Highland Capital Management, L.P., et al.;, 45496-45498 [E9-21138]

Download as PDF jlentini on DSKJ8SOYB1PROD with NOTICES 45496 Federal Register / Vol. 74, No. 169 / Wednesday, September 2, 2009 / Notices and ‘‘Inverse Funds’’ are Funds that seek a specified multiple, up to 300%, of the inverse performance of an Underlying Index. 3. Applicants also seek to amend the terms and conditions of the Prior Application to provide that all representations and conditions contained in the Prior Application that require a Fund to disclose particular information in the Fund’s prospectus (‘‘Prospectus’’) and/or annual report shall be effective with respect to the Fund until the time that the Fund complies with the disclosure requirements adopted by the Commission in Investment Company Act Release No. 28584 (Jan. 13, 2009) (‘‘Summary Prospectus Rule’’). Applicants state that such amendment is warranted because the Commission’s amendments to Form N–1A with regard to exchange-traded funds as part of the Summary Prospectus Rule reflect the Commission’s view with respect to the appropriate types of prospectus and annual report disclosures for an exchange-traded fund. 4. Applicants also seek relief to introduce Conventional Funds that will be 130/30 Funds. Applicants state that in general, ‘‘130/30’’ strategies: (a) establish long positions in securities such that total long exposure amounts to approximately 130% of net assets; and (b) simultaneously establish short positions in other securities such that total short exposure amounts to approximately 30% of net assets. Each 130/30 Fund will hold at least 80% of its total assets (exclusive of collateral held for purposes of securities lending) in the Component Securities that are specified for the long positions and could invest up to 20% in such Component Securities, cash equivalents or other securities. The 130/30 Funds would also enter into financial instruments to obtain any remaining 50% long and 30% short positions dictated by its Underlying Index. The 130/30 Funds will provide full portfolio disclosure so that the intraday value of a 130/30 Fund can accurately be calculated, market participants will be able to understand the principal investment strategies of the 130/30 Funds, and informed trading of 130/30 Funds’ ETS may occur. The creation and redemption process for the 130/30 Funds will be the same as for the existing Leveraged Funds in that Creation Units of 130/30 Funds will generally be purchased and redeemed for a basket of in-kind securities and cash, or solely cash. 5. Applicants believe that the requested relief continues to meet the necessary exemptive standards. VerDate Nov<24>2008 16:56 Sep 01, 2009 Jkt 217001 Applicants’ Legal Analysis: 1. Section 6(c) of the Act provides that the Commission may exempt any person, security or transaction, or any class of persons, securities or transactions, from any provision of the Act, if and to the extent that such 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. 2. Applicants seek to amend the Prior Order to delete the relief granted from section 24(d) of the Act. Applicants state that the deletion of the exemption from section 24(d) that was granted in the Prior Order is warranted because the adoption of the Summary Prospectus Rule should supplant any need by a Fund to use a product description (‘‘Product Description’’). The deletion of the relief granted with respect to section 24(d) of the Act from the Prior Order will also result in the deletion of related discussions in the Prior Application, revision of the Prior Application to delete references to Product Description including in the conditions, and the deletion of condition 4 of the Prior Order. Applicants’ Conditions: Applicants agree that any amended order granting the requested relief will be subject to the same conditions as those imposed by the Prior Order except for condition 4 which will be deleted. All representations and conditions contained in the application and the Prior Application that require a Fund to disclose particular information in the Fund’s Prospectus and/or annual report shall remain effective with respect to the Fund until the time that the Fund complies with the disclosure requirements adopted by the Commission in Investment Company Act Release No. 28584 (Jan. 13, 2009). For the Commission, by the Division of Investment Management, pursuant to delegated authority. Florence E. Harmon, Deputy Secretary. [FR Doc. E9–21139 Filed 9–1–09; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 28888; File No. 812–13221] Highland Capital Management, L.P., et al.; Notice of Application August 27, 2009. AGENCY: Securities and Exchange Commission (‘‘Commission’’). PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 ACTION: Notice of an application under section 6(c) of the Investment Company Act of 1940 (the ‘‘Act’’) for an exemption from sections 18(c) and 18(i) of the Act, under sections 6(c) and 23(c)(3) of the Act for an exemption from rule 23c–3 under the Act, and for an order pursuant to section 17(d) of the Act and rule 17d–1 under the Act. Summary of Application: Applicants request an order to permit certain registered closed-end management investment companies to issue multiple classes