
[Federal Register: October 14, 2008 (Volume 73, Number 199)]
[Notices]               
[Page 60733-60737]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14oc08-96]                         

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 28435; 812-13063]

 
Calamos Convertible Opportunities and Income Fund, et al.; Notice 
of Application

October 7, 2008.
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.

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    Summary of Application: Applicants request an order to permit 
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, and as frequently as 
distributions are specified by or in accordance with the terms of any 
outstanding preferred stock that such investment companies may issue.
    Applicants: Calamos Convertible Opportunities and Income Fund, 
Calamos Convertible and High Income Fund, Calamos Strategic Total 
Return

[[Page 60734]]

Fund, Calamos Global Total Return Fund, and Calamos Global Dynamic 
Income Fund (collectively, the ``Funds'') and Calamos Advisors LLC (the 
``Adviser'').
    Filing Dates: January 27, 2004, March 16, 2007 and July 24, 2008.
    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 November 3, 2008, 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, 2020 Calamos Court, 
Naperville, IL 60563.

FOR FURTHER INFORMATION CONTACT: Wendy Friedlander, Senior Counsel, at 
(202) 551-6837, or James M. Curtis, Branch Chief, at (202) 551-6825 
(Division of Investment Management, Office of Chief Counsel).

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 Room, 100 F Street, NE., Washington, DC 
20549-1520 (telephone (202) 551-5850).

Applicants' Representations

    1. The Funds are registered closed-end investment companies 
organized as Delaware statutory trusts.\1\ The common stock issued by 
each Fund is listed and traded on the New York Stock Exchange. The 
Funds had issued auction rate preferred (``ARP'') stock, most of which 
they have redeemed; applicants are exploring means to redeem the 
remaining outstanding ARP stock. In the future, applicants may issue 
other preferred stock. Applicants believe that the Funds' common 
stockholders desire current income periodically and may favor a fixed 
distribution policy.
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    \1\ Applicants request that any order issued granting the relief 
requested in the application also apply to any closed-end investment 
company that in the future: (a) Is advised by the Adviser (including 
any successor in interest) or by any entity controlling, controlled 
by, or under common control (within the meaning of section 2(a)(9) 
of the Act) with the Adviser; and (b) complies with the terms and 
conditions of the requested order. 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.
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    2. The Adviser is registered under the Investment Advisers Act of 
1940 and is responsible for the overall management of each Fund.
    3. Applicants represent that Board of Trustees (the ``Board'') of 
each of the Funds, including a majority of the members who were not 
``interested persons'' of the Fund as defined in Section 2(a)(19) of 
the Act (the ``Independent Trustees''), requested, and the Adviser 
provided, such information as was reasonably necessary to an informed 
determination of whether the Board should adopt a proposed distribution 
plan. In particular, the Board and the Independent Trustees reviewed 
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 stock under the policy and such Fund's total return 
(in relation to net asset value per share); whether the rate of 
distribution would exceed such Fund's expected total return in relation 
to its NAV per share; and any foreseeable material effects of such 
policy on such Fund's long-term total return (in relation to market 
price and NAV per share). The Independent Trustees also considered what 
conflicts of interest the Adviser and the affiliated persons of the 
Adviser and each such Fund might have with respect to the adoption or 
implementation of such policy. After considering such information the 
Board, including the Independent Trustees, of each Fund approved a 
distribution policy with respect to its common stock (the ``Plan'') and 
determined that such Plan is consistent with such Fund's investment 
objectives and in the best interests of such Fund's common 
stockholders.
    4. Applicants state that the purpose of the Plan of each Fund 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 and, if so determined by 
its Board, all or a portion of the returns of capital paid by portfolio 
companies to such Fund during such year. Applicants represent that 
under the Plan of each Fund, each such Fund would distribute to its 
respective common stockholders a fixed monthly percentage of the market 
price of such Fund's common stock at a particular point in time or a 
fixed monthly percentage of NAV per share at a particular time or a 
fixed monthly amount, any of which may be adjusted from time to time. 
Applicants represent that under each Plan, the minimum annual 
distribution rate with respect to such Fund's common stock would be 
independent of the Fund's performance during any particular period but 
would be expected to correlate with the 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 of 1986 (the ``Code'') for the calendar year, 
each distribution on the common stock would be at the stated rate then 
in effect. Applicants expect that over time the NAV distribution rate 
with respect to a Fund's common stock will approximately equal that 
Fund's total return on NAV.
    5. Applicants state that prior to relying on the order requested in 
this application and implementing the Plan, the Board of each Fund will 
approve and adopt policies and procedures under Rule 38a-1 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 thereunder and condition II below, and all other written 
communications by a Fund or its agents regarding distributions under 
the Plan (``Notices'') comply with condition II below, and all other 
written communications by a Fund or its agents regarding distributions 
under the Plan include the disclosure required by condition III below. 
Applicants state that the Board of each Fund also will adopt policies 
and procedures that will require the Fund to keep records that 
demonstrate the Fund's compliance with all of the conditions of the 
requested order and that are necessary for such Fund to form the basis 
for, and demonstrate the calculation of, the amounts disclosed in its 
Notices.

