[Federal Register Volume 64, Number 195 (Friday, October 8, 1999)]
[Notices]
[Pages 54937-54939]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-26252]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-24066; 812-11690]
Nuveen Floating Rate Fund
October 1, 1999.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of an application for an order under section 6(c) of the
Investment Company Act of 1940 (``Act'') for an exemption from sections
18(c) and 18(i) of the Act, under sections 6(c) and 23(c)(3) of the Act
for an exemption from rule 23c-3 under the Act, and pursuant to section
17(d) of the Act and rule 17d-1 under the Act.
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SUMMARY OF APPLICATION: Applicants request an order to permit certain
registered closed-end investment companies to issue multiple classes of
shares, and impose asset-based distribution fees and early withdrawal
charges.
APPLICANTS: Nuveen Floating Rate Fund (``Fund''), Nuveen Senior Loan
Asset Management Inc. (``Adviser''), and John Nuveen & Co. Incorporated
(``Distributor'').
FILING DATES: The application was filed on July 9, 1999, and amended on
September 23, 1999.
HEARING OR NOTIFICATION OF HEARING: An order granting the application
will be issued unless the SEC orders a hearing. Interested persons may
request a hearing by writing to the SEC's Secretary and serving
applicants with a copy of the request, personally or by mail. Hearing
requests should be received by the SEC by 5:30 p.m. on October 26,
1999, 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
SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 5th Street, NW., Washington, DC 20549-
0609; Gifford R. Zimmerman, Esq., John Nuveen & Co. Incorporated, 333
West Wacker Drive, Chicago, IL 60606.
FOR FURTHER INFORMATION CONTACT: Marilyn Mann, Senior Counsel, at (202)
942-0582, or Mary Kay Frech, Branch Chief, at (202) 942-0564 (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 for a fee at the
SEC's Public Reference Branch, 450 5th Street, NW., Washington, DC
20549-0102 (telephone (202) 942-8090).
Applicants' Representations
1. The Fund is a closed-end management investment company
registered under the Act and organized as a Massachusetts business
trust. The Adviser, a newly organized entity, is in the process of
registering under the Investment Advisers Act of 1940 and will serve as
investment adviser to the Fund. The Distributor, a broker-dealer
registered under the Securities Exchange Act of 1034, will distribute
the Fund's shares. The Adviser and Distributor are both wholly-owned
subsidiaries of The John Nuveen Company. Applicants request that the
order also apply to any other registered closed-end investment company
for which the adviser or the Distributor or any entity controlling,
controlled by, or under common control with the Adviser or the
Distributor acts as investment adviser or principal underwriter.\1\
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\1\ Any registered closed-end investment company relying on this
relief in the future will do so in a manner consistent with the
terms and conditions of the application. Applicants represent that
each investment company presently intending to rely on the requested
relief is listed as an applicant.
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2. The Fund's investment objective is to seek a high level of
current income, consistent with the preservation of capital. The Fund
will invest primarily in senior secured adjustable rate loans made by
commercial banks, investment banks, finance companies and other lenders
to commercial and industrial borrowers (``Loans''). Under normal
circumstances, at least 80% of the Fund's total assets will be invested
in Loans. Up to 20% of the Fund's total assets may be held in other
assets, such as cash, fixed-rate debt obligations, short- to medium-
term notes, high yield securities, asset-backed securities, and equity
securities.
3. The Fund intends to continuously offer its shares to the public
at net asset value. The Fund's shares will not be offered or traded in
the secondary market and will not be listed on any exchange or quoted
on any quotation medium. The Fund intends to operate as an ``interval
fund'' pursuant to rule 23c-3 under the Act and make periodic
repurchase offers to its shareholders.
