Pioneer Floating Rate Trust and Pioneer High Income Trust; Notice of Application, 62360-62363 [E9-28352]
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Federal Register / Vol. 74, No. 227 / Friday, November 27, 2009 / Notices
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration # 11932 and # 11933]
Puerto Rico Disaster # PR–00005
AGENCY: U.S. Small Business
Administration.
ACTION: Notice.
(Catalog of Federal Domestic Assistance
Numbers 59002 and 59008)
SUMMARY: This is a notice of an
Administrative declaration of a disaster
for the Commonwealth of Puerto Rico
dated 11/20/2009.
Incident: Caribbean Petroleum
Corporation Explosion.
Incident Period: 10/28/2009.
Effective Date: 11/20/2009.
Physical Loan Application Deadline
Date: 01/19/2010.
Economic Injury (EIDL) Loan
Application Deadline Date: 08/20/2010.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
FOR FURTHER INFORMATION CONTACT: A.
Escobar, Office of Disaster Assistance,
U.S. Small Business Administration,
409 3rd Street, SW., Suite 6050,
Washington, DC 20416.
SUPPLEMENTARY INFORMATION: Notice is
hereby given that as a result of the
Administrator’s disaster declaration,
applications for disaster loans may be
filed at the address listed above or other
locally announced locations.
The following areas have been
determined to be adversely affected by
the disaster:
Primary Municipalities: Catano.
Contiguous Municipalities: Puerto Rico
Bayamon, Guaynabo, San Juan, Toa
Baja.
The Interest Rates are:
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Percent
For Physical Damage:
Homeowners
with
Credit
Available Elsewhere ..........
Homeowners without Credit
Available Elsewhere ..........
Businesses with Credit Available Elsewhere ..................
Businesses without Credit
Available Elsewhere ..........
Non-Profit Organizations with
Credit Available Elsewhere
Non-Profit
Organizations
without Credit Available
Elsewhere ..........................
For Economic Injury:
Businesses & Small Agricultural Cooperatives without
Credit Available Elsewhere
Non-Profit
Organizations
without Credit Available
Elsewhere ..........................
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18:08 Nov 25, 2009
The number assigned to this disaster
for physical damage is 11932 4 and for
economic injury is 11933 0.
The Commonwealth which received
an EIDL Declaration # is Puerto Rico.
5.125
2.562
6.000
4.000
3.625
3.000
4.000
3.000
Jkt 220001
Dated: November 20, 2009.
Karen G. Mills,
Administrator.
[FR Doc. E9–28385 Filed 11–25–09; 8:45 am]
BILLING CODE 8025–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
28998; File No. 812–13636]
Pioneer Floating Rate Trust and
Pioneer High Income Trust; Notice of
Application
November 20, 2009.
AGENCY: Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of application for an
order under section 6(c) of the
Investment Company Act of 1940
(‘‘Act’’) for an exemption from sections
18(a)(1)(A) and 18(a)(1)(B) of the Act.
APPLICANTS: Pioneer Floating Rate Trust
and Pioneer High Income Trust (each,
an ‘‘Applicant’’ and collectively,
‘‘Applicants’’).
SUMMARY OF APPLICATION: Applicants
request an order (‘‘Order’’) granting an
exemption from sections 18(a)(1)(A) and
18(a)(1)(B) of the Act for a period from
the date of the Order until October 31,
2010. The Order would permit each
Applicant to issue or incur debt that
would be used to redeem all or a portion
of the auction market preferred shares
(‘‘AMPS’’) that it issued prior to
February 1, 2008 and that are
outstanding at the time of such issuance
or incurrence of debt (‘‘post-Order
debt’’), and to refinance such post-Order
debt, subject to the 200% asset coverage
requirement ordinarily applicable to a
senior security that is stock. The Order
also would permit each Applicant to
declare dividends or any other
distributions on, or purchase, capital
stock during the term of the Order,
provided that any such post-Order debt
has asset coverage of at least 200% after
deducting the amount of such
transaction.
FILING DATES: The application was filed
on February 27, 2009, and amended on
August 25, 2009 and November 19,
2009.
HEARING OR NOTIFICATION OF HEARING: An
order granting the application will be
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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 December 14, 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: Dorothy E. Bourassa, Esq.,
Pioneer Investment Management, Inc.,
60 State Street, Boston, MA 02109–
1820.
FOR FURTHER INFORMATION CONTACT:
Laura J. Riegel, Senior Counsel, at (202)
551–6873, or Marilyn Mann, 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://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
Applicants’ Representations
1. Each Applicant is organized as a
Delaware statutory trust and is
registered under the Act as a nondiversified closed-end management
investment company. Each Applicant is
advised by Pioneer Investment
Management, Inc. and has issued and
outstanding a class of common shares
and a class of one or more series of
AMPS.
2. Applicants state that they issued
their AMPS for purposes of investment
leverage to augment the amount of
investment capital available for use in
the pursuit of their investment
objectives. Applicants state that,
through the use of leverage, they seek to
enhance the investment return available
to the holders of their common shares
by earning a rate of portfolio return
(which includes the return obtained
from securities that are purchased from
the proceeds of AMPS offerings) that
exceeds the dividend rate that each
Applicant pays to the AMPS holders.
