
[Federal Register Volume 84, Number 46 (Friday, March 8, 2019)]
[Notices]
[Pages 8550-8553]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-04265]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 33388; 812-14956]


BlackRock Credit Strategies Fund, et al.

March 5, 2019.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice.

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    Notice of an application under section 6(c) of the Investment 
Company Act of 1940 (the ``Act'') for an exemption from sections 
18(a)(2), 18(c) and 18(i) of the Act, under sections 6(c) and 23(c) of 
the Act for an exemption from rule 23c-3 under the Act, and for an 
order pursuant to section 17(d) of the Act and rule 17d-1 under the 
Act.

Summary of Application:  Applicants request an order to permit certain 
registered closed-end management investment companies to issue multiple 
classes of shares and to impose asset-based distribution and/or service 
fees and early withdrawal charges (``EWCs'').

Applicants: BlackRock Credit Strategies Fund (the ``Fund''), BlackRock 
Advisors, LLC (the ``Advisor'') and

[[Page 8551]]

BlackRock Investments, LLC (the ``Distributor'').

Filing Dates: The application was filed on September 24, 2018 and 
amended on January 15, 2019.

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 April 1, 2019, and should be accompanied by proof of 
service on the applicants, in the form of an affidavit, or, for 
lawyers, a certificate of service. Pursuant to rule 0-5 under the Act, 
hearing requests should state the nature of the writer's interest, any 
facts bearing upon the desirability of a hearing on the matter, 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, U.S. Securities and Exchange Commission, 100 F 
Street NE, Washington, DC 20549-1090; Applicants: Janey Ahn, Esq., 
BlackRock Advisors, LLC, 55 East 52nd Street, New York, NY 10055, and 
Thomas A. DeCapo, Esq., Skadden, Arps, Slate, Meagher & Flom LLP, 500 
Boylston Street, Boston, MA 02116.

FOR FURTHER INFORMATION CONTACT: Laura L. Solomon, Senior Counsel or 
Kaitlin C. Bottock, Branch Chief, at (202) 551-6825 (Division of 
Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION:  The following is a summary of the 
application. The complete application may be obtained via the 
Commission's website by searching for the file number, or for an 
applicant using the Company name box, at or by calling (202) 551-8090.

Applicants' Representations

    1. The Fund is a Delaware statutory trust that is registered under 
the Act as a non-diversified, closed-end management investment company. 
The Fund seeks to provide high income and attractive risk adjusted 
return. The Fund seeks to achieve its investment objectives by 
investing, under normal circumstances, at least 80% of its managed 
assets in fixed income securities, with an emphasis on public and 
private corporate credit.
    2. The Advisor is registered as an investment adviser under the 
Investment Advisers Act of 1940, as amended. The Advisor will serve as 
investment adviser to the Fund.
    3. The applicants seek an order to permit the Fund to issue 
multiple classes of shares and to impose asset-based distribution and/
or service fees and EWCs.
    4. Applicants request that the order also apply to any continuously 
offered registered closed-end management investment company that has 
been previously organized or that may be organized in the future for 
which the Advisor or Distributor, or any entity controlling, controlled 
by, or under common control with the Advisor or Distributor, or any 
successor in interest to any such entity,\1\ acts as investment 
manager, adviser or principal underwriter and which operates as an 
interval fund pursuant to rule 23c-3 under the Act or provides periodic 
liquidity with respect to its shares pursuant to rule 13e-4 under the 
Securities Exchange Act of 1934 (``Exchange Act'') (each, a ``Periodic 
Repurchase Fund'' and together with the Fund, the ``Periodic Repurchase 
Funds'').\2\
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    \1\ A successor in interest is limited to an entity that results 
from a reorganization into another jurisdiction or a change in the 
type of business organization.
    \2\ Any Periodic Repurchase 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 each entity 
presently intending to rely on the requested relief is listed as an 
applicant.
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    5. The Fund will continuously offer common shares to the public. 
Applicants state that additional offerings by any Periodic Repurchase 
Fund relying on the order may be on a private placement or public 
offering basis. Shares of the Fund will not be listed on any securities 
exchange nor quoted on any quotation medium. The Fund does not expect 
there to be a secondary trading market for its shares.
    6. The Fund will initially offer only one share class at net asset 
value (the ``Initial Class''). If the requested relief is granted, the 
Fund intends to commence offering a second class of shares (the 
``Second Class''). The Initial Class will not be subject to a front-end 
sales load, a distribution fee or a service fee. The Second Class will 
be subject to a front-end sales load, a distribution fee and/or a 
service fee. The Fund and other Periodic Repurchase Funds may in the 
future offer additional classes of shares and/or another sales charges 
structure. Because of the different distribution fees, services and any 
other class expenses that may be attributable to the each class of 
shares, the net income attributable to, and the dividends payable on, 
each class of shares may differ from each other.
    7. Applicants state that, from time to time, the Periodic 
Repurchase Funds may create additional classes of shares, the terms of 
which may differ from the initial class in the following respects: (i) 
The amount of fees permitted by different distribution plans or 
different service fee arrangements; (ii) voting rights with respect to 
a distribution plan of a class; (iii) different class designations; 
(iv) any differences in dividends and net asset value resulting from 
differences in fees under a distribution or service fee arrangement or 
in class expenses; (v) any EWC or other sales load structure; and (vi) 
exchange or conversion privileges of the classes as permitted under the 
Act.
    8. Applicants state that the Fund has adopted a fundamental policy 
to repurchase a specified percentage of its shares (no less than 5%) at 
net asset value on a quarterly basis. Such repurchase offers will be 
conducted pursuant to rule 23c-3 under the Act. Each of the Periodic 
Repurchase Funds will likewise adopt fundamental investment policies 
and make periodic repurchase offers to its shareholders in compliance 
with rule 23c-3 or will provide periodic liquidity with respect to its 
shares pursuant to rule 13e-4 under the Exchange Act.\3\ Any repurchase 
offers made by a Periodic Repurchase Fund will be made to all holders 
of shares of each such Fund.
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    \3\ Applicants submit that rule 23c-3 and Regulation M under the 
Exchange Act permit an interval fund to make repurchase offers to 
repurchase its shares while engaging in a continuous offering of its 
shares pursuant to Rule 415 under the Securities Act of 1933, as 
amended.
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    9. Applicants represent that any asset-based service and/or 
distribution fees for each class of shares of the Periodic Repurchase 
Funds will comply with the provisions of FINRA Rule 2341(d) (``FINRA 
Sales Charge Rule'').\4\ Applicants also represent that each Periodic 
Repurchase 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. As is required for open-end funds, each Periodic Repurchase Fund 
will disclose its expenses in shareholder reports, and describe any 
arrangements that result in breakpoints in or elimination of sales 
loads in its prospectus.\5\ In addition,

