Reaves Utility Income Fund, et al.; Notice of Application, 35211-35215 [E9-17140]
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Commission’s docket room for
inspection during regular business
hours, and are available on the
Commission’s Web site at https://
www.prc.gov.
Further procedures. Section 3661(c) of
title 39 requires that the Commission
afford an opportunity for formal, on-therecord hearing of the Postal Service’s
Request under the terms specified in
sections 556 and 557 of title 5 of the
United States Code before issuing its
advisory opinion. All interested parties
are hereby notified that notices of
intervention in this proceeding shall be
due on July 28, 2009. Any participant
requesting a hearing in this matter shall
so state in conformance with 39 CFR
3001.20(b).
At this time, the Commission cannot
anticipate the duration, or even the
exact form, proceedings on this matter
will take. Participants who wish to offer
their views on these issues may do so
in their interventions. Due to the nature
of this Initiative, the Commission may
consider holding public hearings
outside of Washington, DC.
The Postal Service indicates that its
Initiative was fostered, in part, by the
current financial crisis and the
continuing decline in mail volume. In
light of this, it requests that the
Commission expeditiously issue its
opinion. However, a proposal for
changes which could impact the nature
of postal service on a nationwide basis
must be examined carefully. The
Commission urges participants to
carefully consider, prior to the
prehearing conference, the justification
for any proposed discovery period.
The Commission will hold a
prehearing conference in this docket on
July 30, 2009 at which these questions
will be discussed.
Public participation. Section 3661(c)
of title 39 requires the participation of
an ‘‘officer of the Commission who shall
be required to represent the interests of
the general public’’ in these
proceedings. Robert Sidman is
designated to serve as Public
Representative to represent the interests
of the general public.
It is ordered:
1. The Commission establishes Docket
No. N2009–1 to consider the Postal
Service Request referred to in the body
of this order.
2. The Commission will act en banc
in this proceeding.
3. Notices of intervention shall be
filed no later than July 28, 2009.
4. Participants who wish to request a
hearing on the Postal Service’s Request
in this docket shall submit such a
request, together with statements in
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conformance with 39 CFR 3001.20(b),
on or before July 28, 2009.
5. A prehearing conference is
scheduled for July 30, 2009, at 9:30 a.m.,
in the Commission’s hearing room.
6. Pursuant to 39 U.S.C. 3661(c), the
Commission appoints Robert Sidman to
represent the interests of the general
public in this proceeding.
7. The Secretary shall arrange for
publication of this notice in the Federal
Register.
Issued: July 10, 2009.
By the Commission.
Judith M. Grady,
Acting Secretary.
[FR Doc. E9–17155 Filed 7–17–09; 8:45 am]
BILLING CODE 7710–FW–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
28818; File No. 812–13200]
Reaves Utility Income Fund, et al.;
Notice of Application
July 14, 2009.
AGENCY: Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of application under
section 6(c) of the Investment Company
Act of 1940 (‘‘Act’’) for an exemption
from section 19(b) of the Act and rule
19b–1 under the Act.
SUMMARY OF APPLICATION: Applicants
request an order to permit a registered
closed-end investment company to
make periodic distributions of long-term
capital gains with respect to its common
shares as often as monthly in any one
taxable year, and as frequently as
distributions are specified by or in
accordance with the terms of its
preferred shares.
APPLICANTS: Reaves Utility Income Fund
(‘‘UTG’’) and W.H. Reaves & Co., Inc.
(‘‘Investment Adviser’’).
DATES: Filing Dates: June 14, 2005, and
amended on February 14, 2007, October
15, 2008, April 20, 2009, and July 10,
2009.
HEARING OR NOTIFICATION OF HEARING: An
order granting the application will be
issued unless the Commission orders a
hearing. Interested persons may request
a hearing by writing to the
Commission’s Secretary and serving
applicants with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on August 10, 2009, and
should be accompanied by proof of
service on applicants, in the form of an
affidavit or, for lawyers, a certificate of
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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, Securities and
Exchange Commission, 100 F Street,
NE., Washington, DC 20549–1090;
Applicants: Reaves Utility Income
Fund, 1290 Broadway, Suite 1100,
Denver, CO 80203, and W.H. Reaves &
Co., Inc., 10 Exchange Place, 18th Floor,
Jersey City, NJ 07302.
FOR FURTHER INFORMATION CONTACT:
Courtney S. Thornton, Senior Counsel,
at (202) 551–6812, or Mary Kay Frech,
Branch Chief, at (202) 551–6821
(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 via the Commission’s
Web site by searching for the file
number, or for an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm, or by
calling (202) 551–8090.
Applicants’ Representations
1. UTG is a registered closed-end
management investment company
organized as a Delaware statutory trust.1
UTG’s primary investment objective is
to provide a high level of after-tax
income and total return consisting
primarily of tax-advantaged dividend
income and capital appreciation. The
common shares issued by UTG are
listed on the NYSE Amex. UTG
currently has three series of preferred
shares outstanding, which are not listed
or traded on any stock exchange.
Applicants believe that the shareholders
of UTG are generally conservative,
dividend-sensitive investors who desire
current income periodically and may
favor a fixed distribution policy.
2. The Investment Adviser is a
Delaware corporation registered under
the Investment Advisers Act of 1940
(‘‘Advisers Act’’). The Investment
Adviser serves as investment adviser to
1 UTG is the only closed-end investment
company that currently intends to rely on the order.
Applicants request that the order also apply to any
registered closed-end investment company that in
the future: (a) Is advised by the Investment Adviser
(including any successor in interest) or by any
entity controlling, controlled by, or under common
control (within the meaning of section 2(a)(9) of the
Act) with the Investment Adviser; and (b) complies
with the terms and conditions of the requested
order (collectively with UTG, ‘‘Funds’’). 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.
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UTG and may in the future serve as
investment adviser to one or more
additional Funds. Each Fund will be
advised by an investment adviser that is
registered under the Advisers Act.
3. Applicants state that on December
12, 2006, the Board of Trustees (the
‘‘Board’’) of UTG, including a majority
of the members of the Board who are not
‘‘interested persons’’ of UTG as defined
in section 2(a)(19) of the Act (the
‘‘Independent Trustees’’), reviewed
information regarding the purpose and
terms of a proposed distribution policy,
the reasonably foreseeable effect of such
policy on UTG’s long-term total return
(based on market price and net asset
value (‘‘NAV’’) per common share) and
the expected relationship between
UTG’s distribution rate on its common
shares under the policy and UTG’s total
return (in relation to NAV per share).