Applicants represent that the AMPS
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holders are entitled to receive a stated
liquidation preference amount of
$25,000 per share (plus any
accumulated but unpaid dividends) in
any liquidation, dissolution, or winding
up of the relevant Applicant before any
distribution or payment to holders of
the Applicant’s common shares. They
state that dividends declared and
payable on their AMPS have a similar
priority over dividends declared and
payable on their common shares. In
addition, Applicants state that their
AMPS are ‘‘perpetual’’ securities and
that Applicants are not required to
redeem them so long as certain asset
coverage tests are met. Further,
Applicants state that their AMPS are
redeemable at each Applicant’s option.
3. Applicants state that prior to
February 2008, dividend rates on the
AMPS for each dividend period were set
at the market clearing rate determined
through an auction process that brought
together bidders, who sought to buy
AMPS, and AMPS holders, who sought
to sell AMPS. Applicants represent that
each Applicant’s Statement of
Preferences setting forth the terms and
conditions of the AMPS (the ‘‘Statement
of Preferences’’) provides that if an
auction fails to clear (because of an
imbalance of sell orders over bids), the
dividend payment rate over the next
dividend period is set at a specified
maximum applicable rate (the
‘‘Maximum Rate’’) determined by
reference to a short-term market interest
rate (such as LIBOR or a commercial
paper rate). Applicants state that an
unsuccessful auction is not a default;
the relevant Applicant continues to pay
dividends to all AMPS holders, but at
the specified Maximum Rate rather than
a market clearing rate. Applicants
represent that they experienced no
unsuccessful auctions prior to February
2008.
4. Applicants state that if investors
did not purchase all of the AMPS
tendered for sale at an auction prior to
the failure of the auction market, dealers
historically would enter into the auction
and purchase any excess shares to
prevent the auction from failing.
Applicants represent that this auction
mechanism had generally provided
readily available liquidity to holders of
AMPS for more than twenty years.
Applicants state that they understand
that many investors may have invested
short-term cash balances in AMPS
believing they were safe short-term
investments and, in many cases, the
equivalent of cash. Applicants state that
in February 2008, the financial
institutions that historically provided
‘‘back stop’’ liquidity to AMPS auctions
stopped participating in them and the
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18:08 Nov 25, 2009
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auctions began to fail. Applicants
further state that, beginning in February
2008, Applicants experienced auction
failures due to an imbalance between
buy and sell orders. Applicants believe
that there is no established secondary
market that would provide holders of
the Applicants’ AMPS with the
liquidation preference of $25,000 per
share. Applicants state that neither of
the Applicants would be able to replace
its AMPS entirely with new debt
without the Order providing temporary
relief from the 300% asset coverage test.
As a result, Applicants state that there
is currently no reliable mechanism for
holders of their AMPS to obtain
liquidity, and believe that the current
lack of liquidity is causing distress and
creating severe hardship for holders of
their AMPS.
5. Applicants seek relief for a
temporary period from the date on
which the Order is granted until
October 31, 2010 (‘‘Exemption Period’’).
The proposed replacement of AMPS
with debt would provide liquidity for
holders of the AMPS, while Applicants
continue their diligent efforts to obtain
a more permanent form of financing,
such as a new type of senior security
that is equity.1 Applicants submit that
the gradual reduction of leverage
through the use of proceeds of any
common share issuances or the
development of an alternative form of
preferred stock might take several
months, if at all, after the Order has
been issued. Applicants state that it is
uncertain when, or if, the securities and
capital markets will return to conditions
that would enable the Applicants to
achieve compliance with the asset
coverage requirements that would apply
in the absence of the Order. Given the
uncertainty and the current and
continuing unsettled state of the
securities and capital markets,
applicants believe that the Exemption
Period is reasonable and appropriate.
Each Applicant’s incurrence of debt to
redeem its AMPS would be subject to
approval by the Applicant’s board of
trustees (‘‘Board’’).
Applicants’ Legal Analysis
1. Section 18(a)(1)(A) of the Act
provides that it is unlawful for any
registered closed-end investment
company to issue any class of senior
security representing indebtedness, or to
sell such security of which it is the
issuer, unless the class of senior security
will have an asset coverage of at least
1 See, e.g., Eaton Vance Management, SEC NoAction Letter (June 13, 2008) (permitting the
issuance of ‘‘liquidity protected preferred shares’’ to
supplement or replace Eaton Vance funds’ auction
rate preferred stock).
