PIMCO Municipal Income Fund, et al.; Notice of Application, 51867-51869 [E8-20615]

Download as PDF mstockstill on PROD1PC66 with NOTICES Federal Register / Vol. 73, No. 173 / Friday, September 5, 2008 / Notices (1) Whether the Plan is accomplishing its purpose(s); (2) the reasonably foreseeable effects of the Plan on the Fund’s long-term total return in relation to the market price and NAV of the Fund’s common stock; and (3) the Fund’s current distribution rate, as described in condition V.B above, compared to the Fund’s average annual total return over the 2-year period, as described in condition V.B, or such longer period as the Board deems appropriate; and (c) based upon that determination, will approve or disapprove the continuation, or continuation after amendment, of the Plan; and 2. The Board will record the information considered by it and the basis for its approval or disapproval of the continuation, or continuation after amendment, of the Plan in its meeting minutes, which must be made and preserved for a period of not less than six years from the date of such meeting, the first two years in an easily accessible place. VI. Public Offerings: The Fund will not make a public offering of the Fund’s common stock other than: A. A rights offering below net asset value to holders of the Fund’s common stock; B. an offering in connection with a dividend reinvestment plan, merger, consolidation, acquisition, spin-off or reorganization of the Fund; or C. an offering other than an offering described in conditions VI.A and VI.B above, unless, with respect to such other offering: 1. the Fund’s average annual distribution rate for the six months ending on the last day of the month ended immediately prior to the most recent distribution declaration date,4 expressed as a percentage of NAV per share as of such date, is no more than 1 percentage point greater than the Fund’s average annual total return for the 5-year period ending on such date; 5 and 2. the transmittal letter accompanying any registration statement filed with the Commission in connection with such offering discloses that the Fund has received an order under section 19(b) to permit it to make periodic distributions of long-term capital gains with respect to its common stock as frequently as twelve times each year, and as frequently as distributions are specified 4 If the fund has been in operation fewer than two years, the measured period will be immediately following the fund’s first public offering. 5 If the fund has been in operation fewer than five years, the measured period will be immediately following the fund’s first public offering. VerDate Aug<31>2005 18:40 Sep 04, 2008 Jkt 214001 in accordance with the terms of any outstanding preferred stock that such Fund may issue. VII. Amendments to Rule 19b–1: The requested relief will expire on the effective date of any amendment to rule 19b–1 that provides relief permitting certain closed-end investment companies to make periodic distributions of long-term capital gains with respect to their outstanding common stock as frequently as twelve times each year. For the Commission, by the Division of Investment Management, under delegated authority. Florence E. Harmon, Acting Secretary. [FR Doc. E8–20614 Filed 9–4–08; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 28370; 812–13381] PIMCO Municipal Income Fund, et al.; Notice of Application August 29, 2008. Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice of an application for an order under section 6(c) of the Investment Company Act of 1940 (the ‘‘Act’’) for an exemption from section 19(b) of the Act and rule 19b–1 under the Act. AGENCY: SUMMARY OF THE APPLICATION: Applicants request an order to permit certain registered closed-end management investment companies to make a greater number of capital gains distributions to holders of shares of their auction market preferred stock than is permitted by section 19(b) of the Act and rule 19b–1 under the Act to the extent necessary to comply with Internal Revenue Ruling 89–81, 1989–1 C.B. 226 (‘‘Revenue Ruling 89–81’’) under the Internal Revenue Code of 1986 (the ‘‘Code’’). APPLICANTS: PIMCO Municipal Income Fund, PIMCO Municipal Income Fund II, PIMCO Municipal Income Fund III, PIMCO California Municipal Income Fund, PIMCO California Municipal Income Fund II, PIMCO California Municipal Income Fund III, PIMCO New York Municipal Income Fund, PIMCO New York Municipal Income Fund II, PIMCO New York Municipal Income Fund III, PIMCO Municipal Advantage Fund Inc., PIMCO Corporate Income Fund, PIMCO Corporate Opportunity Fund, PIMCO High Income PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 51867 Fund, Nicholas-Applegate Convertible & Income Fund, Nicholas-Applegate Convertible & Income Fund II, PIMCO Floating Rate Income Fund, PIMCO Floating Rate Strategy Fund (collectively, the ‘‘Current Funds’’), and Allianz Global Investors Fund Management LLC (‘‘AGIFM’’). FILING DATES: The application was filed on May 2, 2007 and amended on January 10, 2008 and August 29, 2008. HEARING OR NOTIFICATION OF HEARING: An order granting the application will be issued unless the Commission orders a hearing. Interested persons may request a hearing by writing to the Commission’s Secretary and serving the applicants with a copy of the request, personally or by mail. Hearing requests should be received by the Commission by 5:30 p.m. on September 26, 2008 and should be accompanied by proof of service on the applicants in the form of an affidavit or, for lawyers, a certificate of service. Hearing requests should state the nature of the writer’s interest, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by writing to the Commission’s Secretary. ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549– 1090; Applicants, c/o AGIFM, 49th Floor, 1345 Avenue of the Americas, New York, NY 10105. FOR FURTHER INFORMATION CONTACT: Laura J. Riegel, Senior Counsel, at (202) 551–6873 (Division of Investment Management, Office of Investment Company Regulation). SUPPLEMENTARY INFORMATION: The following is a summary of the application. The complete application may be obtained for a fee from the Commission’s Public Reference Room, 100 F Street, NE., Washington, DC 20549–1520 (telephone (202) 551–5850). Applicants’ Representations 1. Each of the Current Funds is organized as a Massachusetts business trust or Maryland corporation. Each of the Current Funds is registered under the Act as a closed-end management investment company. AGIFM, an investment adviser registered under the Investment Advisers Act of 1940, serves as the investment adviser to each Current Fund. Each Current Fund has outstanding one class of common stock that trades on the New York Stock Exchange. Each Current Fund also has outstanding one or more series of preferred stock that pays out distributions at a rate generally set at periodic auctions (‘‘Auction Market E:\FR\FM\05SEN1.SGM 05SEN1 51868 Federal Register / Vol. 73, No. 173 / Friday, September 5, 2008 / Notices mstockstill on PROD1PC66 with NOTICES Preferred Stock’’). Applicants request that the order apply to any registered closed-end management investment company currently advised or to be advised in the future by AGIFM (including any successor in interest) 1 or by an entity controlling, controlled by, or under common control (within the meaning of section 2(a)(9) of the Act) with AGIFM that determines to rely on the requested relief in the future (such investment companies, the ‘‘Future Funds’’ and together with the Current Funds, the ‘‘Funds’’).2 2. The board of directors or trustees of each Fund (a ‘‘Board’’) has set or will set the initial dividend rate for each series of Auction Market Preferred Stock. Subsequently, each Fund pays or will pay dividends generally at seven day intervals (or at such other interval or intervals as the Fund’s organizational documents permit) on its Auction Market Preferred Stock at a rate determined by auction or, under certain circumstances, at the maximum rate.3 3. Each Fund will make annual distributions of realized long-term capital gains, if any, to both the holders of its common stock and Auction Market Preferred Stock. Distributions of long-term capital gains are designed to comply with Revenue Ruling 89–81. Depending upon the amount of longterm capital gains realized in a fiscal year, the period of time between auctions, and the amount of the dividend as set by auction, each Fund may be required to make a greater number of long-term capital gains distributions to the holders of its Auction Market Preferred Stock than is permitted by section 19(b) and rule 19b– 1 to comply with Revenue Ruling 89– 81. Each Fund will make distributions of long-term capital gains to common stockholders in compliance with section 19(b) and rule 19b–1. 4. Applicants apply for an order pursuant to section 6(c) of the Act to exempt distributions of long-term capital gains that are made by the Funds 1 A successor in interest is limited to entities that result from a reorganization into another jurisdiction or a change in the type of business organization. 2 All existing registered closed-end management investment companies that currently intend to rely on the requested order are named as applicants. Any Future Fund that relies on the order will comply with the terms of the application. 3 The maximum rate for a series of Auction Market Preferred Stock has been established or will be established in the organizational documents creating the applicable series of Auction Market Preferred Stock, by reference to independent lending rates. The dividend rate will be the maximum rate when sufficient clearing bids have not been made in an auction or an auction is unable to be held for any reason on the date the auction is scheduled to occur. VerDate Aug<31>2005 18:40 Sep 04, 2008 Jkt 214001 to the holders of their Auction Market Preferred Stock in any one taxable year from the provisions of section 19(b) and rule 19b–1 to the extent necessary to comply with Revenue Ruling 89–81; provided that each Fund maintains in effect a distribution policy calling for periodic distributions to the holders of its Auction Market Preferred Stock (i.e., at seven day intervals or such other interval as specified in the organizational document creating such Auction Market Preferred Stock) at the rates determined by the Board at the time a series of Auction Market Preferred Stock is issued initially, and, thereafter pursuant to auction or at the maximum rate. Applicants’ Legal Analysis 1. Section 19(b) of the Act generally makes it unlawful for any registered company to make long-term capital gains distributions more than