Applicants state that the Independent
Trustees also considered information
about any potential or actual conflicts of
interest that the Investment Adviser,
any affiliated persons of the Investment
Adviser, or any other affiliated persons
of UTG may have relating to the
adoption or implementation of such
policy. Applicants further state that
after considering such information the
Board, including the Independent
Trustees, approved a distribution policy
with respect to UTG’s common shares
(the ‘‘Plan’’) and determined that such
Plan is consistent with UTG’s
investment objectives and policies and
in the best interests of UTG’s common
shareholders. Prior to implementing the
Plan, the Board of UTG, including the
Independent Trustees, will review the
factors considered in connection with
its approval of the Plan, as well as any
changes in such factors since the date of
its approval, and will confirm that the
Plan is consistent with UTG’s
investment objectives and policies and
in the best interests of UTG’s common
shareholders.
4. Applicants state that the purpose of
the Plan is to provide to UTG’s common
shareholders a regular, monthly
distribution that is not dependent on the
timing or amount of investment income
earned or capital gains realized by UTG.
Applicants note that under the Plan,
UTG will distribute all available
investment income to shareholders,
consistent with UTG’s primary
investment objective of providing a high
level of after-tax income and total
returns. Applicants state that if and
when sufficient investment income is
not available on a monthly basis, UTG
will distribute long-term capital gains
and/or return of capital to its
shareholders to maintain the level
distribution rate that has been approved
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by the Board. Applicants further state
that the minimum annual distribution
rate will be independent of UTG’s
performance during any particular
period, but is expected to correlate with
UTG’s performance over time.
Applicants represent that the amount
and frequency of distributions may be
amended at any time by the Board
without prior notice to UTG’s
shareholders. Applicants state that if
UTG’s net investment income and net
realized capital gains for any year
exceed the amount required to be
distributed under the Plan, UTG will at
a minimum make distributions
necessary to comply with the
distribution requirements of subchapter
M of the Internal Revenue Code of 1986
(‘‘Code’’). Applicants note that the Plan
provides that it can be amended,
suspended, or terminated at any time by
the Board without prior notice to UTG’s
shareholders.
5. Applicants state that at the
December 12, 2006 meeting, the Board
adopted policies and procedures under
rule 38a–1 under the Act that are
reasonably designed to ensure that all
notices required to be sent to UTG’s
shareholders pursuant to section 19(a)
of the Act, rule 19a–1 under the Act,
and condition IV below (‘‘19(a)
Notices’’) comply with condition II
below, and that all other written
communications by UTG or its agents
regarding distributions under the Plan
include the disclosure required by
condition III below. Applicants state
that the Board also adopted policies and
procedures at that meeting that require
UTG to keep records that demonstrate
its compliance with all of the conditions
of the requested order and that are
necessary for UTG to form the basis for,
or demonstrate the calculation of, the
amounts disclosed in its 19(a) Notices.
Applicants’ Legal Analysis
1. Section 19(b) of the Act generally
makes it unlawful for any registered
investment company to make long-term
capital gains distributions more than
once every twelve months. Rule 19b–1
under the Act limits the number of
capital gains dividends, as defined in
section 852(b)(3)(C) of the Code
(‘‘distributions’’), that a fund 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. Section 6(c) provides that the
Commission may, by order upon
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application, conditionally or
unconditionally exempt any person,
security, or transaction, or any class or
classes of 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.
3. Applicants state that one of the
concerns underlying section 19(b) and
rule 19b–1 is that shareholders might be
unable to differentiate between frequent
distributions of capital gains and
dividends from investment income.
Applicants state, however, that rule
19a–1 effectively addresses this concern
by requiring that a separate statement
showing the sources of a distribution
(e.g., estimated net income, net shortterm capital gains, net long-term capital
gains and/or return of capital)
accompany any distributions (or the
confirmation of the reinvestment of
distributions) estimated to be sourced in
part from capital gains or capital.
Applicants state that the same
information also is included in UTG’s
annual reports to shareholders and on
its IRS Form 1099–DIV, which is sent to
each common and preferred shareholder
who received distributions during a
particular year (including shareholders
who have sold shares during the year).
4. Applicants further state that UTG
will make the additional disclosures
required by the conditions set forth
below, and has adopted compliance
policies and procedures in accordance
with rule 38a–1 to ensure that all
required 19(a) Notices and disclosures
are sent to shareholders. Applicants
argue that by providing the information
required by section 19(a) and rule 19a–
1, and by complying with the
procedures adopted under the Plan and
the conditions listed below, UTG’s
shareholders are provided sufficient
information to understand that their
periodic distributions are not tied to
UTG’s net investment income (which
for this purpose is UTG’s taxable
income other than from capital gains)
and realized capital gains to date, and
may not represent yield or investment
return. Applicants also state that
compliance with UTG’s compliance
procedures and condition III set forth
below will ensure that prospective
shareholders and third parties are
provided with the same information.
Accordingly, applicants assert that
continuing to subject UTG to section
19(b) and rule 19b–1 would afford
shareholders no extra protection.
5. Applicants note that section 19(b)
and rule 19b–1 also were intended to
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prevent certain improper sales practices,
including, in particular, the practice of
urging an investor to purchase shares of
a fund on the basis of an upcoming
capital gains dividend (‘‘selling the
dividend’’), where the dividend would
result in an immediate corresponding
reduction in NAV and would be in
effect a taxable return of the investor’s
capital. Applicants assert that the
‘‘selling the dividend’’ concern should
not apply to closed-end investment
companies, such as UTG, that do not
continuously distribute shares.
According to applicants, if the
underlying concern extends to
secondary market purchases of shares of
closed-end funds that are subject to a
large upcoming capital gains dividend,
adoption of a periodic distribution plan
actually helps minimize the concern by
avoiding, through periodic
distributions, any buildup of large endof-the-year distributions.