of shares and to impose assetbased distribution fees and early withdrawal charges. Applicants: Highland Capital Management, L.P. (‘‘Highland Capital’’), Highland Funds Asset Management, L.P. (‘‘Highland,’’ and together with Highland Capital, the ‘‘Adviser’’) and Highland Special Situations Fund II (the ‘‘Special Situations Fund’’). Filing Dates: The application was filed on August 3, 2005, and amended on July 12, 2007, November 29, 2007, June 20, 2008 and August 7, 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 September 21, 2009 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 Michael Colvin, Highland Capital Management, L.P., NexBank Tower, 13455 Noel Road, Suite 800, Dallas, TX 75240. FOR FURTHER INFORMATION CONTACT: John Yoder, Senior Counsel, at (202) 551– 6878 or Julia Kim Gilmer, 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 an applicant using the Company name box, at https:// E:\FR\FM\02SEN1.SGM 02SEN1 Federal Register / Vol. 74, No. 169 / Wednesday, September 2, 2009 / Notices www.sec.gov/search/search.htm or by calling (202) 551–8090. Applicants’ Representations jlentini on DSKJ8SOYB1PROD with NOTICES 1. The Special Situations Fund is a Delaware statutory trust that is registered as a non-diversified closedend management investment company under the Act. The Special Situations Fund’s investment strategy focuses on distressed securities, principally in the senior loan market. Highland Capital and Highland are each a Delaware limited partnership and registered as an investment adviser under the Investment Advisers Act of 1940. Highland Capital will serve as investment adviser to the Special Situations Fund. It is expected that Highland will become the investment adviser to the Special Situations Fund after an internal reorganization. 2. Applicants request that the order also apply to any continuously-offered registered closed-end management investment company that has been previously organized or that may be organized in the future for which the Adviser or any entity controlling, controlled by, or under common control with the Adviser, or any successor in interest to any such entity,1 acts as investment adviser and which operates as an interval fund pursuant to rule 23c–3 under the Act or provides periodic liquidity with respect to its shares pursuant to rule 13e–4 under the Securities Exchange Act of 1934 (‘‘Exchange Act’’) (each, a ‘‘Fund,’’ and together with the Special Situations Fund, the ‘‘Funds’’).2 3. The Special Situations Fund will continuously offer its shares to the public at net asset value. Shares of the Funds will not be listed on any securities exchange and will not be quoted on any quotation medium. The Funds do not expect there to be any secondary trading market for their shares. The Special Situations Fund has adopted a fundamental policy to repurchase a specified percentage of its shares (between 5% and 25%) at net asset value on a quarterly basis. Such repurchase offers will be conducted pursuant to rule 23c–3 under the Act. 4. The Funds seek the flexibility to be structured as multiple class funds. If the requested relief is granted, the Special Situations Fund intends to offer three 1 A successor in interest is limited to an entity that results from a reorganization into another jurisdiction or a change in the type of business organization. 2 Any Fund relying on this relief in the future will do so in a manner consistent with the terms and conditions of the application. Applicants represent that each entity presently intending to rely on the requested relief is listed as an applicant. VerDate Nov<24>2008 16:56 Sep 01, 2009 Jkt 217001 classes of shares. The Special Situations Fund will offer Class A shares with a front-end sales charge of up to 4.5% and an annual servicing and/or distribution fee of up to .35% of average daily net assets. Class C shares will be offered without a front-end sales load, with annual distribution fees of .75%, annual servicing fees of .25% and early withdrawal charges (‘‘EWCs’’) of 1% for shares repurchased within one year of purchase. Class Z shares would not be subject to sales charges, distribution or servicing fees, or EWCs. The Funds may in the future offer additional classes of shares and/or another sales charge structure. 5. Applicants represent that any assetbased service and distribution fees will comply with the provisions of NASD Rule 2830(d) (‘‘NASD Sales Charge Rule’’).3 Applicants also represent that each Fund will disclose in its prospectus, the fees, expenses and other characteristics of each class of shares offered for sale by the prospectus, as is required for open-end multiple class funds under Form N–1A. As is required for open-end funds, each Fund will disclose its expenses in shareholder reports, and disclose any arrangements that result in breakpoints in or elimination of sales loads in its prospectus.4 Each Fund and its distributor will also comply with any requirements that may be adopted by the Commission regarding disclosure at the point of sale and in transaction confirmations about the costs and conflicts of interest arising out of the distribution of open-end investment company shares, and regarding prospectus disclosure of sales loads and revenue sharing arrangements as if those requirements applied to the Fund and its distributor.5 6. Each Fund will allocate all expenses incurred by it among the 3 All references to the NASD Sales Charge Rule include any successor or replacement rule that may be adopted by the Financial Industry Regulatory Authority. 