51344 Federal Register / Vol. 74, No. 192 / Tuesday, October 6, 2009 / Notices 

1All registered closed-end investment companies 

that currently intend to rely on the order are named 

as applicants. Applicants request that the order also 

apply to each registered closed-end investment 

company that in the future: (a) Is advised by the 

Investment Adviser (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 the Investment 

Adviser; and (b) complies with the terms and 

conditions of the application (included in the term 

‘‘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. 

Dated: September 30, 2009. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–23995 Filed 10–5–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

28938; File No. 812–13030] 

Evergreen Income Advantage Fund, et 

al.; Notice of Application 

September 30, 2009. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice of application under 

section 6(c) of the Investment Company 

Act of 1940 (‘‘Act’’) for an exemption 

from section 19(b) of the Act and rule 

19b–1 under the Act. 

SUMMARY OF APPLICATION: Applicants 

request an order to permit a registered 

closed-end investment company to 

make periodic distributions of long-term 

capital gains with respect to its common 

shares as often as monthly in any one 

taxable year, and as frequently as 

distributions are specified by or in 

accordance with the terms of its 

preferred shares. 

APPLICANTS: Evergreen Income 

Advantage Fund (‘‘EIAF’’), Evergreen 

Multi-Sector Income Fund (‘‘EMSIF’’), 

Evergreen Utilities and High Income 

Fund (‘‘EUHIF’’), Evergreen 

International Balanced Income Fund 

(‘‘EIBIF’’), and Evergreen Global 

Dividend Opportunity Fund (‘‘EGDOF’’) 

(each a ‘‘Fund’’ and collectively, the 

‘‘Funds’’); and Evergreen Investment 

Management Company, LLC (the 

‘‘Investment Adviser’’). 

FILING DATES: The application was filed 

on October 14, 2003, and amended on 

October 28, 2008, June 29, 2009, and 

September 29, 2009. 

HEARING OR NOTIFICATION OF HEARING: An 

order granting the application will be 

issued unless the Commission orders a 

hearing. Interested persons may request 

a hearing by writing to the 

Commission’s Secretary and serving 

applicants with a copy of the request, 

personally or by mail. Hearing requests 

should be received by the Commission 

by 5:30 p.m. on October 26, 2009, and 

should be accompanied by proof of 

service on applicants, in the form of an 

affidavit or, for lawyers, a certificate of 

service. Hearing requests should state 

the nature of the writer’s interest, the 

reason for the request, and the issues 

contested. Persons who wish to be 

notified of a hearing may request 

notification by writing to the 

Commission’s Secretary. 

ADDRESSES: Secretary, Securities and 

Exchange Commission, 100 F Street, 

NE., Washington, DC 20549–1090; 

Applicants: Evergreen Income 

Advantage Fund, 200 Berkeley Street, 

Boston, MA 02116. 

FOR FURTHER INFORMATION CONTACT: 

Christine Y. Greenlees, Senior Counsel, 

at (202) 551–6879, 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 http:// 

www.sec.gov/search/search.htm, or by 

calling (202) 551–8090. 

Applicants’ Representations 

1. Each of the Funds is a closed-end 

management investment company 

registered under the Act and organized 

as a Delaware statutory trust.1 EIAF’s 

primary investment objective is to seek 

a high level of income. EIAF’s common 

shares are listed on the NYSE Amex. 

EIAF currently has six series of 

preferred shares outstanding, which are 

not listed on a national securities 

exchange. EMSIF’s investment objective 

is to seek a high level of current income. 

EMSIF’s common shares are listed on 

the NYSE Amex. EIAF currently has five 

series of preferred shares outstanding, 

which are not listed on a national 

securities exchange. EUHIF’s 

investment objective is to seek a high 

level of current income and moderate 

capital growth. EUHIF’s common shares 

are listed on the NYSE Amex. EIBIF’s 

investment objective is to seek to 

provide a high level of income. EIBIF’s 

common shares are listed on the New 

York Stock Exchange (‘‘NYSE’’). 

EGDOF’s primary investment objective 

is to seek a high level of current income. 