6. Applicants also note that common
shares of closed-end funds that invest
primarily in equity securities often trade
in the marketplace at a discount to the
funds’ NAV. Applicants believe that this
discount may be reduced for closed-end
funds that pay relatively frequent
dividends on their common shares at a
consistent rate, whether or not those
dividends contain an element of longterm capital gain.
7. Applicants assert that the
application of rule 19b–1 to the Plan
actually could have an undesirable
influence on portfolio management
decisions. Applicants state that, in the
absence of an exemption from rule 19b–
1, the implementation of a periodic
distribution plan imposes pressure on
management (a) not to realize any net
long-term capital gains until the point in
the year that the fund can pay all of its
remaining distributions in accordance
with rule 19b–1, and (b) not to realize
any long-term capital gains during any
particular year in excess of the amount
of the aggregate pay-out for the year
(since as a practical matter excess gains
must be distributed and accordingly
would not be available to satisfy pay-out
requirements in following years),
notwithstanding that purely investment
considerations might favor realization of
long-term gains at different times or in
different amounts. Applicants thus
assert that the limitation on the number
of capital gain distributions that a fund
may make with respect to any one year
imposed by rule 19b–1, may prevent the
efficient operation of a periodic
distribution plan whenever that fund’s
realized net long-term capital gains in
any year exceed the total of the periodic
distributions that may include such
capital gains under the rule.
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8. Applicants also assert that rule
19b–1 may cause fixed regular periodic
distributions under a periodic
distribution plan to be funded with
returns of capital 2 (to the extent net
investment income and realized shortterm capital gains are insufficient to
fund the distribution), even though
realized net long-term capital gains
otherwise could be available. To
distribute all of a fund’s long-term
capital gains within the limits in rule
19b–1, a fund may be required to make
total distributions in excess of the
annual amount called for by its periodic
distribution plan, or to retain and pay
taxes on the excess amount. Applicants
thus assert that the requested order
would minimize these effects of rule
19b–1 by enabling UTG to realize longterm capital gains as often as investment
considerations dictate without fear of
violating rule 19b–1.
9. Applicants state that Revenue
Ruling 89–81 under the Code requires
that a fund that has both common stock
and preferred stock outstanding
designate the types of income, e.g.,
investment income and capital gains, in
the same proportion as the total
distributions distributed to each class
for the tax year. To satisfy the
proportionate designation requirements
of Revenue Ruling 89–81, whenever a
fund has realized a long-term capital
gain with respect to a given tax year, the
fund must designate the required
proportionate share of such capital gain
to be included in common and preferred
stock dividends. Applicants state that
although rule 19b–1 allows a fund some
flexibility with respect to the frequency
of capital gains distributions, a fund
might use all of the exceptions available
under the rule for a tax year and still
need to distribute additional capital
gains allocated to the preferred stock to
comply with Revenue Ruling 89–81.
10. Applicants assert that the
potential abuses addressed by section
19(b) and rule 19b–1 do not arise with
respect to preferred stock issued by a
closed-end fund. Applicants assert that
such distributions are fixed or
determined in periodic auctions by
reference to short-term interest rates
rather than by reference to performance
of the issuer, and Revenue Ruling 89–
81 determines the proportion of such
distributions that are comprised of the
long-term capital gains.
11. Applicants also submit that the
‘‘selling the dividend’’ concern is not
applicable to preferred stock, which
entitles a holder to no more than a
2 Returns of capital as used in the application
means return of capital for financial accounting
purposes and not for tax accounting purposes.
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periodic dividend at a fixed rate or the
rate determined by the market, and, like
a debt security, is priced based upon its
liquidation value, dividend rate, credit
quality, and frequency of payment.
Applicants state that investors buy
preferred shares for the purpose of
receiving payments at the frequency
bargained for, and do not expect the
liquidation value of their shares to
change.
12. Applicants request an order under
section 6(c) granting an exemption from
section 19(b) and rule 19b–1 to permit
UTG to make periodic long-term capital
gains distributions (as defined in section
852(b)(3)(C) of the Code) as often as
monthly in any one taxable year in
respect of its common shares and as
often as specified by or determined in
accordance with the terms thereof in
respect of its preferred shares.3
Applicants’ Conditions:
Applicants agree that any order of the
Commission granting the requested
relief will be subject to the following
conditions:
I. Compliance Review and Reporting
Each Fund’s chief compliance officer
will: (a) Report to the Fund’s Board, no
less frequently than once every three
months or at the next regularly
scheduled quarterly Board meeting,
whether (i) the Fund and its Investment
Adviser have complied with the
conditions of the order, and (ii) a
material compliance matter, as defined
in rule 38a–1(e)(2) under the Act, has
occurred with respect to such
conditions; and (b) review the adequacy
of the policies and procedures adopted
by the Board no less frequently than
annually.
II. Disclosures to Fund Shareholders
A. Each 19(a) Notice disseminated to
the holders of the Fund’s common
shares, in addition to the information
required by section 19(a) and rule 19a–
1:
1. Will provide, in a tabular or
graphical format:
(a) The amount of the distribution, on
a per share basis, together with the
amounts of such distribution amount,
on a per share basis and as a percentage
of such distribution amount, from
estimated: (A) Net investment income;
(B) net realized short-term capital gains;
(C) net realized long-term capital gains;
and (D) return of capital or other capital
source;
3 Applicants state that a future Fund that relies on
the requested order will satisfy each of the
representations in the application except that such
representations will be made in respect of actions
by the board of directors or trustees of such future
Fund and will be made at a future time.
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(b) The fiscal year-to-date cumulative
amount of distributions, on a per share
basis, together with the amounts of such
cumulative amount, on a per share basis
and as a percentage of such cumulative
amount of distributions, from estimated:
(A) Net investment income; (B) net
realized short-term capital gains; (C) net
realized long-term capital gains; and (D)
return of capital or other capital source;
(c) The average annual total return in
relation to the change in NAV for the 5year period (or, if the Fund’s history of
operations is less than five years, the
time period commencing immediately
following the Fund’s first public
offering) ending on the last day of the
month prior to the most recent
distribution record date compared to the
current fiscal period’s annualized
distribution rate expressed as a
percentage of NAV as of the last day of
the month prior to the most recent
distribution record date; and
(d) The cumulative total return in
relation to the change in NAV from the
last completed fiscal year to the last day
of the month prior to the most recent
distribution record date compared to the
fiscal year-to-date cumulative
distribution rate expressed as a
percentage of NAV as of the last day of
the month prior to the most recent
distribution record date.