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300% immediately after issuance or
sale. Section 18(a)(2)(A) of the Act
provides that it is unlawful for any
registered closed-end investment
company to issue any class of senior
security that is a stock, or to sell any
such security of which it is the issuer,
unless the class of senior security will
have an asset coverage of at least 200%
immediately after such issuance or
sale.2
2. Section 18(a)(1)(B) prohibits a
registered closed-end investment
company from declaring a dividend or
any other distribution on, or purchasing,
its own capital stock unless its
outstanding indebtedness will have an
asset coverage of at least 300%
immediately after deducting the amount
of such dividend, distribution or
purchase price.3 Section 18(a)(2)(B)
prohibits a registered closed-end
investment company from declaring a
dividend or other distribution on, or
purchasing, its own common stock
unless its outstanding preferred stock
will have an asset coverage of at least
200% immediately after deducting the
amount of such dividend, distribution
or purchase price.
3. Section 6(c) of the Act provides, in
relevant part, that the Commission, by
order upon application, may
conditionally or unconditionally
exempt any person, security, or
transaction from any provision of the
Act if and to the extent 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.
4. Applicants request that the
Commission issue an Order under
2 Section 18(h) of the Act defines asset coverage
of a class of senior security representing an
indebtedness of an issuer as the ratio which the
value of the total assets of the issuer, less all
liabilities and indebtedness not represented by
senior securities, bears to the aggregate amount of
senior securities representing indebtedness of the
issuer. The section defines asset coverage of the
preferred stock of an issuer as the ratio which the
value of the total assets of the issuer, less all
liabilities and indebtedness not represented by
senior securities, bears to the aggregate amount of
senior securities representing indebtedness of the
issuer plus the aggregate amount the class of senior
security would be entitled to on involuntary
liquidation.
3 An exception is made for the declaration of a
dividend on a class of preferred stock if the senior
security representing indebtedness has an asset
coverage of at least 200% at the time of declaration
after deduction of the amount of such dividend. See
section 18(a)(1)(B) of the Act. Further, section 18(g)
of the Act provides, among other things, that
‘‘senior security,’’ for purposes of section
18(a)(1)(B), does not include any promissory note
or other evidence of indebtedness issued in
consideration of any loan, extension or renewal
thereof, made by a bank or other person and
privately arranged, and not intended to be publicly
distributed.
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section 6(c) of the Act to exempt each
Applicant from the 300% asset coverage
requirements set forth in sections
18(a)(1)(A) and (B) of the Act.
Specifically, Applicants seek relief to
permit each Applicant, for the
Exemption Period, to issue or incur
post-Order debt for the purpose of
redeeming all or a portion of its AMPS
that were issued prior to February 1,
2008 and that are outstanding at the
time of such issuance or incurrence, as
well as any refinancing of such debt
until the expiration of the Exemption
Period, subject to asset coverage of
200% ordinarily applicable to a senior
security that is stock, rather than the
asset coverage of 300% ordinarily
applicable to a senior security
constituting indebtedness. Applicants
also seek relief to permit each Applicant
to declare dividends or any other
distributions on, or purchase, capital
stock during the Exemption Period,
provided that any such post-Order debt
has asset coverage of at least 200% after
deducting the amount of such
transaction. Applicants state that,
except as permitted under the Order, the
Applicants would meet all of the asset
coverage requirements of section 18(a)
of the Act. In addition, Applicants state
that within the Exemption Period each
Applicant that borrows in reliance on
the Order will either pay down or
refinance the post-Order debt so that the
Applicant would, upon expiration of the
Exemption Period and thereafter, have
asset coverage of at least 300% for each
class of senior security representing
indebtedness to the extent required by
the Act.
5. Applicants state that section 18
reflects congressional concerns
regarding preferential treatment for
certain classes of shareholders, complex
capital structures, and the use of
excessive leverage. Applicants submit
that another concern was that senior
securities gave the misleading
impression of safety from risk.
Applicants believe that the request for
temporary relief is necessary,
appropriate and in the public interest
and that such relief is consistent with
the protection of investors and the
purposes intended by the policy and
provisions of the Act.
6. Applicants note that the illiquidity
of AMPS is a unique, exigent situation
that is posing severe hardships on
AMPS holders. Applicants represent
that the proposed replacement of their
AMPS with debt would provide
liquidity for the Applicants’ AMPS
holders while the Applicants continue
their efforts to obtain a more permanent
form of financing (such as through the
issuance of preferred equity-based
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18:08 Nov 25, 2009
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instruments) that fully complies with
the asset coverage requirements of
section 18.4
7. Applicants represent that the Order
would help avoid the potential harm to
common shareholders that could result
if the Applicants were to deleverage
their portfolios in the current difficult
market environment 5 or that could
result if a reduction in investment
return reduced the market price of
common shares. Applicants also state
that the Order would permit Applicants
to continue to provide their common
shareholders with the enhanced returns
that leverage may provide.
8. Applicants believe that the interests
of both classes of the Applicants’
current investors would be well served
by the requested order—the AMPS
holders because they would achieve the
liquidity that the market currently
cannot provide (as well as full recovery
of the liquidation value of their shares),
and the common shareholders because
the adverse consequences of forced
deleveraging would be avoided and
each Applicant’s investment return
would be enhanced to the extent that
the cost of the new form of leverage is
lower than the cost of continuing to pay
the Maximum Rate on their outstanding
AMPS.
