan, dated November 6, 2012 -
Incorporated by reference to Exhibit (n) to Post-Effective
Amendment No. 132 to Registrant's Registration Statement on
Form N-1A (File Nos. 2-29901 and 811-01716), filed with the
Securities and Exchange Commission on February 28, 2013.
(11) Opinion and Consent of Seward & Kissel LLP regarding the legality of
securities being registered - Filed herewith.
(12) Opinion and Consent of Bingham McCutchen LLP as to Tax matters - To
be filed by amendment.
(13) (a) Transfer Agency Agreement between the Registrant and
AllianceBernstein Investor Services, Inc. - Incorporated by
reference to Exhibit 9 to Post-Effective Amendment No. 63 of
Registrant's Registration Statement on Form N-1A (File Nos.
2-29901 and 811-01716), filed with the Securities and Exchange
Commission on January 30, 1998.
(b) Form of Amendment to Transfer Agency Agreement between the
Registrant and AllianceBernstein Investor Services, Inc. -
Incorporated by reference to Exhibit (h)(2) to Post-Effective
Amendment No. 82 of Registrant's Registration Statement on
Form N-1A (File Nos. 2-29901 and 811-01716), filed with the
Securities and Exchange Commission on October 31, 2006.
(c) Form of Expense Limitation Agreement, dated July 6, 2011
between the Registrant, on behalf of AllianceBernstein
International Focus 40 Portfolio, and AllianceBernstein L.P. -
Incorporated by reference to Exhibit (h)(3) to Post-Effective
Amendment No. 99 of Registrant's Registration Statement on
Form N-1A (File Nos. 2-29901 and 811-01716), filed with the
Securities and Exchange Commission on July 6, 2011.
(d) Form of Expense Limitation Agreement, dated October 26, 2010
between the Registrant, on behalf of the AllianceBernstein
International Discovery Equity Portfolio, and
AllianceBernstein L.P. - Incorporated by reference to Exhibit
(h)(4) to Post-Effective Amendment No. 117 of Registrant's
Registration Statement on Form N-1A (File Nos. 2-29901 and
811-01716), filed with the Securities and Exchange Commission
on June 29, 2012.
(e) Form of Expense Limitation Agreement, dated August 31, 2011
between the Registrant, on behalf of the AllianceBernstein
Emerging Markets Multi-Asset Portfolio, and AllianceBernstein
L.P. - Incorporated by reference to Exhibit (h)(5) to
Post-Effective Amendment No. 117 of Registrant's Registration
Statement on Form N-1A (File Nos. 2-29901 and 811-01716),
filed with the Securities and Exchange Commission on June 29,
2012.
(f) Form of Expense Limitation Agreement, dated December 8, 2011
between the Registrant, on behalf of the AllianceBernstein
Select US Equity Portfolio, and AllianceBernstein L.P. -
Incorporated by reference to Exhibit (h)(6) to Post-Effective
Amendment No. 117 of Registrant's Registration Statement on
Form N-1A (File Nos. 2-29901 and 811-01716), filed with the
Securities and Exchange Commission on June 29, 2012.
(g) Form of Expense Limitation Agreement, dated December 15, 2011
between the Registrant, on behalf of the AllianceBernstein
Dynamic All Market Fund, and AllianceBernstein L.P. -
Incorporated by reference to Exhibit (h)(7) to Post-Effective
Amendment No. 117 of Registrant's Registration Statement on
Form N-1A (File Nos. 2-29901 and 811-01716), filed with the
Securities and Exchange Commission on June 29, 2012.
(h) Expense Limitation Agreement, dated September 27, 2012,
between the Registrant, on behalf of the AllianceBernstein
Emerging Markets Equity Portfolio, and AllianceBernstein, L.P.
- Incorporated by reference to Exhibit (h)(8) to
Post-Effective Amendment No. 134 of Registrant's Registration
Statement on Form N-1A (File Nos. 2-29901 and 811-01716),
filed with the Securities and Exchange Commission on June 27,
2013.
(i) Form of Expense Limitation Agreement, dated December 6, 2012,
between the Registrant, on behalf of the AllianceBernstein
Select US Long/Short Portfolio, and AllianceBernstein, L.P. -
Incorporated by reference to Exhibit (h)(9) to Post-Effective
Amendment No. 130 to Registrant's Registration Statement on
Form N-1A (File Nos. 2-29901 and 811-01716), filed with the
Securities and Exchange Commission on December 11, 2012.
(14) Consent of Independent Registered Public Accounting Firm, Tait,
Weller & Baker LLP - Filed herewith.
(15) Financial statements omitted pursuant to Item 14(a)(1). - Not
Applicable.
(16) Powers of Attorney for: John H. Dobkin, Michael J. Downey, William
H. Foulk, Jr., D. James Guzy, Nancy P. Jacklin, Robert M. Keith,
Garry L. Moody, Marshall C. Turner, Jr. and Earl D. Weiner - Filed
herewith.
(17) Additional Exhibits - Not Applicable.
ITEM 17. Undertakings.
(1) The undersigned registrant agrees that prior to any public
reoffering of the securities registered through the use of a
prospectus which is a part of this registration statement by any
person or party who is deemed to be an underwriter within the
meaning of Rule 145(c) of the Securities Act 17 CFR 230.145(c), the
reoffering prospectus will contain the information called for by the
applicable registration form for reofferings by persons who may be
deemed underwriters, in addition to the information called for by
the other items of the applicable form.
(2) The undersigned registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an
amendment to the registration statement and will not be used until
the amendment is effective, and that, in determining any liability
under the 1933 Act, each post-effective amendment shall be deemed to
be a new registration statement for the securities offered therein,
and the offering of the securities at that time shall be deemed to
be the initial bona fide offering of them.
(3) The undersigned registrant undertakes to file a post-effective
amendment to this registration statement upon the closing of the
Acquisition described in this registration statement that contains
an opinion of counsel supporting the tax matters discussed in this
registration statement.
SIGNATURES
----------
As required by the Securities Act of 1933, as amended, this Registration
Statement has been signed on behalf of the Registrant, in the City of New York
and the State of New York, on the 25th day of November, 2013.
ALLIANCEBERNSTEIN CAP FUND, INC.
By: Robert M. Keith *
--------------------
Robert M. Keith
President
As required by the Securities Act of 1933, as amended, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
Signature Title Date
---------- ----- ----
(1) Principal Executive Officer:
Robert M. Keith * President and November 25, 2013
----------------- Chief Executive
Robert M. Keith Officer
(2) Principal Financial and
Accounting Officer:
/s/ Joseph J. Mantineo Treasurer and November 25, 2013
-------------------- Chief Financial
Joseph J. Mantineo Officer
(3) All of the Directors:
John H. Dobkin*
Michael J. Downey*
William H. Foulk, Jr.*
D. James Guzy*
Nancy P. Jacklin*
Robert M. Keith*
Garry L. Moody*
Marshall C. Turner, Jr.*
Earl D. Weiner*
*By: /s/ Nancy E. Hay November 25, 2013
---------------------
Nancy E. Hay
(Attorney-in-fact)
Index to Exhibits
------------------
Exhibit No. Description of Exhibits
----------- -----------------------
(1)(g) Articles Supplementary to Articles of Incorporation
(11) Opinion and Consent of Seward & Kissel LLP
(14) Consent of Independent Registered Public Accounting Firm
Tait, Weller & Baker LLP
(16) Powers of Attorney