Such disclosure shall be made in a
type size at least as large and as
prominent as the estimate of the sources
of the current distribution; and
2. Will include the following
disclosure:
(a) ‘‘You should not draw any
conclusions about the Fund’s
investment performance from the
amount of this distribution or from the
terms of the Fund’s Plan’’;
(b) ‘‘The Fund estimates that it has
distributed more than its income and
net realized capital gains; therefore, a
portion of your distribution may be a
return of capital. A return of capital may
occur for example, when some or all of
the money that you invested in the
Fund is paid back to you. A return of
capital distribution does not necessarily
reflect the Fund’s investment
performance and should not be
confused with ‘yield’ or ‘income’ ’’; 4
and
(c) ‘‘The amounts and sources of
distributions reported in this 19(a)
Notice are only estimates and are not
being provided for tax reporting
purposes. The actual amounts and
sources of the amounts for tax reporting
4 The disclosure in this condition II.A.2(b) will be
included only if the current distribution or the
fiscal year-to-date cumulative distributions are
estimated to include a return of capital.
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purposes will depend upon the Fund’s
investment experience during the
remainder of its fiscal year and may be
subject to changes based on tax
regulations. The Fund will send you a
Form 1099–DIV for the calendar year
that will tell you how to report these
distributions for federal income tax
purposes.’’
Such disclosure shall be made in a
type size at least as large as and as
prominent as any other information in
the 19(a) Notice and placed on the same
page in close proximity to the amount
and the sources of the distribution.
B. On the inside front cover of each
report to shareholders under rule 30e–
1 under the Act, the Fund will:
1. Describe the terms of the Plan
(including the fixed amount or fixed
percentage of the distributions and the
frequency of the distributions);
2. Include the disclosure required by
condition II.A.2(a) above;
3. State, if applicable, that the Plan
provides that the Board may amend or
terminate the Plan at any time without
prior notice to Fund shareholders; and
4. Describe any reasonably foreseeable
circumstances that might cause the
Fund to terminate the Plan and any
reasonably foreseeable consequences of
such termination.
C. Each report provided to
shareholders under rule 30e–1 under
the Act and in each prospectus filed
with the Commission on Form N–2
under the Act, will provide the Fund’s
total return in relation to changes in
NAV in the financial highlights table
and in any discussion about the Fund’s
total return.
III. Disclosure to Shareholders,
Prospective Shareholders and Third
Parties
A. Each Fund will include the
information contained in the relevant
19(a) Notice, including the disclosure
required by condition II.A.2 above, in
any written communication (other than
a communication on Form 1099) about
the Plan or distributions under the Plan
by the Fund, or agents that the Fund has
authorized to make such
communication on the Fund’s behalf, to
any Fund common shareholder,
prospective common shareholder or
third-party information provider;
B. Each Fund will issue,
contemporaneously with the issuance of
any 19(a) Notice, a press release
containing the information in the 19(a)
Notice and will file with the
Commission the information contained
in such 19(a) Notice, including the
disclosure required by condition II.A.2
above, as an exhibit to its next filed
Form N–CSR; and
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C. Each Fund will post prominently a
statement on its (or the Investment
Adviser’s) web site containing the
information in each 19(a) Notice,
including the disclosure required by
condition II.A.2 above, and will
maintain such information on such web
site for at least 24 months.
IV. Delivery of 19(a) Notices to
Beneficial Owners
If a broker, dealer, bank or other
person (‘‘financial intermediary’’) holds
common stock issued by a Fund in
nominee name, or otherwise, on behalf
of a beneficial owner, the Fund: (a) Will
request that the financial intermediary,
or its agent, forward the 19(a) Notice to
all beneficial owners of the Fund’s
shares held through such financial
intermediary; (b) will provide, in a
timely manner, to the financial
intermediary, or its agent, enough
copies of the 19(a) Notice assembled in
the form and at the place that the
financial intermediary, or its agent,
reasonably requests to facilitate the
financial intermediary’s sending of the
19(a) Notice to each beneficial owner of
the Fund’s shares; and (c) upon the
request of any financial intermediary, or
its agent, that receives copies of the
19(a) Notice, will pay the financial
intermediary, or its agent, the
reasonable expenses of sending the 19(a)
Notice to such beneficial owners.
V. Additional Board Determinations for
Funds Whose Shares Trade at a
Premium
If:
A. A Fund’s common shares have
traded on the stock exchange that they
primarily trade on at the time in
question at an average premium to NAV
equal to or greater than 10%, as
determined on the basis of the average
of the discount or premium to NAV of
the Fund’s common shares as of the
close of each trading day over a 12-week
rolling period (each such 12-week
rolling period ending on the last trading
day of each week); and
B. the Fund’s annualized distribution
rate for such 12-week rolling period,
expressed as a percentage of NAV as of
the ending date of such 12-week rolling
period, is greater than the Fund’s
average annual total return in relation to
the change in NAV over the 2-year
period ending on the last day of such
12-week rolling period; then:
1. At the earlier of the next regularly
scheduled meeting or within four
months of the last day of such 12-week
rolling period, the Board including a
majority of the Independent Trustees:
(a) Will request and evaluate, and the
Investment Adviser will furnish, such
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Federal Register / Vol. 74, No. 137 / Monday, July 20, 2009 / Notices
erowe on DSK5CLS3C1PROD with NOTICES
information as may be reasonably
necessary to make an informed
determination of whether the Plan
should be continued or continued after
amendment;
(b) Will determine whether
continuation, or continuation after
amendment, of the Plan is consistent
with the Fund’s investment objective(s)
and policies and in the best interests of
the Fund and its shareholders, after
considering the information in
condition V.B.1(a) above; including,
without limitation:
(1) Whether the Plan is accomplishing
its purpose(s);
(2) The reasonably foreseeable
material 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 shares; and
(3) The Fund’s current distribution
rate, as described in condition V.B
above, compared with the Fund’s
average annual taxable income or 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, including
its consideration of the factors listed in
condition V.B.1(b) above, 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
A Fund will not make a public
offering of the Fund’s common shares
other than:
A. A rights offering below NAV to
holders of the Fund’s common shares;
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, provided that, with respect to
such other offering:
1. The Fund’s annualized distribution
rate for the six months ending on the
last day of the month ended
immediately prior to the most recent
distribution record date,5 expressed as a
5 If the Fund has been in operation fewer than six
months, the measured period will being
immediately following the Fund’s first public
offering.
