The Adams Express Company and Petroleum & Resources Corporation; Notice of Application, 75207-75211 [2012-30548]
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Federal Register / Vol. 77, No. 244 / Wednesday, December 19, 2012 / Notices
purchases of securities in Affiliated
Underwritings are in the best interest of
shareholders of the Fund.
14. Each Fund will maintain and
preserve permanently in an easily
accessible place a written copy of the
procedures described in the preceding
condition, and any modifications to
such procedures, and will maintain and
preserve for a period of not less than six
years from the end of the fiscal year in
which any purchase in an Affiliated
Underwriting occurred, the first two
years in an easily accessible place, a
written record of each purchase of
securities in Affiliated Underwritings,
once an investment by a Fund of Funds
in the securities of the Fund exceeds the
limit of section 12(d)(1)(A)(i) of the Act,
setting forth from whom the securities
were acquired, the identity of the
underwriting syndicate’s members, the
terms of the purchase, and the
information or materials upon which
the Board’s determinations were made.
15. Before investing in a Fund in
excess of the limits in section
12(d)(1)(A), a Fund of Funds will
execute a FOF Participation Agreement
with the Fund stating, without
limitation, that their respective boards
of directors or trustees and their
investment advisers, or Trustee and
Sponsor, as applicable, understand the
terms and conditions of the order, and
agree to fulfill their responsibilities
under the order. At the time of its
investment in Shares of a Fund in
excess of the limit in section
12(d)(1)(A)(i), a Fund of Funds will
notify the Fund of the investment. At
such time, the Fund of Funds will also
transmit to the Fund a list of the names
of each Fund of Funds Affiliate and
Underwriting Affiliate. The Fund of
Funds will notify the Fund of any
changes to the list of the names as soon
as reasonably practicable after a change
occurs. The Fund and the Fund of
Funds will maintain and preserve a
copy of the order, the FOF Participation
Agreement, and the list with any
updated information for the duration of
the investment and for a period of not
less than six years thereafter, the first
two years in an easily accessible place.
16. Before approving any advisory
contract under section 15 of the Act, the
board of directors or trustees of each
Investing Management Company,
including a majority of the independent
directors or trustees, will find that the
advisory fees charged under such
contract are based on services provided
that will be in addition to, rather than
duplicative of, the services provided
under the advisory contract(s) of any
Fund in which the Investment
Management Company may invest.
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These findings and their basis will be
recorded fully in the minute books of
the appropriate Investing Management
Company.
17. Any sales charges and/or service
fees charged with respect to shares of a
Fund of Funds will not exceed the
limits applicable to a fund of funds as
set forth in NASD Conduct Rule 2830.
18. No Fund will acquire securities of
any investment company or company
relying on section 3(c)(1) or 3(c)(7) of
the Act in excess of the limits contained
in section 12(d)(1)(A) of the Act, except
to the extent that such Fund: (i)
Receives securities of another
investment company as a dividend or as
a result of a plan of reorganization of a
company (other than a plan devised for
the purpose of evading section 12(d)(1)
of the Act); or (ii) acquires (or is deemed
to have acquired) securities of another
investment company pursuant to
exemptive relief from the Commission
permitting such Fund to (a) acquire
securities of one or more investment
companies for short-term cash
management purposes or (b) engage in
interfund borrowing and lending
transactions.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–30551 Filed 12–18–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
30304; File No. 812–14064]
The Adams Express Company and
Petroleum & Resources Corporation;
Notice of Application
December 13, 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:
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 shares 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 shares that
such investment companies may issue.
SUMMARY:
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75207
The Adams Express
Company and Petroleum & Resources
Corporation (the ‘‘Funds’’).
DATES: Filing Dates: The application was
filed on July 27, 2012 and amended on
November 20, 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 January 7, 2013, 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, Seven Saint Paul Street,
Suite 1140, Baltimore, MD 21202.