EGDOF’s common shares are listed on 

the NYSE. Applicants believe that the 

shareholders of each Fund are generally 

conservative, dividend-sensitive 

investors who desire current income 

periodically and may favor a fixed 

distribution policy. 

2. The Investment Adviser, a 

subsidiary of Wells Fargo, a bank 

holding company, is registered under 

the Investment Advisers Act of 1940 

(‘‘Advisers Act’’). The Investment 

Adviser has provided investment 

advisory services to each Fund since its 

inception. Each Fund will be advised by 

investment advisers that are registered 

under the Advisers Act. 

3. Applicants state that prior to 

relying on the order, the board of 

trustees (the ‘‘Board’’) of each Fund, 

including a majority of the members of 

the Board who are not ‘‘interested 

persons’’ of the Fund as defined in 

section 2(a)(19) of the Act (the 

‘‘Independent Trustees’’), 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 net asset 

value (‘‘NAV’’) per common share) and 

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 per share). 

Applicants state that prior to relying on 

the requested order the Independent 

Trustees also will consider what 

conflicts of interest the Investment 

Adviser and the affiliated persons of the 

Investment Adviser and each such Fund 

might have with respect to the adoption 

or implementation of such policy. 

Applicants further state that prior to 

relying on the requested order, and after 

considering such information, the 

Board, including the Independent 

Trustees, of each Fund will approve a 

distribution policy with respect to its 

Fund’s common shares (the ‘‘Plan’’) and 

will determine that such Plan is 

consistent with such Fund’s investment 

objective(s) and in the best interests of 

such Fund’s common shareholders. 

4. Applicants state that the purpose of 

each Fund’s Plan is to permit such Fund 

to distribute over the course of each 

year, through periodic distributions as 

nearly equal as practicable and any 

required special distributions, an 

amount closely approximating the total 

taxable income of such Fund during 

such year. Applicants note that under 

the Plan, each Fund would distribute to 

its respective common shareholders a 

fixed monthly percentage of the market 

price of such Fund’s common shares 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 


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from time to time. Applicants further 

state that the minimum annual 

distribution rate would be independent 

of each Fund’s performance during any 

particular period, but would be 

expected to correlate with such Fund’s 

performance over time. Applicants 

explain that 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 year and to enable 

the Fund to comply with the 

distribution requirements of subchapter 

M of the Internal Revenue Code of 1986 

(‘‘Code’’) for the calendar year, each 

distribution on the common shares 

would be at the stated rate then in 

effect. 

5. Applicants state that prior to 

relying on the requested order, the 

Board will adopt policies and 

procedures under rule 38a-1 under the 

Act that are reasonably designed to 

ensure that all notices required to be 

sent to the Fund’s shareholders 

pursuant to section 19(a) of the Act, rule 

19a-1 under the Act, and condition 4 

below (‘‘19(a) Notices’’) comply with 

condition 2.a. below, and that all other 

written communications by the Fund or 

its agents regarding distributions under 

the Plan include the disclosure required 

by condition 3.a. below. Applicants 

state that prior to relying on the 

requested order, the Board will adopt 

policies and procedures that require 

each of the Funds to keep records that 

demonstrate its compliance with all of 

the conditions of the requested 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 

under the Act limits the number of 

capital gains dividends, as defined in 

section 852(b)(3)(C) of the Code 

(‘‘distributions’’), that a fund may make 

with respect to any one taxable year to 

one, plus a supplemental ‘‘clean up’’ 

distribution made pursuant to section 

855 of the Code not exceeding 10% of 

the total amount distributed for the year, 

plus one additional capital gain 

dividend made in whole or in part to 

avoid the excise tax under section 4982 

of the Code. 

2. Section 6(c) provides that the 

Commission may, by order upon 

application, conditionally or 

unconditionally exempt any person, 

security, or transaction, or any class or 

classes of persons, securities or 

transactions, from any provision of the 

Act, if and to the extent that the 

exemption is necessary or appropriate 

in the public interest and consistent 

with the protection of investors and the 

purposes fairly intended by the policy 

and provisions of the Act. 