Applicants' Legal Analysis

    1. Section 19(b) generally makes it unlawful for any registered 
investment company (``fund'') to make long-term capital gains 
distributions more than once each year. Rule 19b-1 limits the number of 
capital gains dividends, as

[[Page 60735]]

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 the one of the concerns underlying section 
19(b) and rule 19b-1 is that stockholders might be unable to 
differentiate between regular distributions of capital gains and 
distributions of 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., 
estimated net income, net short-term 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 state that 
the same information also is included in each Fund's annual reports to 
stockholders and on its IRS Form 1099-DIV, which is sent to each common 
and preferred stockholder who received distributions 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 compliance policies and procedures in accordance with 
rule 38a-1 to ensure that all required Notices and disclosures are sent 
to stockholders. Applicants argue that by providing the information 
required by section 19(a) and rule 19a-1, and by complying with the 
procedures adopted under each Plan and the conditions listed below, the 
Funds would ensure that each Fund's stockholders are provided 
sufficient information to understand that their periodic distributions 
are not tied to the Fund's NAV (which for this purpose is the 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 each Fund's compliance 
procedures and condition III set forth below will ensure that 
prospective stockholders 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 stockholders 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 assert that the ``selling the 
dividend'' concern should not apply to closed-end investment companies, 
such as the Funds, which do not continuously distribute shares. 
According to Applicants, if the underlying concern extends to secondary 
market purchases of stock of closed-end funds that are subject to a 
large upcoming capital gains distribution, adoption of a Plan actually 
helps minimize the concern by avoiding, through periodic distributions, 
any buildup of large end-of-the-year distributions.
    6. Applicants also note that common stock of closed-end funds that 
invest primarily in equity securities often trades in the marketplace 
at a discount to its NAV. Applicants believe that this discount may be 
reduced for closed-end funds that pay relatively frequent distributions 
on their common stock at a consistent rate, whether or not those 
distributions contain an element of long-term 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 Plan imposes pressure on management 
(i) 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 (ii) 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 the limitation on the number of capital gain distributions 
that a fund may make with respect to any one year imposed by rule 19b-
1, may prevent the efficient operation of a Plan whenever that fund's 
realized net long-term capital gains in any year exceed the total of 
the periodic distributions that may include such capital gains under 
the rule.
    8. In addition, Applicants assert that rule 19b-1 may cause fixed 
regular periodic distributions under a Plan to be funded with returns 
of capital \2\ (to the extent net investment income and realized short-
term capital gains are insufficient to fund the distribution), even 
though realized net 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 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.
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    \2\ Returns of capital as used in the application means return 
of capital for financial accounting purposes and not for tax 
accounting purposes.
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    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

[[Page 60736]]

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 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, 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 the provisions of section 19(b) and rule 19b-1 to permit 
each Fund's common stock 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 in respect of its common stock and as often as 
specified by or determined in accordance with the terms thereof in 
respect of its preferred shares.\3\
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    \3\ Applicants 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 such future fund and will be made at a 
future time.
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Applicants' Conditions