FOR FURTHER INFORMATION CONTACT:
Marilyn Mann, Special Counsel, at (202)
551–6813, or Mary Kay Frech, Branch
Chief, at (202) 551–6821 (Division of
Investment Management, Office of
Investment Company Regulation).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained via the Commission’s
Web site by searching for the file
number, or for an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm, or by
calling (202) 551–8090.
APPLICANTS:
Applicants’ Representations
1. The Funds are internally-managed
closed-end management investment
companies registered under the Act and
are organized as Maryland
corporations.1 The common shares of
the Funds are currently listed on the
New York Stock Exchange and in the
future will be listed on the New York
Stock Exchange or another national
securities exchange as defined in
section 2(a)(26) of the Act (each, an
‘‘Exchange’’). The Funds currently do
not intend to issue any preferred shares,
but may do so in the future. The Funds
1 Applicants request that the order also apply to
any successor in interest to the Funds. A successor
in interest is limited to entities that result from a
reorganization into another jurisdiction or a change
in the type of business organization.
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are non-control (within the meaning of
section 2(a)(9) of the Act) affiliates that
are internally-managed by shared
personnel, including a common board of
directors, and common executive
officers and portfolio managers. As of
June 30, 2012, The Adams Express
Company held approximately 8.5% of
the outstanding shares of Petroleum &
Resources Corporation. Both Funds’
investment objectives are preservation
of capital, the attainment of reasonable
income from investments, and an
opportunity for capital appreciation.
Applicants believe that investors in the
common shares of the Funds may prefer
an investment vehicle that provides
regular distributions and a consistent
cash flow.
2. Applicants represent that, before a
Fund implements a proposed
distribution policy with respect to its
common shares in reliance on the order,
the Fund’s board of directors (the
‘‘Board’’), including a majority of the
members of the Board who are not
‘‘interested persons’’ of the respective
Fund, as defined in section 2(a)(19) of
the Act (the ‘‘Independent Directors’’),
will approve the Fund’s adoption of the
proposed distribution policy.
Applicants represent that the Board will
request and evaluate, and the Fund will
furnish, such information as may be
reasonably necessary to make an
informed determination of whether the
Board should adopt and implement the
proposed distribution policy.
Applicants state that, in particular, the
Board, including the Independent
Directors, will review information
regarding the purpose and terms of the
proposed distribution policy, any
reasonably foreseeable material effect of
such policy on the Fund’s long-term
total return (in relation to market price
and net asset value per common share
(‘‘NAV’’)), the relationship between
such Fund’s distribution rate on its
common shares under the policy and
such Fund’s total return (in relation to
NAV), and whether the rate of
distribution will exceed such Fund’s
expected total return (in relation to
NAV). Applicants represent that the
Independent Directors also will
consider what conflicts of interest the
affiliated persons of the Fund might
have with respect to the adoption or
implementation of such policy.
Applicants state that, after considering
such information, the Board of the
relevant Fund, including the
Independent Directors, will only
approve a distribution policy with
respect to the Fund’s common shares
(the ‘‘Plan’’), if the Board, including the
Independent Directors, determines that
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the Plan is consistent with the Fund’s
investment objective(s) and in the best
interests of the Fund’s common
shareholders.
3. Applicants state that the purpose of
any Plan will be to permit a Fund to
provide its common shareholders with
periodic distributions as nearly equal as
practicable and any required special
distributions over the course of each
year. Applicants represent that, under
the Plan of a Fund, such Fund will
distribute to its respective common
shareholders a fixed percentage of the
market price of such Fund’s common
shares at a particular point in time, or
a fixed percentage of NAV at a
particular time or a fixed amount per
common share, any of which may be
adjusted from time to time. Applicants
state that the minimum annual
distribution rate with respect to such
Fund’s common shares 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 the
Fund’s performance for the entire
calendar or taxable year and to enable
the Fund to comply with the
distribution requirements of Subchapter
M and section 4982 of the Internal
Revenue Code of 1986, as amended (the
‘‘Code’’) for the calendar or taxable year,
each distribution on the common shares
would be at the stated rate then in
effect.