VerDate Nov<24>2008
15:18 Jul 17, 2009
Jkt 217001
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; 6 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 in accordance with the
terms of any outstanding preferred stock
as 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, pursuant to
delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–17140 Filed 7–17–09; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meeting
Notice is hereby given, pursuant to
the provisions of the Government in the
Sunshine Act, Public Law 94–409, that
the Securities and Exchange
Commission will hold an Open Meeting
on Wednesday, July 22, 2009 at 2 p.m.,
in the Auditorium, Room L–002.
The subject matter of the Open
Meeting will be:
The Commission will consider
whether to propose a rule to address
‘‘pay to play’’ practices by investment
advisers. The proposal is designed,
among other things, to prohibit advisers
from seeking to influence the award of
advisory contracts by public entities
through political contributions to or for
those officials who are in a position to
influence the awards.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items.
For further information and to
ascertain what, if any, matters have been
added, deleted or postponed, please
contact: The Office of the Secretary at
(202) 551–5400.
Dated: July 15, 2009.
Elizabeth M. Murphy,
Secretary.
[FR Doc. E9–17234 Filed 7–17–09; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–60295; File No. SR–CBOE–
2009–049]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Related to Market-Maker
Guidelines
July 13, 2009.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on July 9,
2009, the Chicago Board Options
Exchange, Incorporated (‘‘Exchange’’ or
‘‘CBOE’’) filed with the Securities and
Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Exchange filed the proposal as a ‘‘noncontroversial’’ proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of
the Act 3 and Rule 19b–4(f)(6)
thereunder.4 The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is proposing to amend
Rule 8.7, Obligations of Market-Makers,
to: (i) Eliminate the provision providing
for bids (offers) to be no more than $1
lower (higher) than the last preceding
transaction plus or minus the aggregate
change in the last sale price of the
underlying, and (ii) amend the
provision pertaining to trades that are
more than $0.25 below parity. The text
of the proposed rule change is available
on the Exchange’s Web site (https://
www.cboe.org/Legal), at the Exchange’s
Office of the Secretary and at the
Commission.
1 15
the Fund has been in operation fewer than five
years, the measured period will being immediately
following the Fund’s first public offering.
PO 00000
6 If
Frm 00061
Fmt 4703
Sfmt 4703
35215
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
2 17
E:\FR\FM\20JYN1.SGM
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]]>Agencies
[Federal Register Volume 74, Number 137 (Monday, July 20, 2009)]
[Notices]
[Pages 35211-35215]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-17140]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 28818; File No. 812-13200]
Reaves Utility Income Fund, et al.; Notice of Application
July 14, 2009.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of application under section 6(c) of the Investment
Company Act of 1940 (``Act'') for an exemption from section 19(b) of
the Act and rule 19b-1 under the Act.
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Summary of Application: Applicants request an order to permit a
registered closed-end investment company to make periodic distributions
of long-term capital gains with respect to its common shares as often
as monthly in any one taxable year, and as frequently as distributions
are specified by or in accordance with the terms of its preferred
shares.
Applicants: Reaves Utility Income Fund (``UTG'') and W.H. Reaves & Co.,
Inc. (``Investment Adviser'').
DATES: Filing Dates: June 14, 2005, and amended on February 14, 2007,
October 15, 2008, April 20, 2009, and July 10, 2009.
Hearing or Notification of Hearing: An order granting the application
will be issued unless the Commission orders a hearing. Interested
persons may request a hearing by writing to the Commission's Secretary
and serving applicants with a copy of the request, personally or by
mail. Hearing requests should be received by the Commission by 5:30
p.m. on August 10, 2009, and should be accompanied by proof of service
on applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, the reason for the request, and the issues
contested. Persons who wish to be notified of a hearing may request
notification by writing to the Commission's Secretary.
ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street,
NE., Washington, DC 20549-1090; Applicants: Reaves Utility Income Fund,
1290 Broadway, Suite 1100, Denver, CO 80203, and W.H. Reaves & Co.,
Inc., 10 Exchange Place, 18th Floor, Jersey City, NJ 07302.
FOR FURTHER INFORMATION CONTACT: Courtney S. Thornton, Senior Counsel,
at (202) 551-6812, or Mary Kay Frech, Branch Chief, at (202) 551-6821
(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 via the
Commission's Web site by searching for the file number, or for an
applicant using the Company name box, at https://www.sec.gov/search/search.htm, or by calling (202) 551-8090.
Applicants' Representations
1. UTG is a registered closed-end management investment company
organized as a Delaware statutory trust.\1\ UTG's primary investment
objective is to provide a high level of after-tax income and total
return consisting primarily of tax-advantaged dividend income and
capital appreciation. The common shares issued by UTG are listed on the
NYSE Amex. UTG currently has three series of preferred shares
outstanding, which are not listed or traded on any stock exchange.
Applicants believe that the shareholders of UTG are generally
conservative, dividend-sensitive investors who desire current income
periodically and may favor a fixed distribution policy.
---------------------------------------------------------------------------
\1\ UTG is the only closed-end investment company that currently
intends to rely on the order. Applicants request that the order also
apply to any registered closed-end investment company that in the
future: (a) Is advised by the Investment Adviser (including any
successor in interest) or by any entity controlling, controlled by,
or under common control (within the meaning of section 2(a)(9) of
the Act) with the Investment Adviser; and (b) complies with the
terms and conditions of the requested order (collectively with UTG,
``Funds''). 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. The Investment Adviser is a Delaware corporation registered
under the Investment Advisers Act of 1940 (``Advisers Act''). The
Investment Adviser serves as investment adviser to
[[Page 35212]]
UTG and may in the future serve as investment adviser to one or more
additional Funds. Each Fund will be advised by an investment adviser
that is registered under the Advisers Act.