    Applicants agree that, with respect to each Fund seeking to rely on 
the order, the order will be subject to the following conditions:
I. Compliance Review and Reporting.
    The 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 
the Adviser have complied with the conditions in the requested order, 
and (ii) a Material Compliance Matter, as defined in rule 38a-1(e)(2), 
has occurred with respect to compliance with such conditions; and (b) 
review the adequacy of the policies and procedures adopted by the Fund 
no less frequently than annually.
II. Disclosures to Fund Stockholders:
    A. Each Notice to the holders of the fund's common stock, in 
addition to the information required by section 19(a) and rule 19a-1:
    1. Will provide, in a tabular or graphical format:
    (a) The amount of the distribution, on a per common share basis, 
together with the amounts of such distribution amount, on a per common 
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;
    (b) the fiscal year-to-date cumulative amount of distributions, on 
a per common share basis, together with the amounts of such cumulative 
amount, on a per common 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;
    (c) 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
    (d) 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
    2. will include the following disclosure:
    (a) ``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'';
    (b) ``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' ''; and
    (c) ``The amounts and sources of distributions reported in this 
Notice are only estimates and are not being provided for tax reporting 
purposes. The actual amounts and sources of the amounts for [accounting 
and] 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 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 stockholders under 
rule 30e-1 under the Act, the Fund will:
    1. Describe the terms of the Plan (including the fixed amount or 
fixed percentage of the distributions and the frequency of the 
distributions);
    2. include the disclosure required by condition II.A.2.a above;
    3. state, if applicable, that the Plan provides that the Board may 
amend or terminate the Plan at any time without prior notice to Fund 
stockholders; and
    4. 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 stockholders under rule 30e-1 and 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.
III. Disclosure to Stockholders, Prospective Stockholders and Third 
Parties:
    A. The Fund will include the information contained in the relevant 
Notice, including the disclosure required by condition II.A.2 above, in 
any written communication (other than a 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 stockholder, prospective common stockholder or third-party 
information provider;
    B. The Fund will issue, contemporaneously with the issuance of any 
Notice, a press release containing the information in the Notice and 
will file with the Commission the

[[Page 60737]]

information contained in such Notice, including the disclosure required 
by condition II.A.2 above, as an exhibit to its next filed Form N-CSR; 
and
    C. The Fund will post prominently a statement on its (or its 
adviser's) Web site containing the information in each Notice, 
including the disclosure required by condition II.A.2 above, and will 
maintain such information on such Web site for at least 24 months.
IV. Delivery of 19(a) Notices to Beneficial Owners:
    If a broker, dealer, bank or other person (``financial 
intermediary'') holds common stock issued by the 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 
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 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 Notice to each beneficial owner of the 
Fund's stock; and (c) upon the request of any financial intermediary, 
or its agent, that receives copies of the Notice, will pay the 
financial intermediary, or its agent, the reasonable expenses of 
sending the Notice to such beneficial owners.
V. Additional Board Determinations for Funds Whose Stock Trades at a 
Premium:
    If:
    A. The Fund's common stock has traded on the exchange on which it 
primarily trades 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 stock 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:
    1. 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:
    (a) Will request and evaluate, and the 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;
    (b) will determine whether continuation, or continuation after 
amendment, of the Plan is consistent with the Fund's investment 
objective(s) and policies and in the best interests of the Fund and its 
stockholders, after considering the information in condition V.B.1.a 
above; including, without limitation:
    (1) Whether the Plan is accomplishing its purpose(s);
    (2) the reasonably foreseeable 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 stock; and
    (3) the Fund's current distribution rate, as described in condition 
V.B above, compared to with the Fund's average annual total return over 
the 2-year period, as described in condition V.B, or such longer period 
as the Board deems appropriate; and
    (c) based upon that determination, will approve or disapprove the 
continuation, or continuation after amendment, of the Plan; and
    2. The Board will record the information considered by it 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.
VI. Public Offerings:
    The Fund will not make a public offering of the Fund's common stock 
other than:
    A. A rights offering below NAV to holders of the Fund's common 
stock;
    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 VI.A 
and VI.B above, unless, with respect to such other offering:
    1. the Fund's average annual distribution rate for the six months 
ending on the last day of the month ended immediately prior to the most 
recent distribution record date,\4\ expressed as a percentage of NAV 
per share as of such 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; \5\ and
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    \4\ If the fund has been in operation fewer than two years, the 
measured period will being immediately following the fund's first 
public offering.
    \5\ If the Fund has been in operation fewer than five years, the 
measured period will begin immediately following the Fund's first 
public offering.
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    2. 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 in accordance with the terms 
of any outstanding preferred stock that such Fund may issue.
VII. Amendments to Rule 19b-1:
    The requested relief 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,
Acting Secretary.
 [FR Doc. E8-24242 Filed 10-10-08; 8:45 am]

BILLING CODE 8011-01-P
