[Federal Register Volume 66, Number 188 (Thursday, September 27, 2001)]
[Notices]
[Pages 49433-49435]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-24180]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-25167; 812-12500]
ING Pilgrim Investments, LLC, et al.; Notice of Application
September 21, 2001.
AGENCY: Securities and Exchange Commission (``Commission'')
ACTION: Notice of application for an order under sections 6(c) and
23(c)(3) of the Investment Company Act of 1940 (the ``Act'') for an
exemption from rule 23c-3 under the Act.
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SUMMARY OF APPLICATION: Applicants request an order under sections 6(c)
and 23(c) of the Act for an exemption from certain provisions of rule
23c-3 to permit a registered closed-end investment company to make
repurchase offers on a monthly basis.
APPLICANTS: ING Pilgrim Investments, LLC (``ING Pilgrim Investments''),
ING Pilgrim Securities, Inc. (``ING Pilgrim Securities''), and Pilgrim
Senior Income Fund (``Fund'').
FILING DATES: The application was filed on April 18, 2001, and amended
on August 31, 2001, September 18, 2001 and September 20, 2001.
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 applicant 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 16, 2001, and should be accompanied by proof of service
on applicant, 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, Commission, 450 Fifth Street, NW, Washington, DC
20549-0609.
Applicants: William H. Rivoir III, Esq., Senior Vice President and
Secretary, ING Pilgrim Investments, LLC, 7337 East Doubletree Ranch
Road, Scottsdale, AZ 85258.
FOR FURTHER INFORMATION CONTACT: Jaea F. Hahn, Senior Counsel, at (202)
942-0614, or Janet M. Grossnickle, 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
Commission's Public Reference Branch, 450 Fifth Street, NW, Washington,
DC 20549-0102 (tel. 202-942-8090).
Applicants' Representations
1. The Fund is a closed-end management investment company
registered under the Act and organized as a Delaware business trust.
ING Pilgrim Investments, an investment adviser registered under the
Investment Advisers Act of 1940 (the ``Advisers Act''), serves as
investment adviser to the Fund. ING Pilgrim Securities, a broker-dealer
registered under the Securities Exchange Act of 1934, distributes the
Fund's shares. ING Pilgrim Investments and ING Pilgrim Securities are
both indirect, wholly owned subsidiaries of ING Groep N.V.
2. The Fund's investment objective is to provide a high level of
monthly income. The Fund invests primarily in U.S. dollar denominated,
floating rate secured senior loans made only to corporations or other
business entities organized under U.S. laws or located in the U.S.
(``Loans''). Under normal market conditions, the Fund will invest at
least 80% its total assets in Loans. The Fund may also invest up to 20%
of its total assets in unsecured loans, subordinated loans, corporate
debt securities, loans made to, or debt securities issued by,
corporations or other business entities organized or located outside
the U.S., equity securities incidental to investment in loans, and
other investment companies
[[Page 49434]]
such as money market funds. Under normal circumstances, the Fund may
also invest up to 10% of its total assets in cash and short-term
instruments.
3. The Fund continuously offers four classes of share to the public
at net asset value. The Fund operates as an ``interval fund'' pursuant
to rule 23c-3 under the Act, and currently makes quarterly tender
offers to repurchase its shares. Applicants propose that the Fund offer
to repurchase a portion of its shares at one-month intervals, rather
than the three, six, or twelve-month intervals specified by rule 23c-3.
The Fund's shares are offered without any initial sales charges, but
certain classes of shares carry deferred sales charges and asset-based
distribution fees.\1\ The Fund may in the future offer additional
classes of shares with a front-end sales charge, an EWC and/or asset-
based service or distribution fees. The Fund's shares are not offered
or traded in the secondary market and are not listed on any exchange or
quoted on any quotation medium.
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\1\ The Fund currently offers Class A, B, C and Q shares. Each
class of shares is subject to annual asset-based service fees. Class
B and C shares are subject to early withdrawal charges (``EWCs'')
and an annual distribution fee. The Fund previously obtained
exemptive relief from the Commission as it relates to the imposition
of EWCs. See In the Matter of ING Pilgrim Investments, LLC, et al.,
Rel. No. IC-24881 (Feb. 28, 2001) (notice), Rel. No. IC-24916 (Mar.