once each year. Rule 19b–1 under the Act limits the number of capital gains dividends, as defined in the Code (‘‘distributions’’), that a registered investment company may make with respect to any one taxable year to one, plus a supplemental ‘‘clean up’’ distribution made pursuant to section 855 of the Code not exceeding 10% of the total amount distributed for the year, plus one additional capital gain dividend made in whole or in part to avoid the excise tax under section 4982 of the Code. 2. Revenue Ruling 89–81 requires a regulated investment company that has two or more classes of stock to make designations of various types of income in the same proportion as the total dividends distributed to each class for the tax year. To satisfy the proportionate designation requirements of Revenue Ruling 89–81, whenever a Fund realizes a long-term capital gain with respect to a given tax year, the Fund designates the required proportionate share of such capital gain to be included in the dividends on its Auction Market Preferred Stock and common stock. Each Fund calculates the ratio by dividing the total dividends paid to holders of each series of its Auction Market Preferred Stock during a taxable year by the total dividends paid to all classes during that year. Each Fund then declares and distributes designated long-term capital gains dividends to the holders of its common stock and Auction Market Preferred Stock in proportion to this ratio. 3. Applicants state that under certain circumstances, a Fund will be able to comply with both Revenue Ruling 89– 81 and rule 19b–1. For example, if the entire dividend payment set at auction distributes in a single dividend the full PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 amount of long-term capital gains required to be distributed by Revenue Ruling 89–81, the Fund will comply with both Revenue Ruling 89–81 and rule 19b–1. Applicants assert, however, that depending upon the amount of a Fund’s realized long-term capital gains in a taxable year, the period of time between auctions, the number of series of its Auction Market Preferred Stock outstanding, and the amount of the dividend set pursuant to an auction, a Fund may be required to make a greater number of long-term capital gains distributions to the holders of its Auction Market Preferred Stock under Revenue Ruling 89–81 than is permitted under section 19(b) and rule 19b–1. Applicants explain that while rule 19b– 1 does give regulated investment companies some flexibility with respect to long-term capital gains distributions, a Fund could have used all of the exceptions provided by rule 19b–1 and, because it would need to make additional distributions to the holders of series of its Auction Market Preferred Stock, be unable to comply with Revenue Ruling 89–81, section 19(b) and rule 19b–1 with respect to its Auction Market Preferred Stock. 4. Applicants submit that one of the concerns leading to the enactment of section 19(b) and the adoption of rule 19b–1 was that investors might be unable to distinguish between regular distributions of capital gains and distributions of investment income. In the case of Auction Market Preferred Stock, applicants state there is little chance for investor confusion since investors expect to receive only the cash amount representing the specified dividend distribution for any particular dividend period and the dividend rate is set through an auction process. With respect to each distribution to the holders of Auction Market Preferred Stock, applicants state that the Current Funds have adopted, and any Future Fund will adopt, procedures designed to comply with the disclosure requirements set forth in section 19(a) of the Act and rule 19a–1 under the Act. Applicants state that in accordance with such procedures, when the Current Funds or their service providers determine or reasonably estimate that a distribution will be comprised of a source other than the sources described in sections 19(a)(1) and 19(a)(2) of the Act, the Current Funds or their service providers include the source information required by rule 19a–1 on the wire confirmation that accompanies the electronic transfer of funds, which represents payment of the distribution. The Current Funds or their service E:\FR\FM\05SEN1.SGM 05SEN1 Federal Register / Vol. 73, No. 173 / Friday, September 5, 2008 / Notices providers include a request that the recipient send the source information to the beneficial shareholder if the recipient is other than the beneficial shareholder of the stock to which the notice relates. 5. Another concern underlying section 19(b) and rule 19b–1 is that frequent long-term capital gains distributions could facilitate improper distribution practices, including, in particular, the practice of urging an investor to purchase fund shares on the basis of an upcoming dividend (‘‘selling the dividend’’) where the dividend results in an immediate corresponding reduction in net asset value and would be, in effect, a return of the investor’s capital. Applicants state that the ‘‘selling the dividend’’ concern is not applicable to Auction Market Preferred Stock, which entitles a holder to a specified periodic dividend and no more, and like a debt security, is initially sold at a price based on its liquidation preference, credit quality, dividend rate and frequency of payment. 