3. Applicants state that one of the 

concerns underlying section 19(b) and 

rule 19b–1 is that shareholders might be 

unable to differentiate between frequent 

distributions of capital gains and 

dividends from investment income. 

Applicants state, however, that rule 

19a–1 effectively addresses this concern 

by requiring that a separate statement 

showing the sources of a distribution 

(e.g., net investment income, net shortterm capital gains, net long-term capital 

gains and/or return of capital) 

accompany any distributions (or the 

confirmation of the reinvestment of 

distributions) estimated to be sourced in 

part from capital gains or capital. 

Applicants also state that the same 

information is included in each Fund’s 

annual reports to shareholders and 

similar information is included on its 

IRS Form 1099–DIV, which is sent to 

each common and, if applicable, 

preferred shareholder who received 

distributions during a particular year 

(including shareholders who have sold 

shares during the year). 

4. Applicants further state that each 

Fund will make the additional 

disclosures required by the conditions 

set forth below, and each of them will 

adopt, prior to reliance on the requested 

order, 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 

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 each 

Fund’s taxable income other than from 

capital gains) and realized capital gains 

to date, and may not represent yield or 

investment return. Applicants also state 

that compliance with the Fund’s 

compliance procedures and condition 3 

set forth below will ensure that 

prospective shareholders and third 

parties are provided with the same 

information. 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) 

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, that do 

not continuously distribute shares. 

According to applicants, if the 

underlying concern extends to 

secondary market purchases of shares of 

closed-end funds that are subject to a 

large upcoming capital gains dividend, 

adoption of a periodic distribution plan 

actually helps minimize the concern by 

avoiding, through periodic 

distributions, any buildup of large endof-the-year distributions. 

6. Applicants also note that common 

shares of closed-end funds 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 longterm capital gain. 

7. Applicants assert that the 

application of rule 19b–1 to a Plan 

actually could have an undesirable 

influence on portfolio management 

decisions. Applicants state that, in the 

absence of an exemption from rule 19b– 

1, the implementation of a periodic 

distribution plan imposes pressure on 

management (a) not to realize any net 

long-term capital gains until the point in 

the year that the fund can pay all of its 

remaining distributions in accordance 

with rule 19b–1, and (b) not to realize 

any long-term capital gains during any 

particular year in excess of the amount 

of the aggregate pay-out for the year 

(since as a practical matter excess gains 

must be distributed and accordingly 

would not be available to satisfy pay-out 

requirements in following years), 

notwithstanding that purely investment 

considerations might favor realization of 

long-term gains at different times or in 

different amounts. Applicants thus 

assert that 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 efficient 

operation of a periodic distribution plan 

whenever that fund’s net realized longterm capital gains in any year exceed 

the total of the periodic distributions 


jlentini on DSKJ8SOYB1PROD with NOTICES
51346 Federal Register / Vol. 74, No. 192 / Tuesday, October 6, 2009 / Notices 

2Returns of capital as used in the application 

means return of capital for financial accounting 

purposes and not for tax accounting purposes. 

3Applicants state that a future Fund that relies on 

the requested order will satisfy each of the 

representations in the application except that such 

representations will be made in respect of actions 

by the board of directors of such future Fund and 

will be made at a future time. 

4The 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. 

that may include such capital gains 

under the rule. 

8. Applicants also assert that rule 

19b–1 may cause fixed regular periodic 

distributions under a periodic 

distribution plan to be funded with 

returns of capital 2 (to the extent net 

investment income and realized shortterm capital gains are insufficient to 

fund the distribution), even though net 

realized long-term capital gains 

otherwise could be available. To 

distribute all of a fund’s long-term 

capital gains within the limits in rule 

19b–1, a fund may be required to make 

total distributions in excess of the 

annual amount called for by its periodic 

distribution plan, or to retain and pay 

taxes on the excess amount. Applicants 

thus assert that the requested order 

would minimize these effects of rule 

19b–1 by enabling 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 has both common stock 

and preferred stock outstanding 

designate the types of income, e.g., 

investment income and capital gains, in 

the same proportion as the total 

distributions distributed to each class 

for the tax year. To satisfy the 

proportionate designation requirements 

of Revenue Ruling 89–81, whenever a 

fund has realized a long-term capital 

gain with respect to a given tax year, the 

fund must designate the required 

proportionate share of such capital gain 

to be included in common and preferred 

stock dividends. Applicants state that 

although rule 19b–1 allows a fund some 

flexibility with respect to the frequency 

of capital gains distributions, a fund 

might use all of the exceptions available 

under the rule for a tax year and still 

need to distribute additional capital 

gains allocated to the preferred stock to 

comply with Revenue Ruling 89–81. 