27, 2001) (order).
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4. The Fund will disclose in its prospectus its fundamental policy
to make monthly offers to repurchase a portion of its securities at net
asset value, less deduction of a repurchase fee, if any, as permitted
by rule 23c-3(b)(1) and the imposition of EWCs as permitted pursuant to
exemptive relief previously granted by the Commission. The policy will
be changeable only by a majority vote of the holders of the Fund's
outstanding voting securities. Under the fundamental policy, the
repurchase offer amount will be determined by the Fund's board of
trustees (the ``Board'') prior to each repurchase offer. A majority of
the Board will consist of persons who are not interested persons of the
Fund. Under its fundamental policy, the Fund will make monthly offers
to repurchase not less than 5% of its outstanding shares at the time of
the repurchase request deadline. The Fund will not repurchase more than
25% in the aggregate of its outstanding shares in any one-quarter
period.
5. The Fund's prospectus will state the monthly repurchase request
deadline, which will be the tenth business day of every month and the
maximum number of days between each repurchase request deadline and the
repurchase pricing date. The Fund's repurchase pricing date will
normally be the same date as the repurchase request deadline and
pricing will be determined after close of business on that date.
6. The Fund will make payment for the repurchased shares in cash on
or before the repurchase payment deadline, which will be no later than
five business days or seven calendar days (whichever period is shorter)
after the repurchase pricing date. The Fund expects to make payment on
the first business day following the repurchase pricing date. The Fund
will make payment for shares repurchased in the previous month's
repurchase offer at least five business days before sending
notification of the next repurchase offer. The Fund does not presently
intend to deduct any repurchase fees from the repurchase proceeds
payable to tendering shareholders.
7. The Fund will provide shareholders with notification of each
repurchase offer no less than seven days and no more than fourteen days
prior to the repurchase request deadline. The notification will include
all information required by rule 23c-3(b)(4). The Fund will file the
notification and the Form N-23c-3 with the Commission within 3 business
days after the sending the notification to the Fund's shareholders.
8. The Fund will not suspend or postpone a repurchase offer except
pursuant to the vote of a majority of its disinterested trustees, and
only under limited circumstances, as provided in rule 23c-3(b)(3)(i).
the Fund will not condition a repurchase offer upon tender of any
minimum amount of shares. In addition, the Fund will comply with the
pro rata and other allocation requirements of rule 23c-3(b)(5) if
shareholders tender more than the repurchase offer amount. Further, the
Fund will permit tenders to be withdrawn or modified at any time until
the repurchase request deadline, but will not permit tenders to be
withdrawn or modified thereafter.
9. From the time the Fund sends its notification to shareholders of
the repurchase offer until the repurchase pricing date, a percentage of
the Fund's asset equal to at least 100% of the repurchase offer amount
will consist of: (a) Assets, which may include Loans, that can be sold
or disposed of in the ordinary course of business at approximately the
price at which the Fund has valued such investment within a period
equal to the period between the repurchase request deadline and the
repurchase payment deadline; or (b) assets, including Loans, that
mature by the next repurchase payment deadline. In the event the Fund's
assets fail to comply with this requirement, the Board will cause the
Fund to take such action as it deems appropriate to ensure compliance.
10. In compliance with the asset coverage requirements of section
18 of the Act, any senior security issued by the Fund or other
indebtedness of the Fund will either mature by the next repurchase
pricing date or provide for the Fund's ability to call or repay such
indebtedness by the next repurchase pricing date, either in whole or in
part, without penalty or premium, as necessary to permit the Fund to
complete the repurchase offer in an amount determined by the Board.
11. The Fund's Board has adopted written procedures to ensure that
the fund's portfolio assets are sufficiently liquid so that the Fund
can comply with its fundamental policy on repurchases and the liquidity
requirements of rule 23c-3(b)(10)(i). the Board will review the overall
composition of the portfolio and make and approve such changes to the
procedures as it deems necessary.
Applicants' Legal Analysis
1. Section 6(c) of the Act provides that the Commission may exempt
any person, security, or transaction from any provision of the Act or
rule thereunder, 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.