4 See Shareholder Reports and Quarterly Portfolio Disclosure of Registered Management Investment Companies, Investment Company Act Release No. 26372 (Feb. 27, 2004) (adopting release) (requiring open-end investment companies to disclose fund expenses in shareholder reports); and Disclosure of Breakpoint Discounts by Mutual Funds, Investment Company Act Release No. 26464 (June 7, 2004) (adopting release) (requiring open-end investment companies to provide prospectus disclosure of certain sales load information). 5 Confirmation Requirements and Point of Sale Disclosure Requirements for Transactions in Certain Mutual Funds and Other Securities, and Other Confirmation Requirement Amendments, and Amendments to the Registration Form for Mutual Funds, Investment Company Act Release Nos. 26341 (Jan. 29, 2004) (proposing release) and 26778 (Feb. 28, 2005) (re-opening the comment period for the proposed rules and requesting additional comments). PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 45497 various classes of shares based on the net assets of the Fund attributable to each class, except that the net asset value and expenses of each class will reflect distribution fees, service fees, and any other incremental expenses of that class. Expenses of the Fund allocated to a particular class of shares will be borne on a pro rata basis by each outstanding share of that class. Applicants state that each Fund will comply with the provisions of rule 18f– 3 under the Act as if it were an openend investment company. 7. Each Fund may waive the EWC for certain categories of shareholders or transactions to be established from time to time. With respect to any waiver of, scheduled variation in, or elimination of the EWC, each Fund will comply with rule 22d–1 under the Act as if the Fund were an open-end investment company. 8. Each Fund operating as an interval fund pursuant to rule 23c–3 under the Act may offer its shareholders an exchange feature under which the shareholders of the Fund may, in connection with the Fund’s periodic repurchase offers, exchange their shares of the Fund for shares of the same class of (i) registered open-end investment companies or (ii) other registered closed-end investment companies that comply with rule 23c–3 under the Act and continuously offer their shares at net asset value, that are in the Fund’s group of investment companies (collectively, ‘‘Other Funds’’). Shares of a Fund operating pursuant to rule 23c– 3 that are exchanged for shares of Other Funds will be included as part of the amount of the repurchase offer amount for such Fund as specified in rule 23c– 3 under the Act. Any exchange option will comply with rule 11a–3 under the Act, as if the Fund were an open-end investment company subject to rule 11a–3. In complying with rule 11a–3, each Fund will treat an EWC as if it were a contingent deferred sales load. Applicants’ Legal Analysis Multiple Classes of Shares 1. Section 18(c) of the Act provides, in relevant part, that a closed-end investment company may not issue or sell any senior security if, immediately thereafter, the company has outstanding more than one class of senior security. Applicants state that the creation of multiple classes of shares of the Funds may be prohibited by section 18(c). 2. Section 18(i) of the Act provides that each share of stock issued by a registered management investment company will be a voting stock and have equal voting rights with every other outstanding voting stock. E:\FR\FM\02SEN1.SGM 02SEN1 45498 Federal Register / Vol. 74, No. 169 / Wednesday, September 2, 2009 / Notices jlentini on DSKJ8SOYB1PROD with NOTICES Applicants state that multiple classes of shares of the Funds may violate section 18(i) of the Act because each class would be entitled to exclusive voting rights with respect to matters solely related to that class. 3. Section 6(c) of the Act provides that the Commission may exempt any person, security or transaction or any class or classes of persons, securities or transactions from any provision of the Act, or from any rule thereunder, if and to the extent such 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. Applicants request an exemption under section 6(c) from sections 18(c) and 18(i) to permit the Funds to issue multiple classes of shares. 4. Applicants submit that the proposed allocation of expenses and voting rights among multiple classes is equitable and will not discriminate against any group or class of shareholders. Applicants submit that the proposed arrangements would permit a Fund to facilitate the distribution of its shares and provide investors with a broader choice of shareholder services. Applicants assert that the proposed closed-end investment company multiple class structure does not raise the concerns underlying section 18 of the Act to any greater degree than open-end investment companies’ multiple class structures that are permitted by rule 18f–3 under the Act. Applicants state that each Fund will comply with the provisions of rule 18f–3 as if it were an open-end investment company. Early Withdrawal Charges 1. Section 23(c) of the Act provides, in relevant part, that no registered closed-end investment company will purchase securities of which it is the issuer, except: (a) On a securities exchange or other open market; (b) pursuant to tenders, after reasonable opportunity to submit tenders given to all holders of securities of the class to be purchased; or (c) under other circumstances as the Commission may permit by rules and regulations or orders for the protection of investors. 