10. Applicants assert that the 

potential abuses addressed by section 

19(b) and rule 19b–1 do not arise with 

respect to preferred stock issued by a 

closed-end fund. Applicants assert that 

such distributions are fixed or 

determined in periodic auctions by 

reference to short-term interest rates 

rather than by reference to performance 

of the issuer, and Revenue Ruling 89– 

81 determines the proportion of such 

distributions that are comprised of the 

long-term capital gains. 

11. Applicants also submit that the 

‘‘selling the dividend’’ concern is not 

applicable to preferred stock, which 

entitles a holder to no more than a 

periodic dividend at a fixed rate or the 

rate determined by the market, and, like 

a debt security, is priced based upon its 

liquidation value, dividend rate, credit 

quality, and frequency of payment. 

Applicants state that investors buy 

preferred shares for the purpose of 

receiving payments at the frequency 

bargained for, and do not expect the 

liquidation value of their shares to 

change. 

12. Applicants request an order under 

section 6(c) granting an exemption from 

section 19(b) and rule 19b–1 to permit 

each Fund to distribute periodic capital 

gains dividends (as defined in section 

852(b)(3)(C) of the Code) as often as 

monthly in any one taxable year with 

respect to its common shares and, with 

respect to each Fund with outstanding 

preferred shares, to allocate to its 

preferred shares capital gain dividends 

as often as necessary in any one taxable 

year to comply with IRS Revenue Ruling 

89–81.3

Applicants’ Conditions 

Applicants agree that any order of the 

Commission granting the requested 

relief will be subject to the following 

conditions: 

1. Compliance Review and Reporting. 

Each Fund’s chief compliance officer 

will: (a) Report to the Fund’s Board, no 

less frequently than once every three 

months or at the next regularly 

scheduled quarterly Board meeting, 

whether (i) the Fund and its Investment 

Adviser have complied with the 

conditions of the order, and (ii) a 

material compliance matter, as defined 

in rule 38a–1(e)(2) under the Act, has 

occurred with respect to such 

conditions; and (b) review the adequacy 

of the policies and procedures adopted 

by the Board no less frequently than 

annually. 

2. Disclosures to Fund Shareholders. 

a. Each 19(a) Notice disseminated to 

the holders of the Fund’s common 

shares, in addition to the information 

required by section 19(a) and rule 19a– 

1: 

i. Will provide, in a tabular or 

graphical format: 

(1) The amount of the distribution, on 

a per share basis, together with the 

amounts of such distribution amount, 

on a per share basis and as a percentage 

of such distribution amount, from 

estimated: (A) Net investment income; 

(B) net realized short-term capital gains; 

(C) net realized long-term capital gains; 

and (D) return of capital or other capital 

source; 

(2) The fiscal year-to-date cumulative 

amount of distributions, on a per share 

basis, together with the amounts of such 

cumulative amount, on a per share basis 

and as a percentage of such cumulative 

amount of distributions, from estimated: 

(A) Net investment income; (B) net 

realized short-term capital gains; (C) net 

realized long-term capital gains; and (D) 

return of capital or other capital source; 

(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 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’ ’’; 4

and 

(3) ‘‘The amounts and sources of 

distributions reported in this 19(a) 


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5 If the Fund has been in operation fewer than six 

months, the measured period will being 

immediately following the Fund’s first public 

offering. 

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 in each prospectus filed 

with the Commission on Form N–2 

under the Act, will provide the Fund’s 

total return in relation to changes in 

NAV in the financial highlights table 

and in any discussion about the Fund’s 

total return. 