4. Applicants state that, in
conjunction with approving a Plan, the
Board of each Fund will also approve
the Fund’s adoption of compliance
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 each Fund’s
shareholders 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 and by condition 2(a)
below, and that all other written
communications by the Fund or its
agents described in condition 3(a) below
about the distributions under the Plan
include the disclosure required by
condition 3(a) below, and (ii) require
each such Fund to keep records that
demonstrate its compliance with all of
the conditions of the order and that are
necessary for the Fund to form the basis
for, or demonstrate the calculation of,
the amounts disclosed in its 19(a)
Notices.
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Applicants’ Legal Analysis
1. Section 19(b) generally makes it
unlawful for any registered investment
company to make long-term capital
gains distributions more than once
every twelve months. Rule 19b–1 under
the Act limits the number of capital
gains dividends, as defined in section
852(b)(3)(C) of the Code
(‘‘distributions’’), that a fund may make
with respect to any one taxable year to
one, plus a supplemental ‘‘clean up’’
distribution made pursuant to section
855 of the Code not exceeding 10% of
the total amount distributed for the year,
plus one additional capital gain
dividend made in whole or in part to
avoid the excise tax under section 4982
of the Code.
2. Section 6(c) of the Act provides that
the Commission may, by order upon
application, conditionally or
unconditionally exempt any person,
security, or transaction, or any class or
classes of persons, securities or
transactions, from any provision of the
Act or any rule under the Act, if and to
the extent that the exemption is
necessary or appropriate in the public
interest and consistent with the
protection of investors and the purposes
fairly intended by the policy and
provisions of the Act.
3. Applicants state that the one of the
concerns leading to the enactment of
section 19(b) and adoption of rule 19b–
1 was that shareholders 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
(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 shareholders and IRS
Form 1099–DIV, which is sent to each
shareholder who received distributions
during a particular year (including
shareholders who have sold shares
during the 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 shareholders. Applicants
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argue that by providing the information
required by section 19(a) and rule 19a1, and by complying with the
procedures adopted under the Plan and
the conditions listed below, each Fund’s
shareholders would be provided
sufficient information to understand
that their periodic distributions are not
tied to the 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 shareholders
no extra protection.
5. Applicants note that section 19(b)
of the Act and rule 19b–1 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 common
shares of closed-end funds often trade in
the marketplace at a discount to the
funds’ NAV. Applicants believe that this
discount may be reduced if the Funds
are permitted to pay relatively frequent
dividends on their common shares at a
consistent rate, whether or not those
dividends contain an element of capital
gain.
7. Applicants assert that the
application of rule 19b–1 to a Plan
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
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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 capital
gain distributions 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 the fixed regular
periodic distributions under a periodic
distribution plan to be funded with
returns of capital 2 (to the extent net
investment income and realized short
term capital gains are insufficient to
fund the distribution), even though
realized net long-term capital gains
otherwise could be available. To
distribute all of a fund’s long-term
capital gains within the limits in rule
19b–1, a fund may be required to make
total distributions in excess of the
annual amount called for by its periodic
distribution plan or to retain and pay
taxes on the excess amount. Applicants
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
regulated investment company under
the Code and that has both common
shares and preferred shares 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
share dividends. Applicants state that
although rule 19b–1 allows a fund some
flexibility with respect to the frequency
of capital gains distributions, a fund
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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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 shares 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 shares issued by a
closed-end fund. Applicants assert that
such distributions are either fixed or are
determined in periodic auctions or
remarketings by reference to short-term
interest rates rather than by reference to
performance of the issuer, and Revenue
Ruling 89–81 determines the proportion
of such distributions that are comprised
of the long-term capital gains.
11. Applicants also submit that the
‘‘selling the dividend’’ concern is not
applicable to preferred shares, which
entitle a holder to no more than a
periodic dividend at a fixed rate or the
rate determined by the market, and, like
a debt security, are priced based upon
their liquidation value, dividend rate,
credit quality, and frequency of
payment. Applicants state that investors
buy preferred shares for the purpose of
receiving payments at the frequency
bargained for and do not expect the
liquidation value of their shares to
change.
