Seward & Kissel LLP
901 K Street, N.W.
Suite 800
Washington, D.C. 20001
Telephone: (202) 737-8833
Facsimile: (202) 737-5184
www.sewkis.com
May 20, 2014
VIA EDGAR
Ms. Deborah O'Neal Johnson
Division of Investment Management
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: AllianceBernstein Cap Fund, Inc. (AllianceBernstein Emerging Markets
Core Portfolio and AllianceBernstein Emerging Markets Growth Portfolio)
Post-Effective Amendment No. 145
File Nos. 2-29901 and 811-01716
Dear Ms. O'Neal Johnson:
This letter provides an additional response to comments of the staff (the
"Staff") of the Securities and Exchange Commission (the "SEC") to the
post-effective amendment to the registration statement filed on Form N-1A that
includes the AllianceBernstein Emerging Markets Core Portfolio ("Emerging
Markets Core") and the AllianceBernstein Emerging Markets Growth Portfolio
("Emerging Markets Growth") (each a "Fund" and collectively the "Funds"), as
provided orally to Joanne A. Skerrett of this office on March 27, 2014. The
Staff's comment and our response are discussed below.
Prospectus
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Emerging Markets Core and Emerging Markets Growth
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Comment 10: Principal Strategies: Please inform the Staff how much of each
Fund's assets will be invested in emerging markets derivatives and
how such derivatives will be valued for purposes of the 80% Test.
Response: The Funds do not have a strategy to invest any particular amount of
their assets in emerging market derivatives, although neither Fund
has a principal investment strategy to invest in derivatives other
than currency derivatives.
With respect to the 80% Test, Rule 35d-1, as you are aware, requires
an investment company with a name that suggests a particular
investment, country or geographic region to invest at least 80% of
its assets in the type of investment, country or region suggested by
its name. In the adopting release for such Rule (Release No.
IC-24828 (Jan. 17, 2001)), the SEC explained that it was not
adopting proposed criteria suggesting that the 80% Test could only
be satisfied by investment in securities of the type suggested by
the fund's name. Instead, the SEC adopted an approach that allows
investment companies the flexibility to invest in additional types
of investments that expose a fund's assets to the economic fortunes
and risks of the investments indicated by its name (in this case,
emerging market securities). In this respect, the SEC gave an
example that a fund with a name suggesting an emphasis in a certain
country or geographic region may, in complying with the Rule, invest
in a foreign stock index futures contract traded on a U.S.
commodities exchange.
The Funds may determine that it is more efficient and economical to
invest in emerging market countries through a futures contract or
other derivative instrument rather than by making direct investments
in securities of emerging market countries. In the case of a futures
contract, variation margin payments are made on a daily or other
frequent basis, and the value of the futures contract on the books
of the fund (the Fund's obligation to make or right to receive
margin payments relating to prior price movements) will generally be
quite small and does not approximate the exposure that the Fund has
to the assets underlying the futures contract by virtue of the
futures contract. Rather, we believe that in such a case the
notional amount of the futures contract adjusted for changes in the
value of the underlying assets provides a better measure of the
Fund's exposure to such assets, as an investment in the futures
contract is the economic equivalent of an investment in the
underlying assets. For example, if a Fund were to buy a futures
contract on an emerging market index with a notional amount of $1
million, and the value of the index declined by 10% while the Fund
held the futures contract, the Fund would effectively have $900,000
of emerging markets exposure through that futures contract, even
though the value of the futures contract on the books of the Fund
may be at or near zero. We believe that it is appropriate and
consistent with the SEC's economic exposure approach to use the
current market value of the notional amount of the futures contract
for compliance with the names test.
Of course, we do not mean to suggest that the notional amount of a
derivative instrument should always be used to measure exposure to
the assets underlying the derivative instrument for purposes of an
80% test under Rule 35d-1. For example, the purchase of an
out-of-the-money call option on an emerging market security is not
the economic equivalent of a purchase of the security, and the
market price of such an option would generally better represent the
Fund's emerging market exposure than the notional amount of the
option (i.e., the value of the underlying security). Also,
specifically as to currency derivatives, which as noted above are
the only derivatives that the Funds may use as a principal
investment strategy, hedging the Funds' emerging market currency
exposure back to the U.S. dollar through derivatives would have no
bearing on the Funds' exposure to emerging market securities, so the
value of any such currency derivatives would generally not be
included in the numerator for the Funds' 80% test.
* * *
We hereby acknowledge that (i) each Fund is responsible for the adequacy
and accuracy of the disclosures in the filing; (ii) Staff comments or changes to
disclosure in response to Staff comments in the filing reviewed by the Staff do
not foreclose the SEC from taking any action with respect to the filing; and
(iii) a Fund may not assert Staff comments as a defense in any proceedings
initiated by the SEC or any person under the federal securities laws of the
United States.
If you have any additional comments or questions, please contact Kathleen
Clarke or the undersigned at (202) 737-8833.
Sincerely,
/s/ Joanne A. Skerrett
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Joanne A. Skerrett
cc: Emilie D. Wrapp, Esq.
Eric Freed, Esq.
Stephen J. Laffey, Esq.
Kathleen K. Clarke, Esq.