9. Applicants represent that the
proposed borrowing would be obtained
from banks, insurance companies or
qualified institutional buyers (as
defined in rule 144A(a)(1) under the
Securities Act of 1933) who would be
capable of assessing the risk associated
with the transaction. Applicants also
state that, to the extent the Act’s asset
coverage requirements were aimed at
limiting leverage because of its potential
to magnify losses as well as gains, they
believe that the proposal would not
unduly increase the speculative nature
of the Applicants’ common shares
because the relief is temporary and the
Applicants would be no more highly
leveraged if they replace the existing
AMPS with borrowing.6 Applicants also
4 See
supra note 1.
state that each Applicant invests a
portion of its assets in either senior securities loans
or preferred securities. Applicants believe that it is
difficult to sell such securities in the current market
because the liquidity of that market has been
reduced in substantial part as a result of the market
makers’ own impaired capital positions. Applicants
thus believe that it would be disadvantageous to
sell these portfolio securities in the current market.
6 Applicants acknowledge that managing any
portfolio that relies on borrowing for leverage
entails the risk that, when the borrowing matures
and must be repaid or refinanced, an economically
attractive form of replacement leverage may not be
available in the capital markets. For that reason, any
portfolio that relies on borrowing for leverage is
subject to the risk that it may have to deleverage,
which could be disadvantageous to the portfolio’s
common shareholders.
5 Applicants
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state that the proposed liquidity
solution would not make Applicants’
capital structure more complex, opaque,
or hard to understand or result in
pyramiding or inequitable distribution
of control.
10. Applicants state that the current
state of the credit markets, which has
affected their AMPS, is an historic event
of unusual severity, which requires a
creative and flexible response on the
part of both the public and private
sectors. Applicants believe that these
issues have created an urgent need for
limited, quick, thoughtful and
responsive solutions. Applicants believe
that the request meets the standards for
exemption under section 6(c) of the Act.
Applicants’ Conditions
Applicants agree that any order of the
Commission granting the requested
relief shall be subject to the following
conditions:
1. Each Applicant that borrows
subject to 200% asset coverage under
the Order will do so only if such
Applicant’s Board, including a majority
of the trustees who are not ‘‘interested
persons’’ as defined in section 2(a)(19)
of the Act (‘‘Independent Trustees’’),
shall have determined that such
borrowing is in the best interests of such
Applicant, its common shareholders,
and its AMPS shareholders. Each
Applicant shall make and preserve for a
period of not less than six years from
the date of such determination, the first
two years in an easily accessible place,
minutes specifically describing the
deliberations by the Board and the
information and documents supporting
those deliberations, the factors
considered by the Board in connection
with such determination, and the basis
of such determination.
2. Upon expiration of the Exemption
Period, each Applicant will have asset
coverage of at least 300% for each class
of senior security representing
indebtedness.
3. The Board of an Applicant that has
borrowed in reliance on the Order shall
receive and review, no less frequently
than quarterly during the Exemption
Period, detailed progress reports
prepared by management (or other
parties selected by the Independent
Trustees) regarding and assessing the
efforts that the Applicant has
undertaken, and the progress that the
Applicant has made, towards achieving
compliance with the appropriate asset
coverage requirements under section 18
by the expiration of the Exemption
Period. The Board, including a majority
of the Independent Trustees, will make
such adjustments as it deems necessary
or appropriate to ensure that the
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Applicant comes into compliance with
section 18 of the Act within a
reasonable period of time, not to exceed
the expiration of the Exemption Period.
Each Applicant will make and preserve
minutes describing these reports and the
Board’s review, including copies of such
reports and all other information
provided to or relied upon by the Board,
for a period of not less than six years,
the first two years in an easily accessible
place.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–28352 Filed 11–25–09; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Notice of Applications for
Deregistration Under Section 8(f) of the
Investment Company Act of 1940
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November 20, 2009.
The following is a notice of
applications for deregistration under
section 8(f) of the Investment Company
Act of 1940 for the month of November,
2009. A copy of each 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://www.sec.gov/search/
search.htm or by calling (202) 551–
8090. An order granting each
application will be issued unless the
SEC orders a hearing. Interested persons
may request a hearing on any
application by writing to the SEC’s
Secretary at the address below and
serving the relevant applicant with a
copy of the request, personally or by
mail. Hearing requests should be
received by the SEC by 5:30 p.m. on
December 15, 2009, and should be
accompanied by proof of service on the
applicant, in the form of an affidavit or,
for lawyers, a certificate of service.
Hearing requests should state the nature
of the writer’s interest, the reason for the
request, and the issues contested.
Persons who wish to be notified of a
hearing may request notification by
writing to the Secretary, U.S. Securities
and Exchange Commission, 100 F
Street, NE., Washington, DC 20549–
1090.
FOR FURTHER INFORMATION CONTACT:
Diane L. Titus at (202) 551–6810, SEC,
Division of Investment Management,
Office of Investment Company
18:08 Nov 25, 2009
Jkt 220001
Nicholas-Applegate Fund, Inc. [File No.