3. Applicants state that on December 12, 2006, the Board of
Trustees (the ``Board'') of UTG, including a majority of the members of
the Board who are not ``interested persons'' of UTG as defined in
section 2(a)(19) of the Act (the ``Independent Trustees''), reviewed
information regarding the purpose and terms of a proposed distribution
policy, the reasonably foreseeable effect of such policy on UTG's long-
term total return (based on market price and net asset value (``NAV'')
per common share) and the expected relationship between UTG's
distribution rate on its common shares under the policy and UTG's total
return (in relation to NAV per share). Applicants state that the
Independent Trustees also considered information about any potential or
actual conflicts of interest that the Investment Adviser, any
affiliated persons of the Investment Adviser, or any other affiliated
persons of UTG may have relating to the adoption or implementation of
such policy. Applicants further state that after considering such
information the Board, including the Independent Trustees, approved a
distribution policy with respect to UTG's common shares (the ``Plan'')
and determined that such Plan is consistent with UTG's investment
objectives and policies and in the best interests of UTG's common
shareholders. Prior to implementing the Plan, the Board of UTG,
including the Independent Trustees, will review the factors considered
in connection with its approval of the Plan, as well as any changes in
such factors since the date of its approval, and will confirm that the
Plan is consistent with UTG's investment objectives and policies and in
the best interests of UTG's common shareholders.
4. Applicants state that the purpose of the Plan is to provide to
UTG's common shareholders a regular, monthly distribution that is not
dependent on the timing or amount of investment income earned or
capital gains realized by UTG. Applicants note that under the Plan, UTG
will distribute all available investment income to shareholders,
consistent with UTG's primary investment objective of providing a high
level of after-tax income and total returns. Applicants state that if
and when sufficient investment income is not available on a monthly
basis, UTG will distribute long-term capital gains and/or return of
capital to its shareholders to maintain the level distribution rate
that has been approved by the Board. Applicants further state that the
minimum annual distribution rate will be independent of UTG's
performance during any particular period, but is expected to correlate
with UTG's performance over time. Applicants represent that the amount
and frequency of distributions may be amended at any time by the Board
without prior notice to UTG's shareholders. Applicants state that if
UTG's net investment income and net realized capital gains for any year
exceed the amount required to be distributed under the Plan, UTG will
at a minimum make distributions necessary to comply with the
distribution requirements of subchapter M of the Internal Revenue Code
of 1986 (``Code''). Applicants note that the Plan provides that it can
be amended, suspended, or terminated at any time by the Board without
prior notice to UTG's shareholders.
5. Applicants state that at the December 12, 2006 meeting, the
Board adopted policies and procedures under rule 38a-1 under the Act
that are reasonably designed to ensure that all notices required to be
sent to UTG's shareholders pursuant to section 19(a) of the Act, rule
19a-1 under the Act, and condition IV below (``19(a) Notices'') comply
with condition II below, and that all other written communications by
UTG or its agents regarding distributions under the Plan include the
disclosure required by condition III below. Applicants state that the
Board also adopted policies and procedures at that meeting that require
UTG to keep records that demonstrate its compliance with all of the
conditions of the requested order and that are necessary for UTG to
form the basis for, or demonstrate the calculation of, the amounts
disclosed in its 19(a) Notices.
Applicants' Legal Analysis
1. Section 19(b) of the Act generally makes it unlawful for any
registered investment company to make long-term capital gains
distributions more than once every twelve months. Rule 19b-1 under the
Act limits the number of capital gains dividends, as defined in section
852(b)(3)(C) of the Code (``distributions''), that a fund 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. Section 6(c) provides that the Commission may, by order upon
application, conditionally or unconditionally exempt any person,
security, or transaction, or any class or classes of 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.
3. Applicants state that one of the concerns underlying section
19(b) and rule 19b-1 is that shareholders might be unable to
differentiate between frequent distributions of capital gains and
dividends from investment income. Applicants state, however, that rule
19a-1 effectively addresses this concern by requiring that a separate
statement showing the sources of a distribution (e.g., estimated net
income, net short-term capital gains, net long-term capital gains and/
or return of capital) accompany any distributions (or the confirmation
of the reinvestment of distributions) estimated to be sourced in part
from capital gains or capital. Applicants state that the same
information also is included in UTG's annual reports to shareholders
and on its IRS Form 1099-DIV, which is sent to each common and
preferred shareholder who received distributions during a particular
year (including shareholders who have sold shares during the year).
4. Applicants further state that UTG will make the additional
disclosures required by the conditions set forth below, and has adopted
compliance policies and procedures in accordance with rule 38a-1 to
ensure that all required 19(a) Notices and disclosures are sent to
shareholders. Applicants argue that by providing the information
required by section 19(a) and rule 19a-1, and by complying with the
procedures adopted under the Plan and the conditions listed below,
UTG's shareholders are provided sufficient information to understand
that their periodic distributions are not tied to UTG's net investment
income (which for this purpose is UTG's taxable income other than from
capital gains) and realized capital gains to date, and may not
represent yield or investment return. Applicants also state that
compliance with UTG's compliance procedures and condition III set forth
below will ensure that prospective shareholders and third parties are
provided with the same information. Accordingly, applicants assert that
continuing to subject UTG to section 19(b) and rule 19b-1 would afford
shareholders no extra protection.
5. Applicants note that section 19(b) and rule 19b-1 also were
intended to
[[Page 35213]]
prevent certain improper sales practices, including, in particular, the
practice of urging an investor to purchase shares of a fund on the
basis of an upcoming capital gains dividend (``selling the dividend''),
where the dividend would result in an immediate corresponding reduction
in NAV and would be in effect a taxable return of the investor's
capital. Applicants assert that the ``selling the dividend'' concern
should not apply to closed-end investment companies, such as UTG, that
do not continuously distribute shares. According to applicants, if the
underlying concern extends to secondary market purchases of shares of
closed-end funds that are subject to a large upcoming capital gains
dividend, adoption of a periodic distribution plan actually helps
minimize the concern by avoiding, through periodic distributions, any
buildup of large end-of-the-year distributions.
6. Applicants also note that common shares of closed-end funds that
invest primarily in equity securities often trade in the marketplace at
a discount to the funds' NAV. Applicants believe that this discount may
be reduced for closed-end funds that pay relatively frequent dividends
on their common shares at a consistent rate, whether or not those
dividends contain an element of long-term capital gain.
