Prudential Short Duration High Yield Fund, Inc. and Prudential Investments LLC; Notice of Application, 55880-55884 [2012-22244]
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55880
Federal Register / Vol. 77, No. 176 / Tuesday, September 11, 2012 / Notices
the 2013 plan year. On May 8, 2012 (at
77 FR 27099), PBGC gave public notice
that it was submitting the revised
procedures and instructions to OMB for
review. On July 6, 2012, the President
signed into law the Moving Ahead for
Progress in the 21st Century Act (MAP–
21). MAP–21 includes provisions
affecting PBGC premiums. PBGC has
modified its proposed premium filing
procedures and instructions
accordingly; this notice informs the
public of the modified OMB
submission.
PBGC now intends to revise the 2013
filing procedures and instructions to:
• Provide for revoking a prior election
to use the Alternative Premium Funding
Target (APFT) to determine unfunded
vested benefits (UVBs). (Under PBGC
regulations, an election to use the APFT
is irrevocable for 5 years; 2008 was the
first year that plans were permitted to
elect the APFT, so 2013 is the first year
for which it is necessary to collect this
information.)
• Require plan administrators to
provide a breakdown of the total
premium funding target into the same
categories of participants used for
reporting on Schedule SB to Form 5500,
i.e., active participants, terminated
vested participants, and retirees and
beneficiaries receiving payment. PBGC
uses the premium funding target to
estimate termination liability, e.g., for
the annual contingency list, and a
breakdown will enable PBGC to make a
much better estimate than simply using
only the total premium funding target.
• Require plan administrators to
report a contact name to make it easier
for PBGC to contact a plan. Filers also
will have the option of providing an
additional plan contact.
• Require plan administrators to
report the plan effective date for all
plans rather than just new and newly
covered plans. This date helps PBGC
trace plans that change Employer
Identification Number or Plan Number.
• Require plan administrators to
break down the premium credit
information in the comprehensive
premium filing into two items rather
than aggregating the premium credit.
This information will help PBGC to
manage the application of
overpayments.
• Add a data item for the MAP–21
variable-rate premium cap, which is
first effective for 2013.
• Explain how MAP–21 affects
premium computations.
• Eliminate the following data
items—
Æ The plan sponsor’s address.
Æ The boxes to check if there has
been a change in name for a plan
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sponsor or a change in name or address
for a plan administrator.
Æ The payment method for paper
filers.
• Reorder and re-number some items
on the illustrative form that
accompanies and is part of the
instructions, and make other minor
changes.
The collection of information under
the regulation has been approved by
OMB through December 31, 2013, under
control number 1212–0007. PBGC is
requesting that OMB extend approval of
this revised collection of information for
three years. An agency may not conduct
or sponsor, and a person is not required
to respond to, a collection of
information unless it displays a
currently valid OMB control number.
PBGC estimates that it will receive
29,900 premium filings per year from
24,600 plan administrators under this
collection of information. PBGC further
estimates that the average annual
burden of this collection of information
is 8,200 hours and $54,387,000.
Issued in Washington, DC, this 6th day of
September, 2012.
John H. Hanley,
Director, Legislative and Regulatory
Department, Pension Benefit Guaranty
Corporation.
[FR Doc. 2012–22352 Filed 9–10–12; 8:45 am]
BILLING CODE 7709–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
30195; File No. 812–13998]
Prudential Short Duration High Yield
Fund, Inc. and Prudential Investments
LLC; Notice of Application
September 5, 2012.
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.
AGENCY:
Applicants
request an order to permit certain
registered closed-end investment
companies to make periodic
distributions of long-term capital gains
with respect to their outstanding
common stock as frequently as monthly
in any one taxable year, and as
frequently as distributions are specified
by or in accordance with the terms of
any outstanding preferred stock that
such investment companies may issue.
SUMMARY OF APPLICATION:
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Prudential Short Duration
High Yield Fund, Inc. (‘‘Initial Fund’’)
and Prudential Investments LLC (‘‘PI’’
or the ‘‘Adviser’’).
FILING DATES: The application was filed
on January 13, 2012, and amended on
July 10, 2012.
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 October 1, 2012, 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: Elizabeth M. Murphy,
Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090;
Applicants, Gateway Center 3, 100
Mulberry Street, 4th Floor, Newark, NJ
07102, Contact: Kathryn Quirk, Esq. and
Claudia DiGiacomo, Esq.