2. Section 23(c) of the Act provides in relevant part that no
registered closed-end investment company shall purchase any securities
of any class of which it is the issuer except: (a) On 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 Commission may permit by rules and regulations or
orders for the protection of investors.
3. Rule 23c-3 under the Act permits a registered closed-end
investment company to make repurchase offers at net asset value to its
shareholders at periodic intervals pursuant to a fundamental policy of
the investment company. ``Periodic interval'' is defined in rule 23c-
3(a)(1) as an interval of three, six, or twelve months. An interval
fund may not suspend or postpone a repurchase offer except by vote of
the fund's directors/trustees, and then only under limited
circumstances. Rule 23c-3(b)(4) requires that notification of each
repurchase offer be sent to shareholders no less than 21 days and no
more than
[[Page 49435]]
42 days before the repurchase request deadline. Rule 23c-3(a)(3)
provides that a repurchase offer amount may be between 5% and 25% of
the common stock outstanding on the repurchase request deadline.
4. Applicants request an order pursuant to sections 6(c) and 23(c)
of the Act exempting them from rule 23c-3(a)(1) to the extent necessary
to permit the Fund to make monthly repurchase offers. Applicants also
request an exemption from the notice provisions of rule 23c-3(b)(4) to
the extent necessary to permit the Fund to send notification of an
upcoming repurchase offer to shareholders at least seven days but no
more than fourteen days in advance of the repurchase request deadline.
5. Applicants contend that monthly repurchase offers are in the
shareholders' best interests and consistent with the policies
underlying rule 23c-3. Applicants assert that monthly repurchase offers
will provide investors with more liquidity than quarterly repurchase
offers. Applicants assert that shareholders will be better able to
manage their investments and plan transactions, because if they decide
to forego a repurchase offer, they will only need to wait one month for
the next offer. Applicants also contend that the Fund's management will
be able to better manage the Fund's Loan portfolio, because repurchase
offers will become part of a routine that is expected to provide
management with more regular and predictable liquidity requirement.
6. Applicants propose to send notification to shareholders at least
seven days, but no more than fourteen days, in advance of a repurchase
request deadline. Applicants assert that, because the Fund intends to
price on the repurchase request deadline and pay on the next business
day, the entire procedure can be completed before the next notification
is sent out to shareholders; thus avoiding any overlap. Applicants
believe that these procedures will eliminate any possibility of
investor confusion. Applicants also state that monthly repurchase
offers will be accepted as a fundamental feature of the Fund, and the
Fund's prospectus will provide a clear explanation of the repurchase
program.
7. Applicants believe that both the primary and secondary markets
for Loans have experience sufficient growth in recent years that the
Fund will have adequate liquidity to support monthly repurchases.
Applicants state that over the past decade, the Loan market has
expanded significantly, with greater volumes and a significantly larger
number of buyers and sellers. Applicants contend that the depth and
efficiency of these markets, together with the portfolio manager's
experience and judgment, will enable the Fund to maintain fully liquid
assets at levels that will meet or exceed the requirements of rule 23c-
3.
8. Applicants submit that for the reasons given above the requested
relief is necessary and appropriate in the public interest and is
consistent with the protection of investors and the purposes fairly
intended by the policy and provisions of the Act.
Applicants' Conditions
Applicants agree that any order granting the requested relief shall
be subject to the following conditions:
1. The Fund will not make a repurchase offer pursuant to rule 23c-
3(b) for a repurchase offer amount of more than 5% in any one-month
period, and not more than 25% in the aggregate in any one-quarter
period of its outstanding shares. The Fund may repurchase additional
tendered shares pursuant to rule 23c-3(b)(5) only to the extent the
aggregate of the percentages of additional shares so repurchased does
not exceed 2% in any given one-quarter period.
2. Payment for repurchased shares will occur at least five business
days before notification of the next repurchase offer is sent to
shareholders of the Fund.
3. The Fund will maintain an investment policy that requires, under
normal conditions, that at least 80% of the value of its total assets
will be invested in Loans.
For the Commission, by the Division of Investment Management,
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-24180 Filed 9-26-01; 8:45 am]
BILLING CODE 8010-01-M