[Federal Register Volume 63, Number 38 (Thursday, February 26, 1998)]
[Notices]
[Pages 9876-9877]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-4917]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Rel. No. 23033; 812-10748]
Franklin Floating Rate Trust, et al.; Notice of Application
February 20, 1998.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for exemption under sections 6(c) and
23(c) of the Investment Company Act of 1940 (the ``Act'').
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SUMMARY OF APPLICATION: Applicants seek an order to permit certain
registered closed-end investment companies to impose early withdrawal
charges (``EWCs'').
APPLICANTS: Franklin Floating Rate Trust (the ``Fund''), Franklin
Advisers, Inc. (the ``Adviser''), Franklin/Templeton Distributors, Inc.
(the ``Distributor''), and Franklin/Templeton Investor Services, Inc.
(the ``Administrator'').
FILING DATES: The application was filed on August 6, 1997. Applicants
have agreed to file an amendment, the substance of which is
incorporated in this notice, during the notice period.
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 March 16, 1998,
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
reasons 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, N.W., Washington, D.C.
20549. Applicants, 777 Mariners Island Boulevard, San Mateo, CA 94404.
FOR FURTHER INFORMATION CONTACT:
Elaine M. Boggs, Senior Attorney, at (202) 942-0572, or Christine Y.
Greenlees, 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 is available for a fee at the
SEC's Public Reference Branch, 450 5th Street, N.W., Washington, D.C.
20549 (telephone (202) 942-8090).
Applicants' Representations
1. The Fund is a closed-end management investment company
registered under the Act. The Fund invests primarily in senior secured
corporate loans and senior secured debt securities that are made or
issued by U.S. companies and U.S. subsidiaries of non-U.S. companies
and that have floating or variable interest rates. The Adviser,
registered under the Investment Advisers Act of 1940, serves as
investment adviser for the Fund. The Distributor serves as distributor
to the Fund and the Administrator serves as the Fund's administrator.
The Adviser, Distributor, and Administrator are wholly-owned
subsidiaries of Franklin Resources, Inc.
2. Applicants request that the order apply to any registered
closed-end investment company for which the Adviser, the Distributor,
the Administrator, or any entity controlling, controlled by, or under
common control with the Adviser, the Distributor, or the Administrator
acts as principal underwriter, investment adviser, or administrator
(collectively with the Fund, the ``Funds''), provided that any
[[Page 9877]]
Fund that in the future relies on the order will do so in a manner
consistent with the terms and conditions of the application.
3. The Funds intend to continuously offer their shares to the
public at net asset value. Initially, the Fund will be sold without a
front-end sales charge, but the Fund and certain other Funds may be in
the future impose a front-end sales charge. The Funds do not intend to
list their shares on any national securities exchange or over-the-
counter market and there will be no secondary market for shares of the
Funds. The Funds intend to operate as ``interval funds'' pursuant to
rule 23c-3 under the Act and make periodic repurchase offers to their
shareholders.
4. The Funds propose to impose EWCs on shares accepted for
repurchase that have been held for less than a certain period of time.
The EWCs will be paid to the Distributor to allow it to recover a
portion of its distribution expenses. The EWC to be imposed by the Fund
is expected to be 1% of the lesser of the then current net asset value
or the original purchase price of the shares being tendered for shares
held less than twelve months. The Funds may in the future impose EWCs
in different amounts or for different time periods.
5. In the future, the Funds may pay service fees that will meet the
requirements of Rule 2830(d) of the Conduct Rules of the National
Association of Securities Dealers, Inc. (the ``NASD'') as if the Fund
were an open-end fund.\1\ Any service fee payments will be in amounts
not to exceed .25% of a Fund's average daily net assets for any fiscal
year. Any front-end sales charge imposed by a Fund also will comply
with the NASD's Conduct Rule 2830(d) as if the Fund were an open-end
fund.
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\1\ The Funds will not impose any distribution fees similar to
those charged by open-end funds under rule 12b-1 under the Act.
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6. The Funds propose to waive the EWC for certain categories of
shareholders or transactions to be established in the future. With
respect to any waiver of, scheduled variation in, or elimination of the
EWC, the Funds will comply with rule 22d-1 under the Act as if the
Funds were open-end funds.\2\
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\2\ The Funds may offer their shareholders an option to exchange
their shares for shares of registered open-end investment companies
in the Franklin/Templeton group of investment companies (as defined
in rule 11a-3 under the Act). Any such exchange option will comply
with rule 11a-3 as if the Funds were open-end investment companies
subject to the rule. In complying with rule 11a-3, the Funds will
treat the EWC as if it were a contingent deferred sales charge.
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Applicants' Legal Analysis
1. Section 23(c) of the Act provides in relevant part that no
registered closed-end fund will 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.
2. Rule 23c-3 under the Act permits a registered closed-end fund
(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. Applicants request relief
from this provision pursuant to sections 69(c) and 23(c) to the extent
that it would prohibit the imposition of an EWC on tendered shares that
have been held for less than a specified period.
3. Rule 6c-10 under the Act permits open-end funds to impose
deferred sales charges, subject to certain conditions. Applicants state
that EWCs are functionally equivalent to contingent deferred sales
charges (``CDSLs'') that open-end funds may charge under rule 6c-10.
Applicants believe that EWCs are necessary for the Distributor to
recover distribution costs from Fund shareholders who redeem early. The
Funds will comply with rule 6c-10 as if the rule were applicable to
them. The Funds also will disclose EWCs in accordance with the
requirements of Form N-1A concerning CDSLs. Finally, as permitted under
rule 6c-10, any waiver of EWCs will comply with the requirements of
rule 22d-1 under the Act.
4. 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 believe that the requested relief meets this standard for
the reasons stated above.
5. 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 which does not unfairly discriminate against any holders of the
class or classes of securities to be purchased. Applicants believe that
the requested relief meets this standard. Applicants state that the
Funds 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.
Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. The Funds that impose an EWC will comply with rule 6c-10 under
the Act as if the rule were applicable to the Funds.
2. The Funds that impose a service fee will comply with Rule
2830(d) of the NASD's Conduct Rules as if the rule were applicable to
the Funds.
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-4917 Filed 2-25-98; 8:45 am]
BILLING CODE 8010-01-M