FOR FURTHER INFORMATION CONTACT: Jaea
F. Hahn, Senior Counsel, at (202) 551–
6870, or Jennifer L. Sawin, 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:
Applicants’ Representations
1. The Initial Fund is a closed-end
management investment company
registered under the Act and is
organized as a Maryland corporation.1
1 Applicants request that any order issued
granting the relief requested in the application also
apply to any registered closed-end investment
company currently advised or to be advised in the
future by PI (including any successor in interest) or
by an entity controlling, controlled by or under
common control (within the meaning of section
2(a)(9) of the Act) with PI (such entities, together
with PI, the ‘‘Advisers’’) that decides in the future
to rely on the requested relief (‘‘Future Fund’’ and
together with the Initial Fund, the ‘‘Funds’’). The
Initial Fund and PI are referred to collectively as
‘‘Applicants’’. Any Future Funds that may rely on
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The investment objective of the Initial
Fund is to provide a high level of
current income by investing primarily
in a diversified portfolio of high yield
fixed income instruments that are rated
below investment grade or, if unrated,
are considered to be of comparable
quality. The Initial Fund’s shares of
common stock are currently listed on
the New York Stock Exchange, a
national securities exchange as defined
in section 2(a)(26) of the Act. The Initial
Fund and any Future Fund may issue
preferred stock. Applicants believe that
closed-end fund investors may prefer an
investment vehicle that provides regular
current income through fixed
distribution policies.
2. PI, a New York limited liability
company, is, and all other Advisers will
be, registered under the Investment
Advisers Act of 1940, as amended
(‘‘Advisers Act’’), or exempt from such
registration. PI acts as investment
adviser to the Initial Fund and has
responsibility for the implementation of
the Initial Fund’s overall investment
strategy. PI entered into a subadvisory
agreement with Prudential Investment
Management Inc. (the ‘‘Subadviser’’), an
affiliate of PI, for the day-to-day
management of the Initial Fund’s
portfolio. The Subadviser is, and any
subadviser to any Future Fund will be,
registered as an investment adviser
under the Advisers Act or exempt from
such registration.
3. Applicants state that, prior to a
Fund’s implementing a distribution
policy (‘‘Distribution Policy’’) in
reliance on the order, the board of
directors (the ‘‘Board’’) of the Fund,
including a majority of the directors
who are not ‘‘interested persons,’’ of
such Fund as defined in section 2(a)(19)
of the Act (the ‘‘Independent
Directors’’), shall have requested, and
the Adviser shall have provided, such
information as is reasonably necessary
to make an informed determination of
whether the Board should adopt a
proposed Distribution Policy. In
particular, the Board and the
Independent Directors will review
information regarding the purpose and
terms of a proposed Distribution Policy;
the likely effects of such policy on such
Fund’s long-term total return (in
relation to market price and its net asset
value (‘‘NAV’’) per share of common
stock); the expected relationship
the order in the future will comply with the terms
and conditions of the application. All existing
registered closed-end investment companies
currently intending to rely on the order have been
named as Applicants. A successor in interest is
limited solely to an entity that results from a
reorganization into another jurisdiction or a change
in the type of business organization.
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between such Fund’s distribution rate
on its common stock under the policy
and the Fund’s total return (in relation
to NAV per share); whether the rate of
distribution would exceed such Fund’s
expected total return in relation to its
NAV per share; and any foreseeable
material effects of such policy on such
Fund’s long-term total return (in
relation to market price and NAV per
share). The Independent Directors shall
also have considered what conflicts of
interest the Adviser and the affiliated
persons of the Adviser and each such
Fund might have with respect to the
adoption or implementation of the
Distribution Policy. Applicants state
that, only after considering such
information shall the Board, including
the Independent Directors, of a Fund
approve a Distribution Policy and in
connection with such approval shall
have determined that the Distribution
Policy is consistent with a Fund’s
investment objectives and in the best
interests of the holders of a Fund’s
common stock.
4. Applicants state that the purpose of
a Distribution Policy, generally, would
be to permit a Fund to distribute over
the course of each year, through
periodic distributions in relatively equal
amounts (plus any required special
distributions), an amount closely
approximating the total taxable income
of such Fund during such year and, if
so determined by its Board, all or a
portion of returns of capital paid by
portfolio companies to such Fund
during the year. Under the Distribution
Policy of a Fund, such Fund would
distribute to its respective common
stockholders a fixed monthly percentage
of the market price of such Fund’s
common stock at a particular point in
time or a fixed monthly percentage of
NAV at a particular time or a fixed
monthly amount, any of which may be
adjusted from time to time. It is
anticipated that under a Distribution
Policy, the minimum annual
distribution rate with respect to such
Fund’s common stock would be
independent of the Fund’s performance
during any particular period but would
be expected to correlate with the Fund’s
performance over time. Except for
extraordinary distributions and
potential increases or decreases in the
final dividend periods in light of a
Fund’s performance for an entire
calendar year and to enable a Fund to
comply with the distribution
requirements of Subchapter M of the
Internal Revenue Code (‘‘Code’’) for the
calendar year, each distribution on the
Fund’s common stock would be at the
stated rate then in effect.