2. Rule 23c–3 under the Act permits a registered closed-end investment company (an ‘‘interval fund’’) to make repurchase offers of between five and twenty-five percent of its outstanding shares at net asset value at periodic intervals pursuant to a fundamental policy of the interval fund. Rule 23c– 3(b)(1) under the Act provides that an interval fund may deduct from VerDate Nov<24>2008 16:56 Sep 01, 2009 Jkt 217001 repurchase proceeds only a repurchase fee, not to exceed two percent of the proceeds, that is reasonably intended to compensate the fund for expenses directly related to the repurchase. 3. Section 23(c)(3) provides that the Commission may issue an order that would permit a closed-end investment company to repurchase its shares in circumstances in which the repurchase is made in a manner or on a basis that does not unfairly discriminate against any holders of the class or classes of securities to be purchased. As noted above, section 6(c) provides that the Commission may exempt any person, security or transaction 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. Applicants request relief under sections 6(c) and 23(c) from rule 23c–3 to the extent necessary for the Funds to impose EWCs on shares of the Funds submitted for repurchase that have been held for less than a specified period. 4. Applicants believe that the requested relief meets the standards of sections 6(c) and 23(c)(3). Rule 6c–10 under the Act permits open-end investment companies to impose contingent deferred sales loads (‘‘CDSLs’’), subject to certain conditions. Applicants state that EWCs are functionally similar to CDSLs imposed by open-end investment companies under rule 6c–10. Applicants state that EWCs may be necessary for the distributor to recover distribution costs. Applicants state that any EWC imposed by the Funds will comply with rule 6c– 10 under the Act as if the rule were applicable to closed-end investment companies. The Funds also will disclose EWCs in accordance with the requirements of Form N–1A concerning CDSLs. Applicants further state that the Funds will apply the EWC (and any waivers or scheduled variations of the EWC) uniformly to all shareholders in a given class and consistently with the requirements of rule 22d–1 under the Act. Asset-based Distribution Fees 1. Section 17(d) of the Act and rule 17d–1 under the Act prohibit an affiliated person of a registered investment company or an affiliated person of such person, acting as principal, from participating in or effecting any transaction in connection with any joint enterprise or joint arrangement in which the investment company participates unless the Commission issues an order permitting PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 the transaction. In reviewing applications submitted under section 17(d) and rule 17d–1, the Commission considers whether the participation of the investment company in a joint enterprise or joint arrangement is consistent with the provisions, policies and purposes of the Act, and the extent to which the participation is on a basis different from or less advantageous than that of other participants. 2. Rule 17d–3 under the Act provides an exemption from section 17(d) and rule 17d–1 to permit open-end investment companies to enter into distribution arrangements pursuant to rule 12b–1 under the Act. Applicants request an order under section 17(d) and rule 17d–1 under the Act to permit the Fund to impose asset-based distribution fees. Applicants have agreed to comply with rules 12b–1 and 17d–3 as if those rules applied to closed-end investment companies. Applicants’ Condition Applicants agree that any order granting the requested relief will be subject to the following condition: Each Fund relying on the order will comply with the provisions of rules 6c– 10, 12b–1, 17d–3, 18f–3, 22d–1, and, where applicable, 11a–3 under the Act, as amended from time to time, as if those rules applied to closed-end management investment companies, and will comply with the NASD Sales Charge Rule, as amended from time to time, as if that rule applied to all closedend management investment companies. For the Commission, by the Division of Investment Management, under delegated authority. Florence E. Harmon, Deputy Secretary. [FR Doc. E9–21138 Filed 9–1–09; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–60572; File No. SR–CBOE– 2009–060] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Related to Hybrid Quote Locks August 26, 2009. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 1 15 2 17 E:\FR\FM\02SEN1.SGM U.S.C. 78s(b)(1). CFR 240.19b–4. 02SEN1