6. Applicants state that another concern leading to the adoption of section 19 and rule 19b–1, an increase in administrative costs, is not present because the Funds will make the same number of distributions with respect to their Auction Market Preferred Stock regardless of whether the characterization of such distributions is income or long-term capital gains. 7. Section 6(c) of the Act provides that the Commission may exempt any person, security, or transaction or class or classes of any persons, securities, or transactions from any provision of the Act, if and to the extent that the exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Act. For the reasons stated above, applicants believe that the requested relief satisfies this standard. mstockstill on PROD1PC66 with NOTICES For the Commission, by the Division of Investment Management, pursuant to delegated authority. Florence E. Harmon, Acting Secretary. [FR Doc. E8–20615 Filed 9–4–08; 8:45 am] BILLING CODE 8010–01–P VerDate Aug<31>2005 18:40 Sep 04, 2008 Jkt 214001 SECURITIES AND EXCHANGE COMMISSION [Release No. IC–28371] Notice of Applications for Deregistration Under Section 8(f) of the Investment Company Act of 1940 August 29, 2008. The following is a notice of applications for deregistration under section 8(f) of the Investment Company Act of 1940 for the month of August, 2008. A copy of each application may be obtained for a fee at the Commission’s Public Reference Room, 100 F Street, NE., Washington, DC 20549–1520 (tel. 202–551–5850). An order granting each application will be issued unless the SEC orders a hearing. Interested persons may request a hearing on any application by writing to the SEC’s Secretary at the address below and serving the relevant applicant with a copy of the request, personally or by mail. Hearing requests should be received by the SEC by 5:30 p.m. on September 23, 2008, and should be accompanied by proof of service on the applicant, in the form of an affidavit or, for lawyers, a certificate of service. Hearing requests should state the nature of the writer’s interest, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by writing to the Secretary, U.S. Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549– 1090. For Further Information Contact: Diane L. Titus at (202) 551–6810, SEC, Division of Investment Management, Office of Investment Company Regulation, 100 F Street, NE., Washington, DC 20549–4041. Credit Suisse Japan Equity Fund, Inc. [File No. 811–7371] Summary: Applicant seeks an order declaring that it has ceased to be an investment company. On April 22, 2008, applicant made a liquidating distribution to its shareholders, based on net asset value. Expenses of $48,327 incurred in connection with the liquidation were paid by Credit Suisse Asset Management, LLC, applicant’s investment adviser. Applicant has retained $41,722 in cash for the payment of outstanding expenses. Filing Date: The application was filed on July 24, 2008. Applicant’s Address: c/o Credit Suisse Asset Management, LLC, Eleven Madison Ave., New York, NY 10010. PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 51869 AIM Select Real Estate Income Fund [File No. 811–21048] Summary: Applicant, a closed-end investment company, seeks an order declaring that it has ceased to be an investment company. On March 12, 2007, applicant transferred its assets to a corresponding series of AIM Counselor Series Trust, based on net asset value. Expenses of $502,800 incurred in connection with the reorganization were paid by applicant. Filing Date: The application was filed on August 8, 2008. Applicant’s Address: 11 Greenway Plaza, Suite 100, Houston, TX 77046– 1173. SEI Opportunity Master Fund, L.P. [File No. 811–21352] Summary: Applicant, a closed-end investment company and a master fund in a master-feeder structure, seeks an order declaring that it has ceased to be an investment company. On July 23, 2008, applicant made a final liquidating distribution to its three feeder funds, based on net asset value. Expenses of $3,250 incurred in connection with the liquidation were paid by applicant. Filing Date: The application was filed on August 8, 2008. Applicant’s Address: One Freedom Valley Dr., Oaks, PA 19456. CGM Capital Development Fund [File No. 811–933] Summary: Applicant seeks an order declaring that it has ceased to be an investment company. On June 27, 2008, applicant transferred its assets to CGM Focus Fund, a series of CGM Trust, based on net asset value. Expenses of $335,000 incurred in connection with the reorganization were paid by Capital Growth Management Limited Partnership, applicant’s investment adviser. Filing Date: The application was filed on August 11, 2008. Applicant’s Address: One International Place, Boston, MA 02110. AllianceBernstein International Research Growth Fund, Inc. [File No. 811–8527] Summary: Applicant seeks an order declaring that it has ceased to be an investment company. On July 25, 2008, applicant transferred its assets to AllianceBernstein International Growth Fund, Inc., based on net asset value. Expenses of $269,000 incurred in connection with the reorganization were paid by applicant. Filing Date: The application was filed on August 11, 2008. Applicant’s Address: 1345 Avenue of the Americas, New York, NY 10105. E:\FR\FM\05SEN1.SGM 05SEN1