811–5019]
Summary: Applicant seeks an order
declaring that it has ceased to be an
investment company. On April 17,
2009, applicant transferred its assets to
Jennison Mid-Cap Growth Fund, Inc.,
based on net asset value. Expenses of
$112,056 incurred in connection with
the reorganization were paid by
applicant and Jennison Associates LLC,
the acquiring fund’s subadviser.
Filing Dates: The application was
filed on September 3, 2009, and
amended on October 19, 2009 and
November 10, 2009.
Applicant’s Address: Gateway Center
Three, 100 Mulberry St., Newark, NJ
07102–4077.
BlackRock Insured Municipal 2008
Term Trust, Inc. [File No. 811–6721];
[Release No. IC–28999]
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Regulation, 100 F Street, NE.,
Washington, DC 20549–4041.
BlackRock California Insured
Municipal 2008 Term Trust, Inc. [File
No. 811–7090];
BlackRock Florida Insured Municipal
2008 Term Trust, Inc. [File No. 811–
7092];
BlackRock New York Insured
Municipal 2008 Term Trust, Inc. [File
No. 811–7094]
Summary: Each applicant, a closedend investment company, seeks an
order declaring that it has ceased to be
an investment company. On July 24,
2009, each applicant made a final
liquidating distribution to its
shareholders, based on net asset value.
Each applicant had issued preferred
shares, which were redeemed prior to
the liquidating distributions. Expenses
of $15,500, $11,500, $11,500 and
$11,500, respectively, incurred in
connection with the liquidations were
paid by applicants.
Filing Dates: The applications were
filed on March 2, 2009, and amended on
October 29, 2009.
Applicants’ Address: 100 Bellevue
Parkway, Wilmington, DE 19809.
The Kensington Funds [File No. 811–
21316]
Summary: Applicant seeks an order
declaring that it has ceased to be an
investment company. On June 12, 2009,
applicant transferred its assets to
corresponding series of the Forward
Funds, based on net asset value.
Expenses of approximately $253,500
incurred in connection with the
reorganization were paid by Kensington
Investment Group, Inc., applicant’s
investment adviser, and Forward
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62363
Management, LLC, investment adviser
and sponsor of the acquiring fund.
Filing Dates: The application was
filed on September 25, 2009, and
amended on October 23, 2009.
Applicant’s Address: 4 Orinda Way,
Suite 200C, Orinda, CA 94563.
Oppenheimer International Value Trust
[File No. 811–21369]
Summary: Applicant seeks an order
declaring that it has ceased to be an
investment company. On November 11,
2008, applicant transferred its assets to
Oppenheimer Quest International Value
Fund, based on net asset value.
Expenses of $58,790 incurred in
connection with the reorganization were
paid by OppenheimerFunds, Inc.,
investment adviser to applicant and the
surviving fund.
Filing Dates: The application was
filed on September 3, 2009, and
amended on October 19, 2009 and
November 4, 2009.
Applicant’s Address: 6803 S Tucson
Way, Centennial, CO 80112.
Janus Adviser Series [File No. 811–
9885]
Summary: Applicant seeks an order
declaring that it has ceased to be an
investment company. On July 6, 2009,
applicant transferred its assets to Janus
Investment Fund, based on net asset
value. Expenses of approximately
$6,922,758 incurred in connection with
the reorganization were paid by Janus
Capital Management LLC, applicant’s
investment adviser.
Filing Date: The application was filed
on November 10, 2009.
Applicant’s Address: 151 Detroit St.,
Denver, CO 80206.
Allianz RCM Global EcoTrends SM
Fund [File No. 811–21975]
Summary: Applicant, a closed-end
investment company, seeks an order
declaring that it has ceased to be an
investment company. On September 2,
2008, applicant transferred its assets to
a corresponding series of Allianz Funds
Multi-Strategy Trust, based on net asset
value. Expenses of approximately
$300,725 incurred in connection with
the reorganization were paid by Allianz
Global Investors Fund Management
LLC, applicant’s investment adviser.
Filing Date: The application was filed
on November 10, 2009.
Applicant’s Address: 1345 Avenue of
the Americas, New York, NY 10105.
First Trust Tax-Advantaged Preferred
Income Fund [File No. 811–21876]
Summary: Applicant, a closed-end
investment company, seeks an order
declaring that it has ceased to be an
E:\FR\FM\27NON1.SGM
27NON1
Agencies
[Federal Register Volume 74, Number 227 (Friday, November 27, 2009)]
[Notices]
[Pages 62360-62363]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-28352]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 28998; File No. 812-13636]
Pioneer Floating Rate Trust and Pioneer High Income Trust; Notice
of Application
November 20, 2009.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of application for an order under section 6(c) of the
Investment Company Act of 1940 (``Act'') for an exemption from sections
18(a)(1)(A) and 18(a)(1)(B) of the Act.
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Applicants: Pioneer Floating Rate Trust and Pioneer High Income Trust
(each, an ``Applicant'' and collectively, ``Applicants'').