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5. Applicants state that prior to the
implementation of a Distribution Policy
for a Fund, the Board shall have
adopted policies and procedures under
rule 38a-1 under the Act that: (i) are
reasonably designed to ensure that all
notices required to be sent to the Fund’s
stockholders pursuant to section 19(a) of
the Act, rule 19a-1 thereunder and
condition 4 below (each a ‘‘19(a)
Notice’’) include the disclosure required
by rule 19a-1 under the Act and by
condition 2(a) below, and that all other
written communications by the Fund or
its agents regarding distributions under
the Distribution Policy include the
disclosure required by condition 3(a)
below; and (ii) require the Fund to keep
records that demonstrate its compliance
with all of the conditions of the order
and that are necessary for such Fund 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
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 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) of the Act provides, in
relevant part, that the Commission may
exempt any person or transaction from
any provision of the Act 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.
3. Applicants state that the one of the
concerns leading to the enactment of
section 19(b) and adoption of rule 19b–
1 was that stockholders might be unable
to distinguish between frequent
distributions of capital gains and
dividends from investment income.
Applicants state, however, that rule 19a1 effectively addresses this concern by
requiring that distributions (or the
confirmation of the reinvestment
thereof) estimated to be sourced in part
from capital gains or capital be
accompanied by a separate statement
showing the sources of the distribution
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(e.g., estimated net income, net shortterm capital gains, net long-term capital
gains and/or return of capital).
Applicants state that similar
information is included in the Funds’
annual reports to stockholders and on
the Internal Revenue Service Form 1099
DIV, which is sent to each common and
preferred stockholder who received
distributions during a particular year.
4. Applicants further state that each of
the Funds will make the additional
disclosures required by the conditions
set forth below, and each of them will
adopt compliance policies and
procedures in accordance with rule 38a1 under the Act to ensure that all
required 19(a) Notices and disclosures
are sent to stockholders. Applicants
state that the information required by
section 19(a), rule 19a-1, the
Distribution Policy, the policies and
procedures under rule 38a-1 noted
above, and the conditions listed below
will help ensure that each Fund’s
stockholders are provided sufficient
information to understand that their
periodic distributions are not tied to a
Fund’s net investment income (which
for this purpose is the Fund’s taxable
income other than from capital gains)
and realized capital gains to date, and
may not represent yield or investment
return. Accordingly, Applicants assert
that continuing to subject the Funds to
section 19(b) and rule 19b–1 would
afford stockholders no extra protection.
5. Applicants note that section 19(b)
and rule 19b–1 also were intended to
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 submit that the
‘‘selling the dividend’’ concern should
not apply to closed-end investment
companies, such as the Funds, which 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 the
common stock of closed-end funds often
trades in the marketplace at a discount
to its NAV. Applicants believe that this
discount may be reduced if the Funds
are permitted to pay relatively frequent
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dividends on their common stock 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 a
Distribution Policy actually could have
an inappropriate influence on portfolio
management decisions. Applicants state
that, in the absence of an exemption
from rule 19b–1, the adoption of a
periodic distribution plan imposes
pressure on management (i) 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 (ii)
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 assert that by limiting the
number of long-term capital gain
dividends that a Fund may make with
respect to any one year, rule 19b–1 may
prevent the normal and efficient
operation of a periodic distribution plan
whenever that Fund’s realized net longterm 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 force 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 would 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
assert that the requested order would
minimize these anomalous effects of
rule 19b–1 by enabling the Funds to
realize long-term 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 seeks to qualify as 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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regulated investment company under
the Code and 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 either 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 longterm 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
specified periodic dividend at a fixed
rate or the rate determined by the
market, and, like a debt security, is
priced based upon its liquidation
preference, dividend rate, credit quality,
and frequency of payment. Applicants
state that investors buy preferred stock
for the purpose of receiving payments at
the frequency bargained for, and any
application of rule 19b–1 to preferred
stock would be contrary to the
expectation of investors.