Agencies

[Federal Register Volume 74, Number 169 (Wednesday, September 2, 2009)]
[Notices]
[Pages 45496-45498]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-21138]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 28888; File No. 812-13221]


Highland Capital Management, L.P., et al.; Notice of Application

August 27, 2009.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application under section 6(c) of the Investment 
Company Act of 1940 (the ``Act'') for an exemption from sections 18(c) 
and 18(i) of the Act, under sections 6(c) and 23(c)(3) of the Act for 
an exemption from rule 23c-3 under the Act, and for an order pursuant 
to section 17(d) of the Act and rule 17d-1 under the Act.

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    Summary of Application: Applicants request an order to permit 
certain registered closed-end management investment companies to issue 
multiple classes of shares and to impose asset-based distribution fees 
and early withdrawal charges.
    Applicants: Highland Capital Management, L.P. (``Highland 
Capital''), Highland Funds Asset Management, L.P. (``Highland,'' and 
together with Highland Capital, the ``Adviser'') and Highland Special 
Situations Fund II (the ``Special Situations Fund'').
    Filing Dates: The application was filed on August 3, 2005, and 
amended on July 12, 2007, November 29, 2007, June 20, 2008 and August 
7, 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 September 21, 2009 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 Michael Colvin, 
Highland Capital Management, L.P., NexBank Tower, 13455 Noel Road, 
Suite 800, Dallas, TX 75240.

FOR FURTHER INFORMATION CONTACT: John Yoder, Senior Counsel, at (202) 
551-6878 or Julia Kim Gilmer, 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 an applicant 
using the Company name box, at https://

[[Page 45497]]

www.sec.gov/search/search.htm or by calling (202) 551-8090.