Summary of Application: Applicants request an order (``Order'')
granting an exemption from sections 18(a)(1)(A) and 18(a)(1)(B) of the
Act for a period from the date of the Order until October 31, 2010. The
Order would permit each Applicant to issue or incur debt that would be
used to redeem all or a portion of the auction market preferred shares
(``AMPS'') that it issued prior to February 1, 2008 and that are
outstanding at the time of such issuance or incurrence of debt (``post-
Order debt''), and to refinance such post-Order debt, subject to the
200% asset coverage requirement ordinarily applicable to a senior
security that is stock. The Order also would permit each Applicant to
declare dividends or any other distributions on, or purchase, capital
stock during the term of the Order, provided that any such post-Order
debt has asset coverage of at least 200% after deducting the amount of
such transaction.
Filing Dates: The application was filed on February 27, 2009, and
amended on August 25, 2009 and November 19, 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 December 14, 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: Dorothy E. Bourassa, Esq.,
Pioneer Investment Management, Inc., 60 State Street, Boston, MA 02109-
1820.
FOR FURTHER INFORMATION CONTACT: Laura J. Riegel, Senior Counsel, at
(202) 551-6873, or Marilyn Mann, 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://www.sec.gov/search/search.htm or
by calling (202) 551-8090.
Applicants' Representations
1. Each Applicant is organized as a Delaware statutory trust and is
registered under the Act as a non-diversified closed-end management
investment company. Each Applicant is advised by Pioneer Investment
Management, Inc. and has issued and outstanding a class of common
shares and a class of one or more series of AMPS.
2. Applicants state that they issued their AMPS for purposes of
investment leverage to augment the amount of investment capital
available for use in the pursuit of their investment objectives.
Applicants state that, through the use of leverage, they seek to
enhance the investment return available to the holders of their common
shares by earning a rate of portfolio return (which includes the return
obtained from securities that are purchased from the proceeds of AMPS
offerings) that exceeds the dividend rate that each Applicant pays to
the AMPS holders. Applicants represent that the AMPS
[[Page 62361]]
holders are entitled to receive a stated liquidation preference amount
of $25,000 per share (plus any accumulated but unpaid dividends) in any
liquidation, dissolution, or winding up of the relevant Applicant
before any distribution or payment to holders of the Applicant's common
shares. They state that dividends declared and payable on their AMPS
have a similar priority over dividends declared and payable on their
common shares. In addition, Applicants state that their AMPS are
``perpetual'' securities and that Applicants are not required to redeem
them so long as certain asset coverage tests are met. Further,
Applicants state that their AMPS are redeemable at each Applicant's
option.
3. Applicants state that prior to February 2008, dividend rates on
the AMPS for each dividend period were set at the market clearing rate
determined through an auction process that brought together bidders,
who sought to buy AMPS, and AMPS holders, who sought to sell AMPS.
Applicants represent that each Applicant's Statement of Preferences
setting forth the terms and conditions of the AMPS (the ``Statement of
Preferences'') provides that if an auction fails to clear (because of
an imbalance of sell orders over bids), the dividend payment rate over
the next dividend period is set at a specified maximum applicable rate
(the ``Maximum Rate'') determined by reference to a short-term market
interest rate (such as LIBOR or a commercial paper rate). Applicants
state that an unsuccessful auction is not a default; the relevant
Applicant continues to pay dividends to all AMPS holders, but at the
specified Maximum Rate rather than a market clearing rate. Applicants
represent that they experienced no unsuccessful auctions prior to
February 2008.
4. Applicants state that if investors did not purchase all of the
AMPS tendered for sale at an auction prior to the failure of the
auction market, dealers historically would enter into the auction and
purchase any excess shares to prevent the auction from failing.
Applicants represent that this auction mechanism had generally provided
readily available liquidity to holders of AMPS for more than twenty
years. Applicants state that they understand that many investors may
have invested short-term cash balances in AMPS believing they were safe
short-term investments and, in many cases, the equivalent of cash.
Applicants state that in February 2008, the financial institutions that
historically provided ``back stop'' liquidity to AMPS auctions stopped
participating in them and the auctions began to fail. Applicants
further state that, beginning in February 2008, Applicants experienced
auction failures due to an imbalance between buy and sell orders.
Applicants believe that there is no established secondary market that
would provide holders of the Applicants' AMPS with the liquidation
preference of $25,000 per share. Applicants state that neither of the
Applicants would be able to replace its AMPS entirely with new debt
without the Order providing temporary relief from the 300% asset
coverage test. As a result, Applicants state that there is currently no
reliable mechanism for holders of their AMPS to obtain liquidity, and
believe that the current lack of liquidity is causing distress and
creating severe hardship for holders of their AMPS.