12. Applicants request an order under
section 6(c) of the Act granting an
exemption from the provisions of
section 19(b) of the Act and rule 19b–
1 thereunder to permit each Fund to
distribute periodic capital gain
dividends (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 stock and as often
as specified by or determined in
accordance with the terms thereof in
respect of its preferred stock.
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Applicants’ Conditions
Applicants agree that, with respect to
each Fund seeking to rely on the order,
the order will be subject to the following
conditions:
1. Compliance Review and Reporting
The 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 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.
srobinson on DSK4SPTVN1PROD with NOTICES
2. Disclosures to Fund Stockholders
(a) Each 19(a) Notice disseminated to
the holders of the Fund’s common
stock, in addition to the information
required by section19(a) and rule 19a-1:
(i) will provide, in a tabular or
graphical format:
(1) the amount of the distribution, on
a per share of common stock basis,
together with the amounts of such
distribution amount, on a per share of
common stock 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;
(2) the fiscal year-to-date cumulative
amount of distributions, on a per share
of common stock basis, together with
the amounts of such cumulative
amount, on a per share of common stock
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;
(3) 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 ended immediately 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
(4) the cumulative total return in
relation to the change in NAV from the
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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
(ii) will include the following
disclosure:
(1) ‘‘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 Distribution
Policy’’;
(2) ‘‘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’’’ 3; and
(3) ‘‘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 stockholders under rule 30e-1
under the Act, the Fund will:
(i) Describe the terms of the
Distribution Policy (including the fixed
amount or fixed percentage of the
distributions and the frequency of the
distributions);
(ii) include the disclosure required by
condition 2(a)(ii)(1) above;
(iii) state, if applicable, that the
Distribution Policy provides that the
3 The disclosure in condition 2(a)(ii)(2) 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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Board may amend or terminate the
Distribution Policy at any time without
prior notice to Fund stockholders; and
(iv) describe any reasonably
foreseeable circumstances that might
cause the Fund to terminate the
Distribution Policy and any reasonably
foreseeable consequences of such
termination.
(c) Each report provided to
stockholders under rule 30e-1 under the
Act and 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.
3. Disclosure to Stockholders,
Prospective Stockholders and Third
Parties
(a) The Fund will include the
information contained in the relevant
19(a) Notice, including the disclosure
required by condition 2(a)(ii) above, in
any written communication (other than
a communication on Form 1099) about
the Distribution Policy or distributions
under the Distribution Policy by the
Fund, or agents that the Fund has
authorized to make such
communication on the Fund’s behalf, to
any Fund stockholder, prospective
stockholder or third-party information
provider;
(b) The 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 2(a)(ii)
above, as an exhibit to its next filed
Form N–CSR; and
(c) The Fund will post prominently a
statement on its (or the Adviser’s) Web
site containing the information in each
19(a) Notice, including the disclosure
required by condition 2(a)(ii) above, and
will maintain such information on such
Web site for at least 24 months.
4. Delivery of 19(a) Notices to Beneficial
Owners
If a broker, dealer, bank or other
person (‘‘financial intermediary’’) holds
common stock issued by the 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 stock
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
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Federal Register / Vol. 77, No. 176 / Tuesday, September 11, 2012 / Notices
srobinson on DSK4SPTVN1PROD with NOTICES
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 stock; 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.
5. Additional Board Determinations for
Funds Whose Common Stock Trades at
a Premium
If:
(a) The Fund’s common stock has
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 stock 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 12week 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:
(i) 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 Directors:
(1) Will request and evaluate, and the
Fund’s Adviser will furnish, such
information as may be reasonably
necessary to make an informed
determination of whether the
Distribution Policy should be continued
or continued after amendment;
(2) will determine whether
continuation, or continuation after
amendment, of the Distribution Policy is
consistent with the Fund’s investment
objective(s) and policies and is in the
best interests of the Fund and its
stockholders, after considering the
information in condition 5(b)(i)(1)
above; including, without limitation:
(A) whether the Distribution Policy is
accomplishing its purpose(s);
(B) the reasonably foreseeable
material effects of the Distribution
Policy on the Fund’s long-term total
return in relation to the market price
and NAV of the Fund’s common stock;
and
(C) the Fund’s current distribution
rate, as described in condition 5(b)
above, compared with the Fund’s
VerDate Mar<15>2010
19:10 Sep 10, 2012
Jkt 226001
average annual taxable income or total
return over the 2-year period, as
described in condition 5(b), or such
longer period as the Board deems
appropriate; and
(3) based upon that determination,
will approve or disapprove the
continuation, or continuation after
amendment, of the Distribution Policy;
and
(ii) The Board will record the
information considered by it, including
its consideration of the factors listed in
condition 5(b)(i)(2) above, and the basis
for its approval or disapproval of the
continuation, or continuation after
amendment, of the Distribution Policy
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.