3. Disclosure to Shareholders, 

Prospective Shareholders and Third 

Parties. 

a. Each Fund will include the 

information contained in the relevant 

19(a) Notice, including the disclosure 

required by condition 2.a.ii. above, in 

any written communication (other than 

a communication on Form 1099) about 

the Plan or distributions under the Plan 

by the Fund, or agents that the Fund has 

authorized to make such 

communication on the Fund’s behalf, to 

any Fund common shareholder, 

prospective common shareholder or 

third-party information provider; 

b. Each Fund will issue, 

contemporaneously with the issuance of 

any 19(a) Notice, a press release 

containing the information in the 19(a) 

Notice and will file with the 

Commission the information contained 

in such 19(a) Notice, including the 

disclosure required by condition 2.a.ii. 

above, as an exhibit to its next filed 

Form N–CSR; and 

c. Each Fund will post prominently a 

statement on its (or the Investment 

Adviser’s) web site containing the 

information in each 19(a) Notice, 

including the disclosure required by 

condition 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 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 Shares Trade at a 

Premium. 

If: 

a. A Fund’s common shares have 

traded on the stock exchange that they 

primarily trade on at the time in 

question at an average premium to NAV 

equal to or greater than 10%, as 

determined on the basis of the average 

of the discount or premium to NAV of 

the Fund’s common shares as of the 

close of each trading day over a 12-week 

rolling period (each such 12-week 

rolling period ending on the last trading 

day of each week); and 

b. The Fund’s annualized distribution 

rate for such 12-week rolling period, 

expressed as a percentage of NAV as of 

the ending date of such 12-week rolling 

period, is greater than the Fund’s 

average annual total return in relation to 

the change in NAV over the 2-year 

period ending on the last day of such 

12-week rolling period; then: 

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 Trustees: 

(1) Will request and evaluate, and the 

Investment Adviser 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 is 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. A Fund will not 

make a public offering of the Fund’s 

common shares other than: 

a. A rights offering below NAV to 

holders of the Fund’s common shares; 

b. An offering in connection with a 

dividend reinvestment plan, merger, 

consolidation, acquisition, spin-off or 

reorganization of the Fund; or 

c. An offering other than an offering 

described in conditions 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,5 expressed as a 

percentage of NAV per share as of such 


jlentini on DSKJ8SOYB1PROD with NOTICES
51348 Federal Register / Vol. 74, No. 192 / Tuesday, October 6, 2009 / Notices 

6 If the Fund has been in operation fewer than five 

years, the measured period will being immediately 

following the Fund’s first public offering. 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3The Commission has modified the text of the 

summaries prepared by OCC. 4This proposal furthers OCC’s continuing efforts 

to utilize its System for Theoretical Analysis and 

Numerical Simulations (‘‘STANS’’) to its fullest 

risk-management potential resulting in lower risk to 

OCC while also increasing margin offset 

opportunities for OCC clearing members. Recent 

OCC rule filings with a similar objective include (i) 

a rule change eliminating the practice of allowing 

clearing members to carry stock loan and borrow 

positions without collecting risk margin and 

requiring instead that all such positions be included 

in the STANS margin calculation [Securities 

Exchange Act Release No. 59036 (December 12, 

2006), 73 FR 74554 (December 8, 2008)] and (ii) a 

rule change (‘‘Collateral in Margins’’) providing that 

common stock deposited as collateral be included 

in the STANS calculation rather than valuing the 

collateral at a current market price less an arbitrary 

30% haircut [Securities Exchange Act Release No. 

58158 (July 15, 2008), 73 FR 42646 (July 22, 2008)]. 

In addition, largely in response to market 

conditions, OCC recently reduced the minimum 

price for common stocks held as collateral from $10 

to $3 and eliminated the 10% concentration test for 

certain ETFs held as collateral. Securities Exchange 

Act Release No. 59845 (April 29, 2009), 74 FR 

21039 (May 6, 2009). 

5The term ‘‘common stock’’ or ‘‘stock’’ is broadly 

used in this rule change to refer to different types 

of equity securities including ETFs but not 

preferred stock. 