Applicants' Representations

    1. The Special Situations Fund is a Delaware statutory trust that 
is registered as a non-diversified closed-end management investment 
company under the Act. The Special Situations Fund's investment 
strategy focuses on distressed securities, principally in the senior 
loan market. Highland Capital and Highland are each a Delaware limited 
partnership and registered as an investment adviser under the 
Investment Advisers Act of 1940. Highland Capital will serve as 
investment adviser to the Special Situations Fund. It is expected that 
Highland will become the investment adviser to the Special Situations 
Fund after an internal reorganization.
    2. Applicants request that the order also apply to any 
continuously-offered registered closed-end management investment 
company that has been previously organized or that may be organized in 
the future for which the Adviser or any entity controlling, controlled 
by, or under common control with the Adviser, or any successor in 
interest to any such entity,\1\ acts as investment adviser and which 
operates as an interval fund pursuant to rule 23c-3 under the Act or 
provides periodic liquidity with respect to its shares pursuant to rule 
13e-4 under the Securities Exchange Act of 1934 (``Exchange Act'') 
(each, a ``Fund,'' and together with the Special Situations Fund, the 
``Funds'').\2\
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    \1\ A successor in interest is limited to an entity that results 
from a reorganization into another jurisdiction or a change in the 
type of business organization.
    \2\ Any Fund relying on this relief in the future will do so in 
a manner consistent with the terms and conditions of the 
application. Applicants represent that each entity presently 
intending to rely on the requested relief is listed as an applicant.
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    3. The Special Situations Fund will continuously offer its shares 
to the public at net asset value. Shares of the Funds will not be 
listed on any securities exchange and will not be quoted on any 
quotation medium. The Funds do not expect there to be any secondary 
trading market for their shares. The Special Situations Fund has 
adopted a fundamental policy to repurchase a specified percentage of 
its shares (between 5% and 25%) at net asset value on a quarterly 
basis. Such repurchase offers will be conducted pursuant to rule 23c-3 
under the Act.
    4. The Funds seek the flexibility to be structured as multiple 
class funds. If the requested relief is granted, the Special Situations 
Fund intends to offer three classes of shares. The Special Situations 
Fund will offer Class A shares with a front-end sales charge of up to 
4.5% and an annual servicing and/or distribution fee of up to .35% of 
average daily net assets. Class C shares will be offered without a 
front-end sales load, with annual distribution fees of .75%, annual 
servicing fees of .25% and early withdrawal charges (``EWCs'') of 1% 
for shares repurchased within one year of purchase. Class Z shares 
would not be subject to sales charges, distribution or servicing fees, 
or EWCs. The Funds may in the future offer additional classes of shares 
and/or another sales charge structure.
    5. Applicants represent that any asset-based service and 
distribution fees will comply with the provisions of NASD Rule 2830(d) 
(``NASD Sales Charge Rule'').\3\ Applicants also represent that each 
Fund will disclose in its prospectus, the fees, expenses and other 
characteristics of each class of shares offered for sale by the 
prospectus, as is required for open-end multiple class funds under Form 
N-1A. As is required for open-end funds, each Fund will disclose its 
expenses in shareholder reports, and disclose any arrangements that 
result in breakpoints in or elimination of sales loads in its 
prospectus.\4\ Each Fund and its distributor will also comply with any 
requirements that may be adopted by the Commission regarding disclosure 
at the point of sale and in transaction confirmations about the costs 
and conflicts of interest arising out of the distribution of open-end 
investment company shares, and regarding prospectus disclosure of sales 
loads and revenue sharing arrangements as if those requirements applied 
to the Fund and its distributor.\5\
---------------------------------------------------------------------------

    \3\ All references to the NASD Sales Charge Rule include any 
successor or replacement rule that may be adopted by the Financial 
Industry Regulatory Authority.
    \4\ See Shareholder Reports and Quarterly Portfolio Disclosure 
of Registered Management Investment Companies, Investment Company 
Act Release No. 26372 (Feb. 27, 2004) (adopting release) (requiring 
open-end investment companies to disclose fund expenses in 
shareholder reports); and Disclosure of Breakpoint Discounts by 
Mutual Funds, Investment Company Act Release No. 26464 (June 7, 
2004) (adopting release) (requiring open-end investment companies to 
provide prospectus disclosure of certain sales load information).
    \5\ Confirmation Requirements and Point of Sale Disclosure 
Requirements for Transactions in Certain Mutual Funds and Other 
Securities, and Other Confirmation Requirement Amendments, and 
Amendments to the Registration Form for Mutual Funds, Investment 
Company Act Release Nos. 26341 (Jan. 29, 2004) (proposing release) 
and 26778 (Feb. 28, 2005) (re-opening the comment period for the 
proposed rules and requesting additional comments).
---------------------------------------------------------------------------

