[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