12. Applicants request an order
pursuant to section 6(c) of the Act
granting an exemption from 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 shares and as
often as specified by or determined in
accordance with the terms thereof in
respect of its preferred shares (if any).
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 has 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 Shareholders.
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(a) Each 19(a) Notice disseminated to
the holders of the Fund’s common
shares, in addition to the information
required by section 19(a) and rule 19a–
1:
(i) will provide, in a tabular or
graphical format:
(1) The amount of the distribution, on
a per common share basis, together with
the amounts of such distribution
amount, on a per common share basis
and as a percentage of such distribution
amount, from estimated: (A) net
investment income; (B) net realized
short-term capital gains; (C) net realized
long-term capital gains; and (D) return
of capital or other capital source;
(2) the fiscal year-to-date cumulative
amount of distributions, on a per
common share basis, together with the
amounts of such cumulative amount, on
a per common share basis and as a
percentage of such cumulative amount
of distributions, from estimated: (A) Net
investment income; (B) net realized
short-term capital gains; (C) net realized
long-term capital gains; and (D) return
of capital or other capital source;
(3) the average annual total return in
relation to the change in NAV for the 5year period 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 Plan’’;
(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
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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 shareholders under rule 30e–
1 under the Act, the Fund will:
(i) Describe the terms of the Plan
(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 Plan
provides that the Board may amend or
terminate the Plan at any time without
prior notice to Fund shareholders; and
(iv) describe any reasonably
foreseeable circumstances that might
cause the Fund to terminate the Plan
and any reasonably foreseeable
consequences of such termination.
(c) Each report provided to
shareholders under rule 30e–1 under
the Act, and 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 Common
Shareholders, Prospective Common
Shareholders 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 Form 1099) about the Plan or
distributions under the Plan by the
Fund, or agents that the Fund has
authorized to make such
communication on the Fund’s behalf, to
any Fund common shareholder,
3 The disclosure in this 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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prospective common shareholder 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 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 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 shares
issued by a Fund in nominee name, or
otherwise, on behalf of a beneficial
owner, the Fund: (a) will request that
the financial intermediary, or its agent,
forward the 19(a) Notice to all beneficial
owners of the Fund’s shares held
through such financial intermediary; (b)
will provide, in a timely manner, to the
financial intermediary, or its agent,
enough copies of the 19(a) Notice
assembled in the form and at the place
that the financial intermediary, or its
agent, reasonably requests to facilitate
the financial intermediary’s sending of
the 19(a) Notice to each beneficial
owner of the Fund’s shares; and (c)
upon the request of any financial
intermediary, or its agent, that receives
copies of the 19(a) Notice, will pay the
financial intermediary, or its agent, the
reasonable expenses of sending the 19(a)
Notice to such beneficial owners.
5. Additional Board Determinations
for Funds Whose Common Shares Trade
at a Premium.
If:
(a) The Fund’s common shares have
traded on the Exchange that they
primarily trade on at the time in
question at an average premium to NAV
equal to or greater than 10%, as
determined on the basis of the average
of the discount or premium to NAV of
the Fund’s common shares as of the
close of each trading day over a 12-week
rolling period (each such 12-week
rolling period ending on the last trading
day of each week); and
(b) The Fund’s annualized
distribution rate for such 12-week
rolling period, expressed as a percentage
of NAV as of the ending date of such 12week rolling period, is greater than the
Fund’s average annual total return in
relation to the change in NAV over the
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Federal Register / Vol. 77, No. 244 / Wednesday, December 19, 2012 / Notices
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 will furnish, such information as
may be reasonably necessary to make an
informed determination of whether the
Plan should be continued or continued
after amendment;
(2) will determine whether
continuation, or continuation after
amendment, of the Plan is consistent
with the Fund’s investment objective(s)
and policies and in the best interests of
the Fund and its shareholders, after
considering the information in
condition 5(b)(i)(1) above; including,
without limitation:
(A) Whether the Plan is
accomplishing its purpose(s);
(B) the reasonably foreseeable
material effects of the Plan on the
Fund’s long-term total return in relation
to the market price and NAV of the
Fund’s common shares; and
(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 Plan; 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 Plan in its meeting
minutes, which must be made and
preserved for a period of not less than
six years from the date of such meeting,
the first two years in an easily accessible
place.