Agencies

[Federal Register Volume 73, Number 173 (Friday, September 5, 2008)]
[Notices]
[Pages 51867-51869]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-20615]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 28370; 812-13381]


PIMCO Municipal Income Fund, et al.; Notice of Application

August 29, 2008.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order under section 6(c) of the 
Investment Company Act of 1940 (the ``Act'') for an exemption from 
section 19(b) of the Act and rule 19b-1 under the Act.

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

Summary of the Application: Applicants request an order to permit 
certain registered closed-end management investment companies to make a 
greater number of capital gains distributions to holders of shares of 
their auction market preferred stock than is permitted by section 19(b) 
of the Act and rule 19b-1 under the Act to the extent necessary to 
comply with Internal Revenue Ruling 89-81, 1989-1 C.B. 226 (``Revenue 
Ruling 89-81'') under the Internal Revenue Code of 1986 (the ``Code'').

Applicants: PIMCO Municipal Income Fund, PIMCO Municipal Income Fund 
II, PIMCO Municipal Income Fund III, PIMCO California Municipal Income 
Fund, PIMCO California Municipal Income Fund II, PIMCO California 
Municipal Income Fund III, PIMCO New York Municipal Income Fund, PIMCO 
New York Municipal Income Fund II, PIMCO New York Municipal Income Fund 
III, PIMCO Municipal Advantage Fund Inc., PIMCO Corporate Income Fund, 
PIMCO Corporate Opportunity Fund, PIMCO High Income Fund, Nicholas-
Applegate Convertible & Income Fund, Nicholas-Applegate Convertible & 
Income Fund II, PIMCO Floating Rate Income Fund, PIMCO Floating Rate 
Strategy Fund (collectively, the ``Current Funds''), and Allianz Global 
Investors Fund Management LLC (``AGIFM'').

Filing Dates: The application was filed on May 2, 2007 and amended on 
January 10, 2008 and August 29, 2008.

Hearing or Notification of Hearing: An order granting the application 
will be issued unless the Commission orders a hearing. Interested 
persons may request a hearing by writing to the Commission's Secretary 
and serving the applicants with a copy of the request, personally or by 
mail. Hearing requests should be received by the Commission by 5:30 
p.m. on September 26, 2008 and should be accompanied by proof of 
service on the applicants in the form of an affidavit or, for lawyers, 
a certificate of service. Hearing requests should state the nature of 
the writer's interest, the reason for the request, and the issues 
contested. Persons who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street, NE., Washington, DC 20549-1090; Applicants, c/o AGIFM, 49th 
Floor, 1345 Avenue of the Americas, New York, NY 10105.

FOR FURTHER INFORMATION CONTACT: Laura J. Riegel, Senior Counsel, at 
(202) 551-6873 (Division of Investment Management, Office of Investment 
Company Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee from 
the Commission's Public Reference Room, 100 F Street, NE., Washington, 
DC 20549-1520 (telephone (202) 551-5850).