7. Applicants assert that the application of rule 19b-1 to the Plan
actually could have an undesirable influence on portfolio management
decisions. Applicants state that, in the absence of an exemption from
rule 19b-1, the implementation of a periodic distribution plan imposes
pressure on management (a) not to realize any net long-term capital
gains until the point in the year that the fund can pay all of its
remaining distributions in accordance with rule 19b-1, and (b) not to
realize any long-term capital gains during any particular year in
excess of the amount of the aggregate pay-out for the year (since as a
practical matter excess gains must be distributed and accordingly would
not be available to satisfy pay-out requirements in following years),
notwithstanding that purely investment considerations might favor
realization of long-term gains at different times or in different
amounts. Applicants thus assert that the limitation on the number of
capital gain distributions that a fund may make with respect to any one
year imposed by rule 19b-1, may prevent the efficient operation of a
periodic distribution plan whenever that fund's realized net long-term
capital gains in any year exceed the total of the periodic
distributions that may include such capital gains under the rule.
8. Applicants also assert that rule 19b-1 may cause fixed regular
periodic distributions under a periodic distribution plan to be funded
with returns of capital \2\ (to the extent net investment income and
realized short-term capital gains are insufficient to fund the
distribution), even though realized net long-term capital gains
otherwise could be available. To distribute all of a fund's long-term
capital gains within the limits in rule 19b-1, a fund may be required
to make total distributions in excess of the annual amount called for
by its periodic distribution plan, or to retain and pay taxes on the
excess amount. Applicants thus assert that the requested order would
minimize these effects of rule 19b-1 by enabling UTG to realize long-
term capital gains as often as investment considerations dictate
without fear of violating rule 19b-1.
---------------------------------------------------------------------------
\2\ Returns of capital as used in the application means return
of capital for financial accounting purposes and not for tax
accounting purposes.
---------------------------------------------------------------------------
9. Applicants state that Revenue Ruling 89-81 under the Code
requires that a fund that has both common stock and preferred stock
outstanding designate the types of income, e.g., investment income and
capital gains, in the same proportion as the total distributions
distributed to each class for the tax year. To satisfy the
proportionate designation requirements of Revenue Ruling 89-81,
whenever a fund has realized a long-term capital gain with respect to a
given tax year, the fund must designate the required proportionate
share of such capital gain to be included in common and preferred stock
dividends. Applicants state that although rule 19b-1 allows a fund some
flexibility with respect to the frequency of capital gains
distributions, a fund might use all of the exceptions available under
the rule for a tax year and still need to distribute additional capital
gains allocated to the preferred stock to comply with Revenue Ruling
89-81.
10. Applicants assert that the potential abuses addressed by
section 19(b) and rule 19b-1 do not arise with respect to preferred
stock issued by a closed-end fund. Applicants assert that such
distributions are fixed or determined in periodic auctions by reference
to short-term interest rates rather than by reference to performance of
the issuer, and Revenue Ruling 89-81 determines the proportion of such
distributions that are comprised of the long-term capital gains.
11. Applicants also submit that the ``selling the dividend''
concern is not applicable to preferred stock, which entitles a holder
to no more than a periodic dividend at a fixed rate or the rate
determined by the market, and, like a debt security, is priced based
upon its liquidation value, dividend rate, credit quality, and
frequency of payment. Applicants state that investors buy preferred
shares for the purpose of receiving payments at the frequency bargained
for, and do not expect the liquidation value of their shares to change.
12. Applicants request an order under section 6(c) granting an
exemption from section 19(b) and rule 19b-1 to permit UTG to make
periodic long-term capital gains distributions (as defined in section
852(b)(3)(C) of the Code) as often as monthly in any one taxable year
in respect of its common shares and as often as specified by or
determined in accordance with the terms thereof in respect of its
preferred shares.\3\
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\3\ Applicants state that a future Fund that relies on the
requested order will satisfy each of the representations in the
application except that such representations will be made in respect
of actions by the board of directors or trustees of such future Fund
and will be made at a future time.
---------------------------------------------------------------------------
Applicants' Conditions:
Applicants agree that any order of the Commission granting the
requested relief will be subject to the following conditions:
I. Compliance Review and Reporting
Each Fund's chief compliance officer will: (a) Report to the Fund's
Board, no less frequently than once every three months or at the next
regularly scheduled quarterly Board meeting, whether (i) the Fund and
its Investment Adviser have complied with the conditions of the order,
and (ii) a material compliance matter, as defined in rule 38a-1(e)(2)
under the Act, has occurred with respect to such conditions; and (b)
review the adequacy of the policies and procedures adopted by the Board
no less frequently than annually.
II. Disclosures to Fund Shareholders
A. Each 19(a) Notice disseminated to the holders of the Fund's
common shares, in addition to the information required by section 19(a)
and rule 19a-1:
1. Will provide, in a tabular or graphical format:
(a) The amount of the distribution, on a per share basis, together
with the amounts of such distribution amount, on a per share basis and
as a percentage of such distribution amount, from estimated: (A) Net
investment income; (B) net realized short-term capital gains; (C) net
realized long-term capital gains; and (D) return of capital or other
capital source;
[[Page 35214]]
(b) The fiscal year-to-date cumulative amount of distributions, on
a per share basis, together with the amounts of such cumulative amount,
on a per share basis and as a percentage of such cumulative amount of
distributions, from estimated: (A) Net investment income; (B) net
realized short-term capital gains; (C) net realized long-term capital
gains; and (D) return of capital or other capital source;
(c) The average annual total return in relation to the change in
NAV for the 5-year period (or, if the Fund's history of operations is
less than five years, the time period commencing immediately following
the Fund's first public offering) ending on the last day of the month
prior to the most recent distribution record date compared to the
current fiscal period's annualized distribution rate expressed as a
percentage of NAV as of the last day of the month prior to the most
recent distribution record date; and
(d) The cumulative total return in relation to the change in NAV
from the last completed fiscal year to the last day of the month prior
to the most recent distribution record date compared to the fiscal
year-to-date cumulative distribution rate expressed as a percentage of
NAV as of the last day of the month prior to the most recent
distribution record date.
