
[Federal Register Volume 77, Number 200 (Tuesday, October 16, 2012)]
[Notices]
[Pages 63360-63361]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-25335]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. IC-30228; 812-14011]


Permal Hedge Strategies Fund, et al.; Notice of Application

October 9, 2012.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application under section 6(c) of the Investment 
Company Act of 1940 (the ``Act'') for an exemption from sections 18(c) 
and 18(i) of the Act.

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    Summary of Application: Applicants request an order to permit 
certain registered closed-end management investment companies to issue 
multiple classes of shares with varying sales loads and asset-based 
distribution and service fees.
    Applicants: Permal Hedge Strategies Fund (``Fund''), Legg Mason 
Partners Fund Advisor, LLC (the ``Adviser''), Permal Asset Management 
Inc., (``Sub-Adviser'' and, together with the Adviser, the 
``Advisers'') and Legg Mason Investors Services, LLC (the 
``Distributor'').
    Filing Dates: The application was filed on March 2, 2012, and 
amended on July 3, 2012. Applicants have agreed to file an amendment 
during the notice period, the substance of which is reflected in this 
notice.
    Hearing or Notification of Hearing: An order granting the requested 
relief 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 2, 2012, and should be accompanied by proof of 
service on the 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: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange 
Commission, 100 F Street, NE., Washington, DC 20549-1090; Applicants, 
c/o Robert I. Frenkel, Esq., Legg Mason & Co., LLC, 100 First Stamford 
Place, 6th Floor, Stamford, CT 06902.

FOR FURTHER INFORMATION CONTACT: Emerson S. Davis, Senior Counsel, at 
(202) 551-6811 or Daniele Marchesani, Branch Chief, at (202) 551-6821 
(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 via the 
Commission's Web site by searching for the file number, or an applicant 
using the Company name box, at http://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.
    Applicants' Representations:
    1. The Fund is a non-diversified closed-end management investment 
company registered under the Act. The Fund is organized as a Maryland 
statutory trust. The Adviser serves as investment adviser and the Sub-
Adviser as a subadviser to the Fund. The Distributor, a broker-dealer 
registered under the Securities Exchange Act of 1934 (``1934 Act''), 
acts as principal underwriter for the Funds. The Distributor is an 
affiliated person, as defined in section 2(a)(3) of the Act, of the 
Adviser and of the Sub-Adviser.
    2. The Fund continuously offers its shares (``Shares'') under the 
Securities Act of 1933. The Shares are not offered or traded in a 
secondary market and are not listed on any securities exchange or 
traded on any over-the counter system. Applicants do not expect that 
any secondary market will ever develop for the Shares.
    3. The Fund currently offers an initial class of Shares (``Initial 
Class'') at net asset value subject to a sales load and an ongoing 
asset-based service and distribution fee and proposes to offer multiple 
classes of Shares. The Fund may offer a new Share class at net asset 
value that would not be subject to a front-end sales load or a service 
and distribution fee, but would be subject to a minimum purchase 
requirement. The Fund intends to continue to offer Initial Class Shares 
at net asset value subject to a sales load, a service and distribution 
fee, and minimum purchase requirements. The Fund may in the future 
adopt this or another structure with respect to distribution and 
service expenses. The Fund does not plan to offer exchange 
privileges.\1\
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    \1\ The Fund also will not impose either an early withdrawal 
charge, or repurchase fee or a contingent deferred sales charge.
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    4. In order to provide a limited degree of liquidity to 
Shareholders, the Funds may from time to time offer to repurchase 
Shares at net asset value in accordance with rule 13e-4 under the 1934 
Act pursuant to written tenders by shareholders. A Fund will repurchase 
Shares at the times, in the amounts and on the terms as may be 
determined by the Board of Trustees (``Board'') of the Fund in its sole 
discretion. The Adviser expects to recommend ordinarily that the Board 
authorize each Fund to offer to repurchase Shares from Shareholders 
quarterly.
    5. Applicants request that the order also apply to any other 
continuously offered registered closed-end management investment 
companies existing now or in the future for which the Advisers, 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, and which provides periodic liquidity with 
respect to its Shares pursuant to rule 13e-4 under the 1934 Act (such 
investment companies, together with the Fund, the ``Funds'').\2\
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    \2\ Any Fund 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 any person presently 
intending to rely on the requested relief is listed as an applicant.
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    6. Applicants represent that any asset-based 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 Conduct Rule 2830'').\3\ Applicants also represent that 
each Fund will disclose in its prospectus, the fees, expenses and other 
characteristics of each class of Shares offered for sale by the 
prospectus as is required for open-end multiple class funds under Form 
N-1A. The Fund will disclose fund expenses in shareholder reports as if 
it were an open-end management investment company, and disclose any 
arrangements that result in