6. Public Offerings. The Fund will not
make a public offering of the Fund’s
common shares other than:
(a) A rights offering below NAV to
holders of the Fund’s common shares;
(b) an offering in connection with a
dividend reinvestment plan, merger,
consolidation, acquisition, spin off or
reorganization of the Fund; or
(c) an offering other than an offering
described in conditions 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
VerDate Mar<15>2010
16:35 Dec 18, 2012
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immediately prior to the most recent
distribution record date, expressed as a
percentage of NAV 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; 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
shares 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
shares that such Fund may issue.
7. Amendments to Rule 19b–1. The
requested order will expire on the
effective date of any amendment to rule
19b–1 that provides relief permitting
certain closed-end investment
companies to make periodic
distributions of long-term capital gains
with respect to their outstanding
common shares 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. 2012–30548 Filed 12–18–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–68433; File No. S7–13–12]
Order Granting Conditional
Exemptions Under the Securities
Exchange Act of 1934 in Connection
With Portfolio Margining of Swaps and
Security-Based Swaps
December 14, 2012.
Securities and Exchange
Commission.
ACTION: Exemptive order; request for
comment.
AGENCY:
The Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
is issuing an order granting conditional
exemptive relief from compliance with
certain provisions of the Securities
Exchange Act of 1934 (‘‘Exchange Act’’)
in connection with a program to
commingle and portfolio margin
customer positions in cleared credit
default swaps (‘‘CDS’’), which include
both swaps and security-based swaps, in
a segregated account established and
SUMMARY:
PO 00000
Frm 00107
Fmt 4703
Sfmt 4703
75211
maintained in accordance with Section
4d(f) of the Commodity Exchange Act
(‘‘CEA’’).
Effective Date: This exemptive
order is effective on December 19, 2012.
Comments Due Date: Comments must be
received on or before February 19, 2013.
DATES:
Comments may be
submitted, identified by File Number
S7–13–12, by any of the following
methods:
ADDRESSES:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/other.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number S7–13–12 on the subject line;
or
• Use the Federal Rulemaking Portal
(https://www.regulations.gov). Follow the
instructions for submitting comments.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090. All submissions should
refer to File Number S7–13–12. This file
number should be included on the
subject line if email is used. To help us
process and review your comments
more efficiently, please use only one
method. The Commission will post all
comments on the Commission’s Internet
Web site (https://www.sec/gov/rules/
other.shtml). Comments are also
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. All comments
received will be posted without charge;
the Commission does not edit personal
identifying information from
submissions. You should only submit
information that you wish to make
publicly available.
FOR FURTHER INFORMATION CONTACT:
Emily Westerberg Russell, Senior
Special Counsel, Catherine Moore,
Senior Special Counsel, and Natasha Vij
Greiner, Special Counsel, at 202–551–
5550, Division of Trading and Markets,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–7010.
I. Introduction
On July 21, 2010, President Barack
Obama signed the Dodd-Frank Act into
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[Federal Register Volume 77, Number 244 (Wednesday, December 19, 2012)]
[Notices]
[Pages 75207-75211]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-30548]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 30304; File No. 812-14064]
The Adams Express Company and Petroleum & Resources Corporation;
Notice of Application
December 13, 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.
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SUMMARY: 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 shares 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 shares that such
investment companies may issue.
Applicants: The Adams Express Company and Petroleum & Resources
Corporation (the ``Funds'').
DATES: Filing Dates: The application was filed on July 27, 2012 and
amended on November 20, 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 January 7, 2013, 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,
Seven Saint Paul Street, Suite 1140, Baltimore, MD 21202.
FOR FURTHER INFORMATION CONTACT: Marilyn Mann, Special Counsel, at
(202) 551-6813, or Mary Kay Frech, Branch Chief, at (202) 551-6821
(Division of Investment Management, Office of Investment Company
Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or for an
applicant using the Company name box, at https://www.sec.gov/search/search.htm, or by calling (202) 551-8090.