Applicants' Representations

    1. Each of the Current Funds is organized as a Massachusetts 
business trust or Maryland corporation. Each of the Current Funds is 
registered under the Act as a closed-end management investment company. 
AGIFM, an investment adviser registered under the Investment Advisers 
Act of 1940, serves as the investment adviser to each Current Fund. 
Each Current Fund has outstanding one class of common stock that trades 
on the New York Stock Exchange. Each Current Fund also has outstanding 
one or more series of preferred stock that pays out distributions at a 
rate generally set at periodic auctions (``Auction Market

[[Page 51868]]

Preferred Stock''). Applicants request that the order apply to any 
registered closed-end management investment company currently advised 
or to be advised in the future by AGIFM (including any successor in 
interest) \1\ or by an entity controlling, controlled by, or under 
common control (within the meaning of section 2(a)(9) of the Act) with 
AGIFM that determines to rely on the requested relief in the future 
(such investment companies, the ``Future Funds'' and together with the 
Current Funds, the ``Funds'').\2\
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    \1\ A successor in interest is limited to entities that result 
from a reorganization into another jurisdiction or a change in the 
type of business organization.
    \2\ All existing registered closed-end management investment 
companies that currently intend to rely on the requested order are 
named as applicants. Any Future Fund that relies on the order will 
comply with the terms of the application.
---------------------------------------------------------------------------

    2. The board of directors or trustees of each Fund (a ``Board'') 
has set or will set the initial dividend rate for each series of 
Auction Market Preferred Stock. Subsequently, each Fund pays or will 
pay dividends generally at seven day intervals (or at such other 
interval or intervals as the Fund's organizational documents permit) on 
its Auction Market Preferred Stock at a rate determined by auction or, 
under certain circumstances, at the maximum rate.\3\
---------------------------------------------------------------------------

    \3\ The maximum rate for a series of Auction Market Preferred 
Stock has been established or will be established in the 
organizational documents creating the applicable series of Auction 
Market Preferred Stock, by reference to independent lending rates. 
The dividend rate will be the maximum rate when sufficient clearing 
bids have not been made in an auction or an auction is unable to be 
held for any reason on the date the auction is scheduled to occur.
---------------------------------------------------------------------------

    3. Each Fund will make annual distributions of realized long-term 
capital gains, if any, to both the holders of its common stock and 
Auction Market Preferred Stock. Distributions of long-term capital 
gains are designed to comply with Revenue Ruling 89-81. Depending upon 
the amount of long-term capital gains realized in a fiscal year, the 
period of time between auctions, and the amount of the dividend as set 
by auction, each Fund may be required to make a greater number of long-
term capital gains distributions to the holders of its Auction Market 
Preferred Stock than is permitted by section 19(b) and rule 19b-1 to 
comply with Revenue Ruling 89-81. Each Fund will make distributions of 
long-term capital gains to common stockholders in compliance with 
section 19(b) and rule 19b-1.
    4. Applicants apply for an order pursuant to section 6(c) of the 
Act to exempt distributions of long-term capital gains that are made by 
the Funds to the holders of their Auction Market Preferred Stock in any 
one taxable year from the provisions of section 19(b) and rule 19b-1 to 
the extent necessary to comply with Revenue Ruling 89-81; provided that 
each Fund maintains in effect a distribution policy calling for 
periodic distributions to the holders of its Auction Market Preferred 
Stock (i.e., at seven day intervals or such other interval as specified 
in the organizational document creating such Auction Market Preferred 
Stock) at the rates determined by the Board at the time a series of 
Auction Market Preferred Stock is issued initially, and, thereafter 
pursuant to auction or at the maximum rate.