[[Page 63361]]

breakpoints in, or elimination of, sales loads.\4\ The Fund and 
Distributor will also comply with any requirements that may be adopted 
by the Commission or FINRA regarding disclosure at the point of sale 
and in transaction confirmations about the costs and conflicts of 
interest arising out of the distribution of open-end investment company 
shares, and regarding prospectus disclosure of sales loads and revenue 
sharing arrangements as if those requirements applied to the Fund and 
the Distributor.\5\
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    \3\ All references to NASD Conduct Rule 2830 include any 
successor or replacement rule that may be adopted by the Financial 
Industry Regulatory Authority (``FINRA'').
    \4\ See Shareholder Reports and Quarterly Portfolio Disclosure 
of Registered Management Investment Companies, Investment Company 
Act Release No. 26372 (Feb. 27, 2004) (adopting release) (requiring 
open-end investment companies to disclose fund expenses in 
shareholder reports); and Disclosure of Breakpoint Discounts by 
Mutual Funds, Investment Company Act Release No. 26464 (June 7, 
2004) (adopting release) (requiring open-end investment companies to 
provide prospectus disclosure of certain sales load information).
    \5\ See, e.g., Confirmation Requirements and Point of Sale 
Disclosure Requirements for Transactions in Certain Mutual Funds and 
Other Securities, and Other Confirmation Requirement Amendments, and 
Amendments to the Registration Form for Mutual Funds, Investment 
Company Act Release No. 26341 (Jan. 29, 2004) (proposing release).
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    7. All expenses incurred by the Fund will be allocated among its 
various classes of Shares based on the respective 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 of that class. Expenses of a Fund 
allocated to a particular class of Shares will be borne on a pro rata 
basis by each outstanding Share of that class. Applicants state that 
each Fund will comply with the provisions of rule 18f-3 under the Act 
as if it were an open-end investment company.
    Applicants' 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 Funds 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 investment company will be a voting 
stock and have equal voting rights with every other outstanding voting 
stock. Applicants state that permitting multiple classes of Shares of 
the Funds 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 Commission may exempt 
any person, security or transaction or any class or classes of persons, 
securities or transactions from any provision of the Act, or from any 
rule under the Act, if and to the extent 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) from sections 18(c) and 18(i) to permit the Funds 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 would permit a Fund to facilitate 
the distribution of its Shares and provide investors with a broader 
choice of shareholder services. Applicants assert that the proposed 
closed-end investment company multiple class structure 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' 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 12b-1 and 18f-3 
under the Act, as amended from time to time or replaced, as if those 
rules applied to closed-end management investment companies, and will 
comply with the NASD Conduct Rule 2830, as amended from time to time, 
as if that rule applied to all closed-end management investment 
companies. Additionally, to the extent the Fund may determine to waive, 
impose scheduled variations of, or eliminate sales charges, it will do 
so consistently with the requirements of rule 22d-1 under the Act, as 
amended from time to time or replaced, as if that rule applied to 
closed-end management investment companies.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-25335 Filed 10-15-12; 8:45 am]
BILLING CODE 8011-01-P