5. Applicants seek relief for a temporary period from the date on
which the Order is granted until October 31, 2010 (``Exemption
Period''). The proposed replacement of AMPS with debt would provide
liquidity for holders of the AMPS, while Applicants continue their
diligent efforts to obtain a more permanent form of financing, such as
a new type of senior security that is equity.\1\ Applicants submit that
the gradual reduction of leverage through the use of proceeds of any
common share issuances or the development of an alternative form of
preferred stock might take several months, if at all, after the Order
has been issued. Applicants state that it is uncertain when, or if, the
securities and capital markets will return to conditions that would
enable the Applicants to achieve compliance with the asset coverage
requirements that would apply in the absence of the Order. Given the
uncertainty and the current and continuing unsettled state of the
securities and capital markets, applicants believe that the Exemption
Period is reasonable and appropriate. Each Applicant's incurrence of
debt to redeem its AMPS would be subject to approval by the Applicant's
board of trustees (``Board'').
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\1\ See, e.g., Eaton Vance Management, SEC No-Action Letter
(June 13, 2008) (permitting the issuance of ``liquidity protected
preferred shares'' to supplement or replace Eaton Vance funds'
auction rate preferred stock).
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Applicants' Legal Analysis
1. Section 18(a)(1)(A) of the Act provides that it is unlawful for
any registered closed-end investment company to issue any class of
senior security representing indebtedness, or to sell such security of
which it is the issuer, unless the class of senior security will have
an asset coverage of at least 300% immediately after issuance or sale.
Section 18(a)(2)(A) of the Act provides that it is unlawful for any
registered closed-end investment company to issue any class of senior
security that is a stock, or to sell any such security of which it is
the issuer, unless the class of senior security will have an asset
coverage of at least 200% immediately after such issuance or sale.\2\
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\2\ Section 18(h) of the Act defines asset coverage of a class
of senior security representing an indebtedness of an issuer as the
ratio which the value of the total assets of the issuer, less all
liabilities and indebtedness not represented by senior securities,
bears to the aggregate amount of senior securities representing
indebtedness of the issuer. The section defines asset coverage of
the preferred stock of an issuer as the ratio which the value of the
total assets of the issuer, less all liabilities and indebtedness
not represented by senior securities, bears to the aggregate amount
of senior securities representing indebtedness of the issuer plus
the aggregate amount the class of senior security would be entitled
to on involuntary liquidation.
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2. Section 18(a)(1)(B) prohibits a registered closed-end investment
company from declaring a dividend or any other distribution on, or
purchasing, its own capital stock unless its outstanding indebtedness
will have an asset coverage of at least 300% immediately after
deducting the amount of such dividend, distribution or purchase
price.\3\ Section 18(a)(2)(B) prohibits a registered closed-end
investment company from declaring a dividend or other distribution on,
or purchasing, its own common stock unless its outstanding preferred
stock will have an asset coverage of at least 200% immediately after
deducting the amount of such dividend, distribution or purchase price.
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\3\ An exception is made for the declaration of a dividend on a
class of preferred stock if the senior security representing
indebtedness has an asset coverage of at least 200% at the time of
declaration after deduction of the amount of such dividend. See
section 18(a)(1)(B) of the Act. Further, section 18(g) of the Act
provides, among other things, that ``senior security,'' for purposes
of section 18(a)(1)(B), does not include any promissory note or
other evidence of indebtedness issued in consideration of any loan,
extension or renewal thereof, made by a bank or other person and
privately arranged, and not intended to be publicly distributed.
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3. Section 6(c) of the Act provides, in relevant part, that the
Commission, by order upon application, may conditionally or
unconditionally exempt any person, security, or transaction from any
provision of the Act if and to the extent 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.
4. Applicants request that the Commission issue an Order under
[[Page 62362]]
section 6(c) of the Act to exempt each Applicant from the 300% asset
coverage requirements set forth in sections 18(a)(1)(A) and (B) of the
Act. Specifically, Applicants seek relief to permit each Applicant, for
the Exemption Period, to issue or incur post-Order debt for the purpose
of redeeming all or a portion of its AMPS that were issued prior to
February 1, 2008 and that are outstanding at the time of such issuance
or incurrence, as well as any refinancing of such debt until the
expiration of the Exemption Period, subject to asset coverage of 200%
ordinarily applicable to a senior security that is stock, rather than
the asset coverage of 300% ordinarily applicable to a senior security
constituting indebtedness. Applicants also seek relief to permit each
Applicant to declare dividends or any other distributions on, or
purchase, capital stock during the Exemption Period, provided that any
such post-Order debt has asset coverage of at least 200% after
deducting the amount of such transaction. Applicants state that, except
as permitted under the Order, the Applicants would meet all of the
asset coverage requirements of section 18(a) of the Act. In addition,
Applicants state that within the Exemption Period each Applicant that
borrows in reliance on the Order will either pay down or refinance the
post-Order debt so that the Applicant would, upon expiration of the
Exemption Period and thereafter, have asset coverage of at least 300%
for each class of senior security representing indebtedness to the
extent required by the Act.
5. Applicants state that section 18 reflects congressional concerns
regarding preferential treatment for certain classes of shareholders,
complex capital structures, and the use of excessive leverage.
Applicants submit that another concern was that senior securities gave
the misleading impression of safety from risk. Applicants believe that
the request for temporary relief is necessary, appropriate and in the
public interest and that such relief is consistent with the protection
of investors and the purposes intended by the policy and provisions of
the Act.