7. Amendments to Rule 19b–1
The requested order will expire on the
effective date of any amendments to rule
19b–1 that provide relief permitting
certain closed-end investment
companies to make periodic
distributions of long-term capital gains
with respect to their outstanding
common stock as frequently as twelve
times each year.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–22244 Filed 9–10–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
6. Public Offerings
Sunshine Act Meeting
The Fund will not make a public
offering of the Fund’s common stock
other than:
(a) A rights offering below NAV to
holders of the Fund’s common stock;
(b) an offering in connection with a
dividend reinvestment plan, merger,
consolidation, acquisition, spin-off or
reorganization of the Fund; or
(c) an offering other than an offering
described in conditions 6(a) and 6(b)
above, provided that, with respect to
such other offering:
(i) 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,4 expressed as a
percentage of NAV per share as of such
date, is no more than 1 percentage point
greater than the Fund’s average annual
total return for the 5-year period ending
on such date; 5 and
(ii) 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 by or determined in
accordance with the terms of any
outstanding preferred stock as such
Fund may issue.
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 a Closed Meeting
on Thursday, September 13, 2012 at
2:00 p.m.
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the Closed Meeting. Certain
staff members who have an interest in
the matters also may be present.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (7), 9(B) and (10)
and 17 CFR 200.402(a)(3), (5), (7), 9(ii)
and (10), permit consideration of the
scheduled matters at the Closed
Meeting.
Commissioner Gallagher, as duty
officer, voted to consider the items
listed for the Closed Meeting in closed
session, and determined that no earlier
notice thereof was possible.
The subject matter of the Closed
Meeting scheduled for Thursday,
September 13, 2012 will be:
Institution and settlement of injunctive
actions;
Institution and settlement of
administrative proceedings; and
Other matters relating to enforcement
proceedings.
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.
4 If the Fund has been in operation fewer than six
months, the measured period will begin
immediately following the Fund’s first public
offering.
5 If the Fund has been in operation fewer than five
years, the measured period will begin immediately
following the Fund’s first public offering.
PO 00000
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]]>Agencies
[Federal Register Volume 77, Number 176 (Tuesday, September 11, 2012)]
[Notices]
[Pages 55880-55884]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-22244]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 30195; File No. 812-13998]
Prudential Short Duration High Yield Fund, Inc. and Prudential
Investments LLC; Notice of Application
September 5, 2012.
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 certain
registered closed-end investment companies to make periodic
distributions of long-term capital gains with respect to their
outstanding common stock as frequently as monthly in any one taxable
year, and as frequently as distributions are specified by or in
accordance with the terms of any outstanding preferred stock that such
investment companies may issue.
Applicants: Prudential Short Duration High Yield Fund, Inc. (``Initial
Fund'') and Prudential Investments LLC (``PI'' or the ``Adviser'').
Filing Dates: The application was filed on January 13, 2012, and
amended on July 10, 2012.
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 October 1, 2012, 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: Elizabeth M. Murphy, Secretary, Securities and Exchange
Commission, 100 F Street NE., Washington, DC 20549-1090; Applicants,
Gateway Center 3, 100 Mulberry Street, 4th Floor, Newark, NJ 07102,
Contact: Kathryn Quirk, Esq. and Claudia DiGiacomo, Esq.
FOR FURTHER INFORMATION CONTACT: Jaea F. Hahn, Senior Counsel, at (202)
551-6870, or Jennifer L. Sawin, 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. The Initial Fund is a closed-end management investment company
registered under the Act and is organized as a Maryland corporation.\1\
[[Page 55881]]
The investment objective of the Initial Fund is to provide a high level
of current income by investing primarily in a diversified portfolio of
high yield fixed income instruments that are rated below investment
grade or, if unrated, are considered to be of comparable quality. The
Initial Fund's shares of common stock are currently listed on the New
York Stock Exchange, a national securities exchange as defined in
section 2(a)(26) of the Act. The Initial Fund and any Future Fund may
issue preferred stock. Applicants believe that closed-end fund
investors may prefer an investment vehicle that provides regular
current income through fixed distribution policies.