Applicants' Legal Analysis

    1. Section 19(b) of the Act generally makes it unlawful for any 
registered company to make long-term capital gains distributions more 
than once each year. Rule 19b-1 under the Act limits the number of 
capital gains dividends, as defined in the Code (``distributions''), 
that a registered investment company may make with respect to any one 
taxable year to one, plus a supplemental ``clean up'' distribution made 
pursuant to section 855 of the Code not exceeding 10% of the total 
amount distributed for the year, plus one additional capital gain 
dividend made in whole or in part to avoid the excise tax under section 
4982 of the Code.
    2. Revenue Ruling 89-81 requires a regulated investment company 
that has two or more classes of stock to make designations of various 
types of income in the same proportion as the total dividends 
distributed to each class for the tax year. To satisfy the 
proportionate designation requirements of Revenue Ruling 89-81, 
whenever a Fund realizes a long-term capital gain with respect to a 
given tax year, the Fund designates the required proportionate share of 
such capital gain to be included in the dividends on its Auction Market 
Preferred Stock and common stock. Each Fund calculates the ratio by 
dividing the total dividends paid to holders of each series of its 
Auction Market Preferred Stock during a taxable year by the total 
dividends paid to all classes during that year. Each Fund then declares 
and distributes designated long-term capital gains dividends to the 
holders of its common stock and Auction Market Preferred Stock in 
proportion to this ratio.
    3. Applicants state that under certain circumstances, a Fund will 
be able to comply with both Revenue Ruling 89-81 and rule 19b-1. For 
example, if the entire dividend payment set at auction distributes in a 
single dividend the full amount of long-term capital gains required to 
be distributed by Revenue Ruling 89-81, the Fund will comply with both 
Revenue Ruling 89-81 and rule 19b-1. Applicants assert, however, that 
depending upon the amount of a Fund's realized long-term capital gains 
in a taxable year, the period of time between auctions, the number of 
series of its Auction Market Preferred Stock outstanding, and the 
amount of the dividend set pursuant to an auction, a Fund may be 
required to make a greater number of long-term capital gains 
distributions to the holders of its Auction Market Preferred Stock 
under Revenue Ruling 89-81 than is permitted under section 19(b) and 
rule 19b-1. Applicants explain that while rule 19b-1 does give 
regulated investment companies some flexibility with respect to long-
term capital gains distributions, a Fund could have used all of the 
exceptions provided by rule 19b-1 and, because it would need to make 
additional distributions to the holders of series of its Auction Market 
Preferred Stock, be unable to comply with Revenue Ruling 89-81, section 
19(b) and rule 19b-1 with respect to its Auction Market Preferred 
Stock.
    4. Applicants submit that one of the concerns leading to the 
enactment of section 19(b) and the adoption of rule 19b-1 was that 
investors might be unable to distinguish between regular distributions 
of capital gains and distributions of investment income. In the case of 
Auction Market Preferred Stock, applicants state there is little chance 
for investor confusion since investors expect to receive only the cash 
amount representing the specified dividend distribution for any 
particular dividend period and the dividend rate is set through an 
auction process. With respect to each distribution to the holders of 
Auction Market Preferred Stock, applicants state that the Current Funds 
have adopted, and any Future Fund will adopt, procedures designed to 
comply with the disclosure requirements set forth in section 19(a) of 
the Act and rule 19a-1 under the Act. Applicants state that in 
accordance with such procedures, when the Current Funds or their 
service providers determine or reasonably estimate that a distribution 
will be comprised of a source other than the sources described in 
sections 19(a)(1) and 19(a)(2) of the Act, the Current Funds or their 
service providers include the source information required by rule 19a-1 
on the wire confirmation that accompanies the electronic transfer of 
funds, which represents payment of the distribution. The Current Funds 
or their service

[[Page 51869]]

providers include a request that the recipient send the source 
information to the beneficial shareholder if the recipient is other 
than the beneficial shareholder of the stock to which the notice 
relates.
    5. Another concern underlying section 19(b) and rule 19b-1 is that 
frequent long-term capital gains distributions could facilitate 
improper distribution practices, including, in particular, the practice 
of urging an investor to purchase fund shares on the basis of an 
upcoming dividend (``selling the dividend'') where the dividend results 
in an immediate corresponding reduction in net asset value and would 
be, in effect, a return of the investor's capital. Applicants state 
that the ``selling the dividend'' concern is not applicable to Auction 
Market Preferred Stock, which entitles a holder to a specified periodic 
dividend and no more, and like a debt security, is initially sold at a 
price based on its liquidation preference, credit quality, dividend 
rate and frequency of payment.
    6. Applicants state that another concern leading to the adoption of 
section 19 and rule 19b-1, an increase in administrative costs, is not 
present because the Funds will make the same number of distributions 
with respect to their Auction Market Preferred Stock regardless of 
whether the characterization of such distributions is income or long-
term capital gains.
    7. Section 6(c) of the Act provides that the Commission may exempt 
any person, security, or transaction or class or classes of any 
persons, securities, or transactions from any provision of the Act, if 
and to the extent that the exemption is necessary or appropriate in the 
public interest and consistent with the protection of investors and the 
purposes fairly intended by the policy and provisions of the Act. For 
the reasons stated above, applicants believe that the requested relief 
satisfies this standard.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-20615 Filed 9-4-08; 8:45 am]
BILLING CODE 8010-01-P