4. The Fund seeks the flexibility to be structured as a multiple-
class investment company and currently intends to offer four classes or
shares. The Fund will offer Class B shares at net asset value without a
front-end sales charge, but subject to an early withdrawal charge
(``EWC'') on shares that are repurchased by the Fund within five years
of the date of purchase. Class B shares will automatically convert to
Class A shares six years after the date of purchase. The Fund may also
offer Class A shares at net asset value plus a front-end sales charge,
which may be waived for certain classes of purchasers in accordance
with rule 22d-1 under the Act. The Fund will offer Class C shares at
net asset value without a front-end sales charge, but subject to an EWC
on shares that are repurchased by the Fund within one year of the date
of purchase. Class A, Class B, and Class C shares will be subject to an
annual shareholder service fee of up to 0.25% of average daily net
assets. Class B and Class C shares will be subject to an annual
distribution fee of up to .75% of average daily net assets. Applicants
represent that the service and distribution fees will comply with the
provisions of rule 2830(d) of the Conduct Rules of the National
Association of Securities Dealers, Inc. (``NASD'') as if the Fund were
an open-end investment company. The Fund also will offer Class R
shares, which will be sold exclusively to certain eligible investors
such as certain employees and directors of the Distributor or employees
of authorized dealers and bank trust departments. Class R shares also
may be purchased through registered investment advisers, certified
financial planners and registered broker-dealers who charge asset-based
or comprehensive ``wrap'' fees for their services. Class R shares will
not be subject to distribution fees, service fees, front-end sales
charges or EWCs. Applicants represent that the Fund will disclose in
its prospectus the fees, expenses and other characteristics
[[Page 54938]]
of each class of shares offered for sale, as is required for open-end
multi-class investment companies under Form N-1A.
5. All expenses incurred by the Fund will be allocated among the
various classes of shares based on the net assets of the Fund
attributable to each class, except that the net asset value and
expenses of each class will reflect distribution fees, service fees,
and any other incremental expenses attributable to that class. Expenses
of the Fund allocated to a particular class of shares will be borne on
a pro rata basis by each outstanding share of that class. The Fund may
create additional classes of shares in the future that may have
different terms from Class A, Class B, Class C, and Class R shares.
Applicants state that the Fund will comply with the provisions of rule
18f-3 under the Act as if it were an open-end investment company.
6. The Fund may waive the EWC for certain categories of
shareholders or transactions to be established from time to time. With
respect to any waiver of, scheduled variation in, or elimination of the
EWC, the Fund will comply with rule 22d-1 under the Act as if the Fund
were an open-end investment company.
7. The Fund may offer its shareholders an exchange feature under
which shareholders of the Fund may exchange their shares during the
quarterly repurchase period for shares of the same class of other
investment companies in the Nuveen group of investment companies. Fund
shares so exchanged will be counted as part of the repurchase offer
amount as specified in rule 23c-3 under the Act. Any exchange option
will comply with rule 11a-3 under the Act as if the Fund were an open-
end investment company. In complying with rule 11a-3, the Fund will
treat the EWC as if it were a contingent deferred sales charge
(``CDSC'').
Applicant's Legal Analysis
Multiple Classes of Shares
1. Section 18(c) of the Act provides, in relevant part, that a
closed-end investment company may not issue or sell any senior security
if, immediately thereafter, the company has outstanding more than one
class of senior security. Applicants state that the creation of
multiple classes of shares of the Fund may be prohibited by section
18(c).
2. Section 18(i) of the Act provides that each share of stock
issued by a registered management company will be a voting stock and
have equal voting rights with every other outstanding voting stock.
Applicants state that multiple class of shares of the Fund may violate
Section 18(i) of the Act because each class would be entitled to
exclusive voting rights with respect to matters solely related to that
class.
3. Section 6(c) of the Act provides that the SEC may exempt any
person, security, or transaction from any provision of the Act, if and
to the extent that such exemption is necessary or appropriate in the
public interest and consistent with the protection of investors and the
purposes fairly intended by the policy and provisions of the Act.
Applicants request an exemption under section 6(c) of the Act from
sections 18(c) and 18(i) of the Act to permit the Fund to issue
multiple classes of shares.
4. Applicants submit that the proposed allocation of expenses and
voting rights among multiple classes is equitable and will not
discriminate against any group or class of shareholders. Applicants
submit that the proposed arrangements will permit the Fund to
facilitate the distribution of its securities and provide investors
with a broader choice of shareholder services. Applicants assert that
their proposal does not raise the concerns underlying section 18 of the
Act to any greater degree than open-end investment companies' multiple
class structures that are permitted by rule 18f-3 under the Act.