---------------------------------------------------------------------------
\1\ Applicants request that any order issued granting the relief
requested in the application also apply to any registered closed-end
investment company currently advised or to be advised in the future
by PI (including any successor in interest) or by an entity
controlling, controlled by or under common control (within the
meaning of section 2(a)(9) of the Act) with PI (such entities,
together with PI, the ``Advisers'') that decides in the future to
rely on the requested relief (``Future Fund'' and together with the
Initial Fund, the ``Funds''). The Initial Fund and PI are referred
to collectively as ``Applicants''. Any Future Funds that may rely on
the order in the future will comply with the terms and conditions of
the application. All existing registered closed-end investment
companies currently intending to rely on the order have been named
as Applicants. A successor in interest is limited solely to an
entity that results from a reorganization into another jurisdiction
or a change in the type of business organization.
---------------------------------------------------------------------------
2. PI, a New York limited liability company, is, and all other
Advisers will be, registered under the Investment Advisers Act of 1940,
as amended (``Advisers Act''), or exempt from such registration. PI
acts as investment adviser to the Initial Fund and has responsibility
for the implementation of the Initial Fund's overall investment
strategy. PI entered into a subadvisory agreement with Prudential
Investment Management Inc. (the ``Subadviser''), an affiliate of PI,
for the day-to-day management of the Initial Fund's portfolio. The
Subadviser is, and any subadviser to any Future Fund will be,
registered as an investment adviser under the Advisers Act or exempt
from such registration.
3. Applicants state that, prior to a Fund's implementing a
distribution policy (``Distribution Policy'') in reliance on the order,
the board of directors (the ``Board'') of the Fund, including a
majority of the directors who are not ``interested persons,'' of such
Fund as defined in section 2(a)(19) of the Act (the ``Independent
Directors''), shall have requested, and the Adviser shall have
provided, such information as is reasonably necessary to make an
informed determination of whether the Board should adopt a proposed
Distribution Policy. In particular, the Board and the Independent
Directors will review information regarding the purpose and terms of a
proposed Distribution Policy; the likely effects of such policy on such
Fund's long-term total return (in relation to market price and its net
asset value (``NAV'') per share of common stock); the expected
relationship between such Fund's distribution rate on its common stock
under the policy and the Fund's total return (in relation to NAV per
share); whether the rate of distribution would exceed such Fund's
expected total return in relation to its NAV per share; and any
foreseeable material effects of such policy on such Fund's long-term
total return (in relation to market price and NAV per share). The
Independent Directors shall also have considered what conflicts of
interest the Adviser and the affiliated persons of the Adviser and each
such Fund might have with respect to the adoption or implementation of
the Distribution Policy. Applicants state that, only after considering
such information shall the Board, including the Independent Directors,
of a Fund approve a Distribution Policy and in connection with such
approval shall have determined that the Distribution Policy is
consistent with a Fund's investment objectives and in the best
interests of the holders of a Fund's common stock.
4. Applicants state that the purpose of a Distribution Policy,
generally, would be to permit a Fund to distribute over the course of
each year, through periodic distributions in relatively equal amounts
(plus any required special distributions), an amount closely
approximating the total taxable income of such Fund during such year
and, if so determined by its Board, all or a portion of returns of
capital paid by portfolio companies to such Fund during the year. Under
the Distribution Policy of a Fund, such Fund would distribute to its
respective common stockholders a fixed monthly percentage of the market
price of such Fund's common stock at a particular point in time or a
fixed monthly percentage of NAV at a particular time or a fixed monthly
amount, any of which may be adjusted from time to time. It is
anticipated that under a Distribution Policy, the minimum annual
distribution rate with respect to such Fund's common stock would be
independent of the Fund's performance during any particular period but
would be expected to correlate with the Fund's performance over time.
Except for extraordinary distributions and potential increases or
decreases in the final dividend periods in light of a Fund's
performance for an entire calendar year and to enable a Fund to comply
with the distribution requirements of Subchapter M of the Internal
Revenue Code (``Code'') for the calendar year, each distribution on the
Fund's common stock would be at the stated rate then in effect.