Applicants' Representations
1. The Funds are internally-managed closed-end management
investment companies registered under the Act and are organized as
Maryland corporations.\1\ The common shares of the Funds are currently
listed on the New York Stock Exchange and in the future will be listed
on the New York Stock Exchange or another national securities exchange
as defined in section 2(a)(26) of the Act (each, an ``Exchange''). The
Funds currently do not intend to issue any preferred shares, but may do
so in the future. The Funds
[[Page 75208]]
are non-control (within the meaning of section 2(a)(9) of the Act)
affiliates that are internally-managed by shared personnel, including a
common board of directors, and common executive officers and portfolio
managers. As of June 30, 2012, The Adams Express Company held
approximately 8.5% of the outstanding shares of Petroleum & Resources
Corporation. Both Funds' investment objectives are preservation of
capital, the attainment of reasonable income from investments, and an
opportunity for capital appreciation. Applicants believe that investors
in the common shares of the Funds may prefer an investment vehicle that
provides regular distributions and a consistent cash flow.
---------------------------------------------------------------------------
\1\ Applicants request that the order also apply to any
successor in interest to the Funds. A successor in interest is
limited to entities that result from a reorganization into another
jurisdiction or a change in the type of business organization.
---------------------------------------------------------------------------
2. Applicants represent that, before a Fund implements a proposed
distribution policy with respect to its common shares in reliance on
the order, the Fund's board of directors (the ``Board''), including a
majority of the members of the Board who are not ``interested persons''
of the respective Fund, as defined in section 2(a)(19) of the Act (the
``Independent Directors''), will approve the Fund's adoption of the
proposed distribution policy. Applicants represent that the Board will
request and evaluate, and the Fund will furnish, such information as
may be reasonably necessary to make an informed determination of
whether the Board should adopt and implement the proposed distribution
policy. Applicants state that, in particular, the Board, including the
Independent Directors, will review information regarding the purpose
and terms of the proposed distribution policy, any reasonably
foreseeable material effect of such policy on the Fund's long-term
total return (in relation to market price and net asset value per
common share (``NAV'')), the relationship between such Fund's
distribution rate on its common shares under the policy and such Fund's
total return (in relation to NAV), and whether the rate of distribution
will exceed such Fund's expected total return (in relation to NAV).
Applicants represent that the Independent Directors also will consider
what conflicts of interest the affiliated persons of the Fund might
have with respect to the adoption or implementation of such policy.
Applicants state that, after considering such information, the Board of
the relevant Fund, including the Independent Directors, will only
approve a distribution policy with respect to the Fund's common shares
(the ``Plan''), if the Board, including the Independent Directors,
determines that the Plan is consistent with the Fund's investment
objective(s) and in the best interests of the Fund's common
shareholders.
3. Applicants state that the purpose of any Plan will be to permit
a Fund to provide its common shareholders with periodic distributions
as nearly equal as practicable and any required special distributions
over the course of each year. Applicants represent that, under the Plan
of a Fund, such Fund will distribute to its respective common
shareholders a fixed percentage of the market price of such Fund's
common shares at a particular point in time, or a fixed percentage of
NAV at a particular time or a fixed amount per common share, any of
which may be adjusted from time to time. Applicants state that the
minimum annual distribution rate with respect to such Fund's common
shares 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 the Fund's performance for the entire calendar or taxable year and
to enable the Fund to comply with the distribution requirements of
Subchapter M and section 4982 of the Internal Revenue Code of 1986, as
amended (the ``Code'') for the calendar or taxable year, each
distribution on the common shares would be at the stated rate then in
effect.