Such disclosure shall be made in a type size at least as large and
as prominent as the estimate of the sources of the current
distribution; and
2. Will include the following disclosure:
(a) ``You should not draw any conclusions about the Fund's
investment performance from the amount of this distribution or from the
terms of the Fund's Plan'';
(b) ``The Fund estimates that it has distributed more than its
income and net realized capital gains; therefore, a portion of your
distribution may be a return of capital. A return of capital may occur
for example, when some or all of the money that you invested in the
Fund is paid back to you. A return of capital distribution does not
necessarily reflect the Fund's investment performance and should not be
confused with `yield' or `income' ''; \4\ and
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\4\ The disclosure in this condition II.A.2(b) will be included
only if the current distribution or the fiscal year-to-date
cumulative distributions are estimated to include a return of
capital.
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(c) ``The amounts and sources of distributions reported in this
19(a) Notice are only estimates and are not being provided for tax
reporting purposes. The actual amounts and sources of the amounts for
tax reporting purposes will depend upon the Fund's investment
experience during the remainder of its fiscal year and may be subject
to changes based on tax regulations. The Fund will send you a Form
1099-DIV for the calendar year that will tell you how to report these
distributions for federal income tax purposes.''
Such disclosure shall be made in a type size at least as large as
and as prominent as any other information in the 19(a) Notice and
placed on the same page in close proximity to the amount and the
sources of the distribution.
B. On the inside front cover of each report to shareholders under
rule 30e-1 under the Act, the Fund will:
1. Describe the terms of the Plan (including the fixed amount or
fixed percentage of the distributions and the frequency of the
distributions);
2. Include the disclosure required by condition II.A.2(a) above;
3. State, if applicable, that the Plan provides that the Board may
amend or terminate the Plan at any time without prior notice to Fund
shareholders; and
4. Describe any reasonably foreseeable circumstances that might
cause the Fund to terminate the Plan and any reasonably foreseeable
consequences of such termination.
C. Each report provided to shareholders under rule 30e-1 under the
Act and in each prospectus filed with the Commission on Form N-2 under
the Act, will provide the Fund's total return in relation to changes in
NAV in the financial highlights table and in any discussion about the
Fund's total return.
III. Disclosure to Shareholders, Prospective Shareholders and Third
Parties
A. Each Fund will include the information contained in the relevant
19(a) Notice, including the disclosure required by condition II.A.2
above, in any written communication (other than a communication on Form
1099) about the Plan or distributions under the Plan by the Fund, or
agents that the Fund has authorized to make such communication on the
Fund's behalf, to any Fund common shareholder, prospective common
shareholder or third-party information provider;
B. Each Fund will issue, contemporaneously with the issuance of any
19(a) Notice, a press release containing the information in the 19(a)
Notice and will file with the Commission the information contained in
such 19(a) Notice, including the disclosure required by condition
II.A.2 above, as an exhibit to its next filed Form N-CSR; and
C. Each Fund will post prominently a statement on its (or the
Investment Adviser's) web site containing the information in each 19(a)
Notice, including the disclosure required by condition II.A.2 above,
and will maintain such information on such web site for at least 24
months.
IV. Delivery of 19(a) Notices to Beneficial Owners
If a broker, dealer, bank or other person (``financial
intermediary'') holds common stock issued by a Fund in nominee name, or
otherwise, on behalf of a beneficial owner, the Fund: (a) Will request
that the financial intermediary, or its agent, forward the 19(a) Notice
to all beneficial owners of the Fund's shares held through such
financial intermediary; (b) will provide, in a timely manner, to the
financial intermediary, or its agent, enough copies of the 19(a) Notice
assembled in the form and at the place that the financial intermediary,
or its agent, reasonably requests to facilitate the financial
intermediary's sending of the 19(a) Notice to each beneficial owner of
the Fund's shares; and (c) upon the request of any financial
intermediary, or its agent, that receives copies of the 19(a) Notice,
will pay the financial intermediary, or its agent, the reasonable
expenses of sending the 19(a) Notice to such beneficial owners.
V. Additional Board Determinations for Funds Whose Shares Trade at a
Premium
If:
A. A Fund's common shares have traded on the stock exchange that
they primarily trade on at the time in question at an average premium
to NAV equal to or greater than 10%, as determined on the basis of the
average of the discount or premium to NAV of the Fund's common shares
as of the close of each trading day over a 12-week rolling period (each
such 12-week rolling period ending on the last trading day of each
week); and
B. the Fund's annualized distribution rate for such 12-week rolling
period, expressed as a percentage of NAV as of the ending date of such
12-week rolling period, is greater than the Fund's average annual total
return in relation to the change in NAV over the 2-year period ending
on the last day of such 12-week rolling period; then:
1. At the earlier of the next regularly scheduled meeting or within
four months of the last day of such 12-week rolling period, the Board
including a majority of the Independent Trustees:
(a) Will request and evaluate, and the Investment Adviser will
furnish, such
[[Page 35215]]
information as may be reasonably necessary to make an informed
determination of whether the Plan should be continued or continued
after amendment;
(b) Will determine whether continuation, or continuation after
amendment, of the Plan is consistent with the Fund's investment
objective(s) and policies and in the best interests of the Fund and its
shareholders, after considering the information in condition V.B.1(a)
above; including, without limitation:
(1) Whether the Plan is accomplishing its purpose(s);
(2) The reasonably foreseeable material 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 shares; and
(3) The Fund's current distribution rate, as described in condition
V.B above, compared with the Fund's average annual taxable income or
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,
including its consideration of the factors listed in condition V.B.1(b)
above, 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
A Fund will not make a public offering of the Fund's common shares
other than:
A. A rights offering below NAV to holders of the Fund's common
shares;
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, provided that, with respect to such other offering:
1. The Fund's annualized distribution rate for the six months
ending on the last day of the month ended immediately prior to the most
recent distribution record date,\5\ 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; \6\ and
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\5\ If the Fund has been in operation fewer than six months, the
measured period will being immediately following the Fund's first
public offering.
\6\ If the Fund has been in operation fewer than five years, the
measured period will being immediately following the Fund's first
public offering.
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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 in accordance with the terms
of any outstanding preferred stock as 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,
pursuant to delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-17140 Filed 7-17-09; 8:45 am]
BILLING CODE 8010-01-P