5. Applicants state that prior to the implementation of a
Distribution Policy for a Fund, the Board shall have adopted policies
and procedures under rule 38a-1 under the Act that: (i) are reasonably
designed to ensure that all notices required to be sent to the Fund's
stockholders pursuant to section 19(a) of the Act, rule 19a-1
thereunder and condition 4 below (each a ``19(a) Notice'') include the
disclosure required by rule 19a-1 under the Act and by condition 2(a)
below, and that all other written communications by the Fund or its
agents regarding distributions under the Distribution Policy include
the disclosure required by condition 3(a) below; and (ii) require the
Fund to keep records that demonstrate its compliance with all of the
conditions of the order and that are necessary for such Fund 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 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 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) of the Act provides, in relevant part, that the
Commission may exempt any person or transaction from any provision of
the Act 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.
3. Applicants state that the one of the concerns leading to the
enactment of section 19(b) and adoption of rule 19b-1 was that
stockholders might be unable to distinguish 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 distributions (or the confirmation of the
reinvestment thereof) estimated to be sourced in part from capital
gains or capital be accompanied by a separate statement showing the
sources of the distribution
[[Page 55882]]
(e.g., estimated net income, net short-term capital gains, net long-
term capital gains and/or return of capital). Applicants state that
similar information is included in the Funds' annual reports to
stockholders and on the Internal Revenue Service Form 1099 DIV, which
is sent to each common and preferred stockholder who received
distributions during a particular year.
4. Applicants further state that each of the Funds will make the
additional disclosures required by the conditions set forth below, and
each of them will adopt compliance policies and procedures in
accordance with rule 38a-1 under the Act to ensure that all required
19(a) Notices and disclosures are sent to stockholders. Applicants
state that the information required by section 19(a), rule 19a-1, the
Distribution Policy, the policies and procedures under rule 38a-1 noted
above, and the conditions listed below will help ensure that each
Fund's stockholders are provided sufficient information to understand
that their periodic distributions are not tied to a Fund's net
investment income (which for this purpose is the Fund's taxable income
other than from capital gains) and realized capital gains to date, and
may not represent yield or investment return. Accordingly, Applicants
assert that continuing to subject the Funds to section 19(b) and rule
19b-1 would afford stockholders no extra protection.
5. Applicants note that section 19(b) and rule 19b-1 also were
intended to 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 submit that the ``selling the
dividend'' concern should not apply to closed-end investment companies,
such as the Funds, which 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 the common stock of closed-end funds
often trades in the marketplace at a discount to its NAV. Applicants
believe that this discount may be reduced if the Funds are permitted to
pay relatively frequent dividends on their common stock 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 a
Distribution Policy actually could have an inappropriate influence on
portfolio management decisions. Applicants state that, in the absence
of an exemption from rule 19b-1, the adoption of a periodic
distribution plan imposes pressure on management (i) 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 (ii) 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 assert that by limiting the
number of long-term capital gain dividends that a Fund may make with
respect to any one year, rule 19b-1 may prevent the normal and
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 force 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 would 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 assert that the requested order would
minimize these anomalous effects of rule 19b-1 by enabling the Funds 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 seeks to qualify as a regulated investment
company under the Code and 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 either 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 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 specified periodic dividend at a fixed rate or the
rate determined by the market, and, like a debt security, is priced
based upon its liquidation preference, dividend rate, credit quality,
and frequency of payment. Applicants state that investors buy preferred
stock for the purpose of receiving payments at the frequency bargained
for, and any application of rule 19b-1 to preferred stock would be
contrary to the expectation of investors.
12. Applicants request an order under section 6(c) of the Act
granting an exemption from the provisions of section 19(b) of the Act
and rule 19b-1 thereunder to permit each Fund to distribute periodic
capital gain dividends (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
stock and as often as specified by or determined in accordance with the
terms thereof in respect of its preferred stock.
[[Page 55883]]
Applicants' Conditions
Applicants agree that, with respect to each Fund seeking to rely on
the order, the order will be subject to the following conditions:
1. Compliance Review and Reporting
The 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 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.
2. Disclosures to Fund Stockholders
(a) Each 19(a) Notice disseminated to the holders of the Fund's
common stock, in addition to the information required by section19(a)
and rule 19a-1:
(i) will provide, in a tabular or graphical format:
(1) the amount of the distribution, on a per share of common stock
basis, together with the amounts of such distribution amount, on a per
share of common stock 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;
(2) the fiscal year-to-date cumulative amount of distributions, on
a per share of common stock basis, together with the amounts of such
cumulative amount, on a per share of common stock 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;
(3) 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
ended immediately 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
(4) 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
(ii) will include the following disclosure:
(1) ``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 Distribution Policy'';
(2) ``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''' \3\; and
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\3\ The disclosure in condition 2(a)(ii)(2) will be included
only if the current distribution or the fiscal year-to-date
cumulative distributions are estimated to include a return of
capital.