    6. Each Fund will allocate all expenses incurred by it among the 
various classes of shares based on the net assets of the Fund 
attributable to each class, except that the net asset value and 
expenses of each class will reflect distribution fees, service fees, 
and any other incremental expenses of that class. Expenses of the Fund 
allocated to a particular class of shares will be borne on a pro rata 
basis by each outstanding share of that class. Applicants state that 
each Fund will comply with the provisions of rule 18f-3 under the Act 
as if it were an open-end investment company.
    7. Each Fund may waive the EWC for certain categories of 
shareholders or transactions to be established from time to time. With 
respect to any waiver of, scheduled variation in, or elimination of the 
EWC, each Fund will comply with rule 22d-1 under the Act as if the Fund 
were an open-end investment company.
    8. Each Fund operating as an interval fund pursuant to rule 23c-3 
under the Act may offer its shareholders an exchange feature under 
which the shareholders of the Fund may, in connection with the Fund's 
periodic repurchase offers, exchange their shares of the Fund for 
shares of the same class of (i) registered open-end investment 
companies or (ii) other registered closed-end investment companies that 
comply with rule 23c-3 under the Act and continuously offer their 
shares at net asset value, that are in the Fund's group of investment 
companies (collectively, ``Other Funds''). Shares of a Fund operating 
pursuant to rule 23c-3 that are exchanged for shares of Other Funds 
will be included as part of the amount of the repurchase offer amount 
for such Fund as specified in rule 23c-3 under the Act. Any exchange 
option will comply with rule 11a-3 under the Act, as if the Fund were 
an open-end investment company subject to rule 11a-3. In complying with 
rule 11a-3, each Fund will treat an EWC as if it were a contingent 
deferred sales load.

Applicants' Legal Analysis

Multiple Classes of Shares

    1. Section 18(c) of the Act provides, in relevant part, that a 
closed-end investment company may not issue or sell any senior security 
if, immediately thereafter, the company has outstanding more than one 
class of senior security. Applicants state that the creation of 
multiple classes of shares of the Funds may be prohibited by section 
18(c).
    2. Section 18(i) of the Act provides that each share of stock 
issued by a registered management investment company will be a voting 
stock and have equal voting rights with every other outstanding voting 
stock.

[[Page 45498]]

Applicants state that multiple classes of shares of the Funds may 
violate section 18(i) of the Act because each class would be entitled 
to exclusive voting rights with respect to matters solely related to 
that class.
    3. Section 6(c) of the Act provides that the Commission may exempt 
any person, security or transaction or any class or classes of persons, 
securities or transactions from any provision of the Act, or from any 
rule thereunder, if and to the extent such 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. Applicants request an exemption under section 
6(c) from sections 18(c) and 18(i) to permit the Funds to issue 
multiple classes of shares.
    4. Applicants submit that the proposed allocation of expenses and 
voting rights among multiple classes is equitable and will not 
discriminate against any group or class of shareholders. Applicants 
submit that the proposed arrangements would permit a Fund to facilitate 
the distribution of its shares and provide investors with a broader 
choice of shareholder services. Applicants assert that the proposed 
closed-end investment company multiple class structure does not raise 
the concerns underlying section 18 of the Act to any greater degree 
than open-end investment companies' multiple class structures that are 
permitted by rule 18f-3 under the Act. Applicants state that each Fund 
will comply with the provisions of rule 18f-3 as if it were an open-end 
investment company.