6 ‘‘Covered securities’’ are securities that are 

authorized for listing on the New York Stock 

Exchange, the American Stock Exchange, the 

National Market System of the Nasdaq Stock Market 

(collectively, ‘‘Exchanges’’), or any other national 

securities exchange, or tiers thereof, that the 

Commission determines are substantially similar to 

the listing standards applicable to securities on the 

Exchanges. 15 U.S.C. 77r(b)(1). 

date, is no more than 1 percentage point 

greater than the Fund’s average annual 

total return for the 5-year period ending 

on such date; 6 and 

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 amendment to rule 

19b–1 that provides relief permitting 

certain closed-end investment 

companies to make periodic 

distributions of long-term capital gains 

with respect to their outstanding 

common stock as frequently as twelve 

times each year. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–24005 Filed 10–5–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60743; File No. SR–OCC– 

2009–15] 

Self-Regulatory Organizations; The 

Options Clearing Corporation; Notice 

of Filing of Proposed Rule Change to 

Revise the Minimum Eligibility Criteria 

for Common Stock Loaned Through 

Stock Loan Programs and Deposited 

as Margin Collateral 

September 29, 2009. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder 2

notice is hereby given that on August 

28, 2009, The Options Clearing 

Corporation (‘‘OCC’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared primarily by OCC. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of the Substance 

of the Proposed Rule Change 

The proposed rule change would 

revise minimum eligibility criteria 

applicable to common stock loaned 

through OCC’s Stock Loan Programs and 

deposited as margin collateral. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

OCC included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. OCC has prepared 

summaries, set forth in sections (A), (B), 

and (C) below, of the most significant 

aspects of these statements.3

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

The purpose of this rule change is to 

revise OCC’s minimum eligibility 

requirements for stock borrows and 

loans accepted in the OCC’s Stock Loan 

Programs and common stock accepted 

as margin collateral.4

Stock Loan Programs 

OCC’s clearing services involve 

common stock 5 in several ways. Stocks 

are: (i) Underlying securities for 

exchange-traded equity option 

contracts, (ii) constituent securities of 

stock indexes that underlie stock index 

options or of indexes on which 

underlying ETFs are based, (iii) 

constituent securities of ETFs that 

although are not underlying securities 

are based on indexes that underlie index 

options (‘‘Index Option Related ETFs’’), 

(iv) the subject of stock loan or borrow 

transactions cleared pursuant to OCC’s 

Stock Loan Programs, and (v) deposited 

with OCC as margin collateral. 

Rationalizing the interrelationship 

among the criteria applied to stocks for 

these various purposes will maximize 

the potential for offsets and reduce risk 

in the clearing system. 

Under OCC’s Stock Loan Programs, 

only loans of stocks that are either 

underlying securities for options or 

futures or ETFs based on a stock index 

underlying an index option contract are 

eligible for clearance through OCC 

(collectively, ‘‘Options-Related Stocks’’). 

OCC restricted stock loan activity to 

limit its risk to loans supporting short 

sales that might be serving as hedges for 

options transactions or helping to add 

liquidity to the options markets. At the 

time this criterion was implemented in 

2002, OCC managed the risk of stock 

loan transactions for most clearing 

members on a credit basis—that is OCC 

did not collect margin on such 

transactions. As noted above, OCC now 

requires margin on all stock loan 

transactions thus reducing the risk 

associated with this activity. 

Accordingly, OCC believes that it is no 

longer necessary or appropriate to limit 

stock loan transactions to OptionsRelated Stocks. 

In connection with the foregoing 

change, OCC is proposing to 

supplement its existing criteria for stock 

eligible for the Stock Loan Programs by 

requiring that in order to qualify as an 

‘‘Eligible Stock’’ for purposes of the 

Stock Loan Programs a stock must be a 

‘‘covered security’’ as defined in Section 

18(b)(1) of the Securities Act of 1933.6

By agreement with the options 

exchanges, OCC already requires that all 

underlying stocks meet this criterion, 

and OCC believes that it is an 

appropriate minimum assurance of 

quality. In addition, OCC is imposing a 

$3 minimum share price requirement 


jlentini on DSKJ8SOYB1PROD with NOTICES