4. Applicants state that, in conjunction with approving a Plan, the
Board of each Fund will also approve the Fund's adoption of compliance
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
each Fund's shareholders 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 and by condition 2(a)
below, and that all other written communications by the Fund or its
agents described in condition 3(a) below about the distributions under
the Plan include the disclosure required by condition 3(a) below, and
(ii) require each such Fund to keep records that demonstrate its
compliance with all of the conditions of the order and that are
necessary for the 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) generally makes it unlawful for any registered
investment company to make long-term capital gains distributions more
than once every twelve months. Rule 19b-1 under the Act limits the
number of capital gains dividends, as defined in section 852(b)(3)(C)
of the Code (``distributions''), that a fund may make with respect to
any one taxable year to one, plus a supplemental ``clean up''
distribution made pursuant to section 855 of the Code not exceeding 10%
of the total amount distributed for the year, plus one additional
capital gain dividend made in whole or in part to avoid the excise tax
under section 4982 of the Code.
2. Section 6(c) of the Act provides that the Commission may, by
order upon application, conditionally or unconditionally exempt any
person, security, or transaction, or any class or classes of persons,
securities or transactions, from any provision of the Act or any rule
under the Act, if and to the extent that the exemption is necessary or
appropriate in the public interest and consistent with the protection
of investors and the purposes fairly intended by the policy and
provisions of the Act.
3. Applicants state that the one of the concerns leading to the
enactment of section 19(b) and adoption of rule 19b-1 was that
shareholders 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 (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 shareholders and IRS Form 1099-DIV, which is sent to
each shareholder who received distributions during a particular year
(including shareholders who have sold shares during the 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 shareholders. Applicants
[[Page 75209]]
argue that by providing the information required by section 19(a) and
rule 19a-1, and by complying with the procedures adopted under the Plan
and the conditions listed below, each Fund's shareholders would be
provided sufficient information to understand that their periodic
distributions are not tied to the 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
shareholders no extra protection.
5. Applicants note that section 19(b) of the Act and rule 19b-1
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 common shares of closed-end funds
often trade in the marketplace at a discount to the funds' NAV.
Applicants believe that this discount may be reduced if the Funds are
permitted to pay relatively frequent dividends on their common shares
at a consistent rate, whether or not those dividends contain an element
of capital gain.
7. Applicants assert that the application of rule 19b-1 to a Plan
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 capital gain
distributions 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 the fixed
regular periodic distributions under a periodic distribution plan to be
funded with returns of capital \2\ (to the extent net investment income
and realized short term capital gains are insufficient to fund the
distribution), even though realized net long-term capital gains
otherwise could be available. To distribute all of a fund's long-term
capital gains within the limits in rule 19b-1, a fund may be required
to make total distributions in excess of the annual amount called for
by its periodic distribution plan or to retain and pay taxes on the
excess amount. Applicants 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 shares and preferred
shares 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 share
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 shares 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
shares issued by a closed-end fund. Applicants assert that such
distributions are either fixed or are determined in periodic auctions
or remarketings by reference to short-term interest rates rather than
by reference to performance of the issuer, and Revenue Ruling 89-81
determines the proportion of such distributions that are comprised of
the long-term capital gains.
11. Applicants also submit that the ``selling the dividend''
concern is not applicable to preferred shares, which entitle a holder
to no more than a periodic dividend at a fixed rate or the rate
determined by the market, and, like a debt security, are priced based
upon their liquidation value, dividend rate, credit quality, and
frequency of payment. Applicants state that investors buy preferred
shares for the purpose of receiving payments at the frequency bargained
for and do not expect the liquidation value of their shares to change.
12. Applicants request an order pursuant to section 6(c) of the Act
granting an exemption from 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 shares and as
often as specified by or determined in accordance with the terms
thereof in respect of its preferred shares (if any).
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 has 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 Shareholders.