Early Withdrawal Charges

    1. Section 23(c) of the Act provides, in relevant part, that no 
registered closed-end investment company will purchase securities of 
which it is the issuer, except: (a) On a securities exchange or other 
open market; (b) pursuant to tenders, after reasonable opportunity to 
submit tenders given to all holders of securities of the class to be 
purchased; or (c) under other circumstances as the Commission may 
permit by rules and regulations or orders for the protection of 
investors.
    2. Rule 23c-3 under the Act permits a registered closed-end 
investment company (an ``interval fund'') to make repurchase offers of 
between five and twenty-five percent of its outstanding shares at net 
asset value at periodic intervals pursuant to a fundamental policy of 
the interval fund. Rule 23c-3(b)(1) under the Act provides that an 
interval fund may deduct from repurchase proceeds only a repurchase 
fee, not to exceed two percent of the proceeds, that is reasonably 
intended to compensate the fund for expenses directly related to the 
repurchase.
    3. Section 23(c)(3) provides that the Commission may issue an order 
that would permit a closed-end investment company to repurchase its 
shares in circumstances in which the repurchase is made in a manner or 
on a basis that does not unfairly discriminate against any holders of 
the class or classes of securities to be purchased. As noted above, 
section 6(c) provides that the Commission may exempt any person, 
security or transaction 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. 
Applicants request relief under sections 6(c) and 23(c) from rule 23c-3 
to the extent necessary for the Funds to impose EWCs on shares of the 
Funds submitted for repurchase that have been held for less than a 
specified period.
    4. Applicants believe that the requested relief meets the standards 
of sections 6(c) and 23(c)(3). Rule 6c-10 under the Act permits open-
end investment companies to impose contingent deferred sales loads 
(``CDSLs''), subject to certain conditions. Applicants state that EWCs 
are functionally similar to CDSLs imposed by open-end investment 
companies under rule 6c-10. Applicants state that EWCs may be necessary 
for the distributor to recover distribution costs. Applicants state 
that any EWC imposed by the Funds will comply with rule 6c-10 under the 
Act as if the rule were applicable to closed-end investment companies. 
The Funds also will disclose EWCs in accordance with the requirements 
of Form N-1A concerning CDSLs. Applicants further state that the Funds 
will apply the EWC (and any waivers or scheduled variations of the EWC) 
uniformly to all shareholders in a given class and consistently with 
the requirements of rule 22d-1 under the Act.

Asset-based Distribution Fees

    1. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
an affiliated person of a registered investment company or an 
affiliated person of such person, acting as principal, from 
participating in or effecting any transaction in connection with any 
joint enterprise or joint arrangement in which the investment company 
participates unless the Commission issues an order permitting the 
transaction. In reviewing applications submitted under section 17(d) 
and rule 17d-1, the Commission considers whether the participation of 
the investment company in a joint enterprise or joint arrangement is 
consistent with the provisions, policies and purposes of the Act, and 
the extent to which the participation is on a basis different from or 
less advantageous than that of other participants.
    2. Rule 17d-3 under the Act provides an exemption from section 
17(d) and rule 17d-1 to permit open-end investment companies to enter 
into distribution arrangements pursuant to rule 12b-1 under the Act. 
Applicants request an order under section 17(d) and rule 17d-1 under 
the Act to permit the Fund to impose asset-based distribution fees. 
Applicants have agreed to comply with rules 12b-1 and 17d-3 as if those 
rules applied to closed-end investment companies.

Applicants' Condition

    Applicants agree that any order granting the requested relief will 
be subject to the following condition:
    Each Fund relying on the order will comply with the provisions of 
rules 6c-10, 12b-1, 17d-3, 18f-3, 22d-1, and, where applicable, 11a-3 
under the Act, as amended from time to time, as if those rules applied 
to closed-end management investment companies, and will comply with the 
NASD Sales Charge Rule, as amended from time to time, as if that rule 
applied to all closed-end management investment companies.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-21138 Filed 9-1-09; 8:45 am]
BILLING CODE 8010-01-P
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