---------------------------------------------------------------------------
(3) ``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 stockholders under
rule 30e-1 under the Act, the Fund will:
(i) Describe the terms of the Distribution Policy (including the
fixed amount or fixed percentage of the distributions and the frequency
of the distributions);
(ii) include the disclosure required by condition 2(a)(ii)(1)
above;
(iii) state, if applicable, that the Distribution Policy provides
that the Board may amend or terminate the Distribution Policy at any
time without prior notice to Fund stockholders; and
(iv) describe any reasonably foreseeable circumstances that might
cause the Fund to terminate the Distribution Policy and any reasonably
foreseeable consequences of such termination.
(c) Each report provided to stockholders under rule 30e-1 under the
Act and 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.
3. Disclosure to Stockholders, Prospective Stockholders and Third
Parties
(a) The Fund will include the information contained in the relevant
19(a) Notice, including the disclosure required by condition 2(a)(ii)
above, in any written communication (other than a communication on Form
1099) about the Distribution Policy or distributions under the
Distribution Policy by the Fund, or agents that the Fund has authorized
to make such communication on the Fund's behalf, to any Fund
stockholder, prospective stockholder or third-party information
provider;
(b) The 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
2(a)(ii) above, as an exhibit to its next filed Form N-CSR; and
(c) The Fund will post prominently a statement on its (or the
Adviser's) Web site containing the information in each 19(a) Notice,
including the disclosure required by condition 2(a)(ii) above, and will
maintain such information on such Web site for at least 24 months.
4. Delivery of 19(a) Notices to Beneficial Owners
If a broker, dealer, bank or other person (``financial
intermediary'') holds common stock issued by the 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 stock 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
[[Page 55884]]
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 stock; 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.
5. Additional Board Determinations for Funds Whose Common Stock Trades
at a Premium
If:
(a) The Fund's common stock has 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 stock 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:
(i) 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 Directors:
(1) Will request and evaluate, and the Fund's Adviser will furnish,
such information as may be reasonably necessary to make an informed
determination of whether the Distribution Policy should be continued or
continued after amendment;
(2) will determine whether continuation, or continuation after
amendment, of the Distribution Policy is consistent with the Fund's
investment objective(s) and policies and is in the best interests of
the Fund and its stockholders, after considering the information in
condition 5(b)(i)(1) above; including, without limitation:
(A) whether the Distribution Policy is accomplishing its
purpose(s);
(B) the reasonably foreseeable material effects of the Distribution
Policy on the Fund's long-term total return in relation to the market
price and NAV of the Fund's common stock; and
(C) the Fund's current distribution rate, as described in condition
5(b) above, compared with the Fund's average annual taxable income or
total return over the 2-year period, as described in condition 5(b), or
such longer period as the Board deems appropriate; and
(3) based upon that determination, will approve or disapprove the
continuation, or continuation after amendment, of the Distribution
Policy; and
(ii) The Board will record the information considered by it,
including its consideration of the factors listed in condition
5(b)(i)(2) above, and the basis for its approval or disapproval of the
continuation, or continuation after amendment, of the Distribution
Policy 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.
6. Public Offerings
The Fund will not make a public offering of the Fund's common stock
other than:
(a) A rights offering below NAV to holders of the Fund's common
stock;
(b) an offering in connection with a dividend reinvestment plan,
merger, consolidation, acquisition, spin-off or reorganization of the
Fund; or
(c) an offering other than an offering described in conditions 6(a)
and 6(b) above, provided that, with respect to such other offering:
(i) 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,\4\ expressed as a percentage of NAV
per share as of such date, is no more than 1 percentage point greater
than the Fund's average annual total return for the 5-year period
ending on such date; \5\ and
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\4\ If the Fund has been in operation fewer than six months, the
measured period will begin immediately following the Fund's first
public offering.
\5\ If the Fund has been in operation fewer than five years, the
measured period will begin immediately following the Fund's first
public offering.
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(ii) 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 by or determined in
accordance with the terms of any outstanding preferred stock as such
Fund may issue.
7. Amendments to Rule 19b-1
The requested order will expire on the effective date of any
amendments to rule 19b-1 that provide relief permitting certain closed-
end investment companies to make periodic distributions of long-term
capital gains with respect to their outstanding common stock as
frequently as twelve times each year.
For the Commission, by the Division of Investment Management,
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-22244 Filed 9-10-12; 8:45 am]
BILLING CODE 8011-01-P