[[Page 75210]]
(a) Each 19(a) Notice disseminated to the holders of the Fund's
common shares, in addition to the information required by section 19(a)
and rule 19a-1:
(i) will provide, in a tabular or graphical format:
(1) The amount of the distribution, on a per common share basis,
together with the amounts of such distribution amount, on a per common
share basis and as a percentage of such distribution amount, from
estimated: (A) net investment income; (B) net realized short-term
capital gains; (C) net realized long-term capital gains; and (D) return
of capital or other capital source;
(2) the fiscal year-to-date cumulative amount of distributions, on
a per common share basis, together with the amounts of such cumulative
amount, on a per common share basis and as a percentage of such
cumulative amount of distributions, from estimated: (A) Net investment
income; (B) net realized short-term capital gains; (C) net realized
long-term capital gains; and (D) return of capital or other capital
source;
(3) the average annual total return in relation to the change in
NAV for the 5-year period 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 Plan'';
(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 disclosure in this 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 shareholders under
rule 30e-1 under the Act, the Fund will:
(i) Describe the terms of the Plan (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 Plan provides that the Board
may amend or terminate the Plan at any time without prior notice to
Fund shareholders; and
(iv) describe any reasonably foreseeable circumstances that might
cause the Fund to terminate the Plan and any reasonably foreseeable
consequences of such termination.
(c) Each report provided to shareholders under rule 30e-1 under the
Act, and 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 Common Shareholders, Prospective Common
Shareholders 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 Form 1099) about the
Plan or distributions under the Plan by the Fund, or agents that the
Fund has authorized to make such communication on the Fund's behalf, to
any Fund common shareholder, prospective common shareholder or third-
party information provider;
(b) 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 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 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
shares issued by a Fund in nominee name, or otherwise, on behalf of a
beneficial owner, the Fund: (a) will request that the financial
intermediary, or its agent, forward the 19(a) Notice to all beneficial
owners of the Fund's shares held through such financial intermediary;
(b) will provide, in a timely manner, to the financial intermediary, or
its agent, enough copies of the 19(a) Notice assembled in the form and
at the place that the financial intermediary, or its agent, reasonably
requests to facilitate the financial intermediary's sending of the
19(a) Notice to each beneficial owner of the Fund's shares; and (c)
upon the request of any financial intermediary, or its agent, that
receives copies of the 19(a) Notice, will pay the financial
intermediary, or its agent, the reasonable expenses of sending the
19(a) Notice to such beneficial owners.
5. Additional Board Determinations for Funds Whose Common Shares
Trade at a Premium.
If:
(a) The Fund's common shares have traded on the Exchange that they
primarily trade on at the time in question at an average premium to NAV
equal to or greater than 10%, as determined on the basis of the average
of the discount or premium to NAV of the Fund's common shares as of the
close of each trading day over a 12-week rolling period (each such 12-
week rolling period ending on the last trading day of each week); and
(b) The Fund's annualized distribution rate for such 12-week
rolling period, expressed as a percentage of NAV as of the ending date
of such 12-week rolling period, is greater than the Fund's average
annual total return in relation to the change in NAV over the
[[Page 75211]]
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 will furnish, such
information as may be reasonably necessary to make an informed
determination of whether the Plan should be continued or continued
after amendment;
(2) will determine whether continuation, or continuation after
amendment, of the Plan is consistent with the Fund's investment
objective(s) and policies and in the best interests of the Fund and its
shareholders, after considering the information in condition 5(b)(i)(1)
above; including, without limitation:
(A) Whether the Plan is accomplishing its purpose(s);
(B) the reasonably foreseeable material effects of the Plan on the
Fund's long-term total return in relation to the market price and NAV
of the Fund's common shares; and
(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 Plan; 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 Plan in its
meeting minutes, which must be made and preserved for a period of not
less than six years from the date of such meeting, the first two years
in an easily accessible place.
6. Public Offerings. The Fund will not make a public offering of
the Fund's common shares other than:
(a) A rights offering below NAV to holders of the Fund's common
shares;
(b) an offering in connection with a dividend reinvestment plan,
merger, consolidation, acquisition, spin off or reorganization of the
Fund; or
(c) an offering other than an offering described in conditions 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, expressed as a percentage of NAV 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;
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 shares 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 shares that such
Fund may issue.
7. Amendments to Rule 19b-1. The requested order will expire on the
effective date of any amendment to rule 19b-1 that provides relief
permitting certain closed-end investment companies to make periodic
distributions of long-term capital gains with respect to their
outstanding common shares 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. 2012-30548 Filed 12-18-12; 8:45 am]
BILLING CODE 8011-01-P