6. Applicants note that the illiquidity of AMPS is a unique,
exigent situation that is posing severe hardships on AMPS holders.
Applicants represent that the proposed replacement of their AMPS with
debt would provide liquidity for the Applicants' AMPS holders while the
Applicants continue their efforts to obtain a more permanent form of
financing (such as through the issuance of preferred equity-based
instruments) that fully complies with the asset coverage requirements
of section 18.\4\
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\4\ See supra note 1.
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7. Applicants represent that the Order would help avoid the
potential harm to common shareholders that could result if the
Applicants were to deleverage their portfolios in the current difficult
market environment \5\ or that could result if a reduction in
investment return reduced the market price of common shares. Applicants
also state that the Order would permit Applicants to continue to
provide their common shareholders with the enhanced returns that
leverage may provide.
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\5\ Applicants state that each Applicant invests a portion of
its assets in either senior securities loans or preferred
securities. Applicants believe that it is difficult to sell such
securities in the current market because the liquidity of that
market has been reduced in substantial part as a result of the
market makers' own impaired capital positions. Applicants thus
believe that it would be disadvantageous to sell these portfolio
securities in the current market.
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8. Applicants believe that the interests of both classes of the
Applicants' current investors would be well served by the requested
order--the AMPS holders because they would achieve the liquidity that
the market currently cannot provide (as well as full recovery of the
liquidation value of their shares), and the common shareholders because
the adverse consequences of forced deleveraging would be avoided and
each Applicant's investment return would be enhanced to the extent that
the cost of the new form of leverage is lower than the cost of
continuing to pay the Maximum Rate on their outstanding AMPS.
9. Applicants represent that the proposed borrowing would be
obtained from banks, insurance companies or qualified institutional
buyers (as defined in rule 144A(a)(1) under the Securities Act of 1933)
who would be capable of assessing the risk associated with the
transaction. Applicants also state that, to the extent the Act's asset
coverage requirements were aimed at limiting leverage because of its
potential to magnify losses as well as gains, they believe that the
proposal would not unduly increase the speculative nature of the
Applicants' common shares because the relief is temporary and the
Applicants would be no more highly leveraged if they replace the
existing AMPS with borrowing.\6\ Applicants also state that the
proposed liquidity solution would not make Applicants' capital
structure more complex, opaque, or hard to understand or result in
pyramiding or inequitable distribution of control.
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\6\ Applicants acknowledge that managing any portfolio that
relies on borrowing for leverage entails the risk that, when the
borrowing matures and must be repaid or refinanced, an economically
attractive form of replacement leverage may not be available in the
capital markets. For that reason, any portfolio that relies on
borrowing for leverage is subject to the risk that it may have to
deleverage, which could be disadvantageous to the portfolio's common
shareholders.
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10. Applicants state that the current state of the credit markets,
which has affected their AMPS, is an historic event of unusual
severity, which requires a creative and flexible response on the part
of both the public and private sectors. Applicants believe that these
issues have created an urgent need for limited, quick, thoughtful and
responsive solutions. Applicants believe that the request meets the
standards for exemption under section 6(c) of the Act.
Applicants' Conditions
Applicants agree that any order of the Commission granting the
requested relief shall be subject to the following conditions:
1. Each Applicant that borrows subject to 200% asset coverage under
the Order will do so only if such Applicant's Board, including a
majority of the trustees who are not ``interested persons'' as defined
in section 2(a)(19) of the Act (``Independent Trustees''), shall have
determined that such borrowing is in the best interests of such
Applicant, its common shareholders, and its AMPS shareholders. Each
Applicant shall make and preserve for a period of not less than six
years from the date of such determination, the first two years in an
easily accessible place, minutes specifically describing the
deliberations by the Board and the information and documents supporting
those deliberations, the factors considered by the Board in connection
with such determination, and the basis of such determination.
2. Upon expiration of the Exemption Period, each Applicant will
have asset coverage of at least 300% for each class of senior security
representing indebtedness.
3. The Board of an Applicant that has borrowed in reliance on the
Order shall receive and review, no less frequently than quarterly
during the Exemption Period, detailed progress reports prepared by
management (or other parties selected by the Independent Trustees)
regarding and assessing the efforts that the Applicant has undertaken,
and the progress that the Applicant has made, towards achieving
compliance with the appropriate asset coverage requirements under
section 18 by the expiration of the Exemption Period. The Board,
including a majority of the Independent Trustees, will make such
adjustments as it deems necessary or appropriate to ensure that the
[[Page 62363]]
Applicant comes into compliance with section 18 of the Act within a
reasonable period of time, not to exceed the expiration of the
Exemption Period. Each Applicant will make and preserve minutes
describing these reports and the Board's review, including copies of
such reports and all other information provided to or relied upon by
the Board, for a period of not less than six years, the first two years
in an easily accessible place.
For the Commission, by the Division of Investment Management,
under delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-28352 Filed 11-25-09; 8:45 am]
BILLING CODE 8011-01-P