Applicants state that the Fund will comply with the provisions of rule
18f-3 as if it were an open-end investment company.
Early Withdrawal Charges
5. Section 23(c) of the Act provides, in relevant part, that no
registered closed-end investment company may purchase any securities of
which it is the issuer except: (a) On a securities exchange or other
open market; (b) pursuant to tenders, after reasonable opportunity to
submit tenders given to all holders of securities of the class to be
purchased; or (c) under other circumstances as the SEC may permit by
rules and regulations or orders for the protection of investors.
6. Rule 23c-3 under the Act permits a registered closed-end
investment company (an ``interval fund'') to make repurchase offers of
between five and twenty-five percent of its outstanding shares at net
asset value at periodic intervals pursuant to a fundamental policy of
the fund. Rule 23c-3(b)(1) provides that an interval fund may deduct
from repurchase proceeds only a repurchase fee, not to exceed two
percent of the proceeds, that is reasonably intended to compensate the
fund for expenses directly related to the repurchase.
7. Section 23(c)(3) provides that the SEC may issue an order that
would permit a closed-end investment company to repurchase its shares
in circumstances in which the repurchase is made in a manner or on a
basis that does not unfairly discriminate against any holders of the
class or classes of securities to be purchased. As noted above, section
6(c) provides that the SEC may exempt any person, security, or
transaction from any provision of the Act, if and to the extent that
the exemption is necessary or appropriate in the public interest and
consistent with the protection of investors and the purposes fairly
intended by the policy and provisions of the Act. Applicants request
relief under sections 6(c) and 23(c) from rule 23c-3 to permit them to
impose EWCs on shares submitted for repurchase that have been held for
less than a specified period.
8. Applicants believe that the requested relief meets the standards
of sections 6(c) and 23(c)(3). Rule 6c-10 under the Act permits open-
end investment companies to impose CDSCs, subject to certain
conditions. Applicants state that EWCs are functionally similar to
CDSCs imposed by open-end investment companies under rule 6c-10 under
the Act. Applicants state that EWCs may be necessary for the
Distributor to recover distribution costs and that EWCs may discourage
investors from moving their money quickly in and out of the Fund, a
practice that applicants submit imposes costs on all shareholders.
Applicants will comply with rule 6c-10 under the Act as if that rule
applied to closed-end investment companies. The Fund also will disclose
EWCs in accordance with the requirements of Form N-1A concerning CDSCs.
Applicants further state that the Fund will apply the EWC (and any
waivers or scheduled variations of the EWC) uniformly to all
shareholders in a given class and consistent with the requirements of
rule 22d-1 under the Act.
Asset-Based Distribution Fees
9. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
an affiliated person of a registered investment company, acting as
principal, from participating in or effecting any transaction in
connection with any joint enterprise or joint arrangement in which the
investment company participates unless the SEC issues an order
permitting the transaction. In reviewing applications submitted under
section 17(d) and rule 17d-1, the SEC considers whether the
participation of the investment
[[Page 54939]]
company in a joint enterprise or joint arrangement is consistent with
the provisions, policies, and purposes of the Act, and the extent to
which the participation is on a basis different from or less
advantageous than that of other participants.
10. Rule 17d-3 under the Act provides an exemption from section
17(d) and rule 17d-1 to permit open-end investment companies to enter
into distribution arrangements pursuant to rule 12b-1. Applicants also
request an order under section 17(d) and rule 17d-1 to permit the Fund
to impose asset-based distribution fees. Applicants have agreed to
comply with rules 12b-1 and 17d-3 as if those rules applied to closed-
end investment companies.
Applicants' Condition
Applicants agree that any order granting the requested relief will
be subject to the following condition:
Applicants will comply with the provisions of rules 6c-10, 11a-3,
12b-1, 17d-3, 18f-3, and 22d-1 under the Act and NASD Conduct Rule
2830(d), as amended from time to time, as if those rules applied to
closed-end investment companies.
For the SEC, by the Division of Investment Management, pursuant
to delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 99-26252 Filed 10-7-99; 8:45 am]
BILLING CODE 8010-01-M