[[Page 8552]]

applicants will comply with applicable enhanced fee disclosure 
requirements for fund of funds, including registered funds of hedge 
funds.\6\
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    \4\ Any reference to the FINRA Sales Charge Rule includes any 
successor or replacement to the FINRA Sales Charge Rule.
    \5\ 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).
    \6\ Fund of Funds Investments, Investment Company Act Rel. Nos. 
26198 (Oct. 1, 2003) (proposing release) and 27399 (Jun. 20, 2006) 
(adopting release). See also Rules 12d1-1, et seq. of the Act.
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    10. Each Periodic Repurchase Fund will comply with any requirements 
that the Commission or FINRA may adopt 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 each Periodic Repurchase Fund. In addition, each Periodic 
Repurchase Fund will contractually require that any distributor of the 
Periodic Repurchase Fund's shares comply with such requirements in 
connection with the distribution of such Periodic Repurchase Fund's 
shares.
    11. Each Periodic Repurchase Fund will allocate all expenses 
incurred by it among the various classes of shares based on the net 
assets of that Periodic Repurchase Fund attributable to each class, 
except that the net asset value and expenses of each class will reflect 
the expenses associated with the distribution plan of that class, 
service fees attributable to that class (if any), including transfer 
agency fees, and any other incremental expenses of that class. Expenses 
of a Periodic Repurchase 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 Periodic Repurchase Fund will comply 
with the provisions of rule 18f-3 under the Act as if it were an open-
end investment company.
    12. Applicants state that each Periodic Repurchase Fund may impose 
an EWC on shares submitted for repurchase that have been held less than 
a specified period and may waive the EWC for certain categories of 
shareholders or transactions to be established from time to time. 
Applicants state that each Periodic Repurchase Fund will apply the EWC 
(and any waivers or scheduled variations, or elimination of the EWC) 
uniformly to all shareholders in a given class and consistently with 
the requirements of rule 22d-1 under the Act as if the Periodic 
Repurchase Funds were open-end investment companies.
    13. Each Periodic Repurchase Fund operating as an interval fund 
pursuant to rule 23c-3 under the Act may offer its shareholders an 
exchange feature under which the shareholders of the Periodic 
Repurchase Fund may, in connection with such Periodic Repurchase Fund's 
periodic repurchase offers, exchange their shares of the Periodic 
Repurchase Fund for shares of the same class of (i) registered open-end 
investment companies or (ii) other registered closed-end investment 
companies that comply with rule 23c-3 under the Act or rule 13e-4 under 
the Exchange Act and continuously offer their shares at net asset 
value, that are in the Periodic Repurchase Fund's group of investment 
companies (collectively, ``Other Funds''). Shares of a Periodic 
Repurchase Fund operating pursuant to rule 23c-3 that are exchanged for 
shares of Other Funds will be included as part of the amount of the 
repurchase offer amount for such Periodic Repurchase Fund as specified 
in rule 23c-3 under the Act. Any exchange option will comply with rule 
11a-3 under the Act, as if the Periodic Repurchase Fund were an open-
end investment company subject to rule 11a-3. In complying with rule 
11a-3, each Periodic Repurchase Fund will treat an EWC as if it were a 
contingent deferred sales load (``CDSL'').

Applicants' Legal Analysis

Multiple Classes of Shares

    1. Section 18(a)(2) of the Act provides that a closed-end 
investment company may not issue or sell a senior security that is a 
stock unless certain requirements are met. Applicants state that the 
creation of multiple classes of shares of the Periodic Repurchase Funds 
may violate section 18(a)(2) because the Periodic Repurchase Funds may 
not meet such requirements with respect to a class of shares that may 
be a senior security.
    2. 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 Periodic Repurchase Funds may be 
prohibited by section 18(c), as a class may have priority over another 
class as to payment of dividends because shareholders of different 
classes would pay different fees and expenses.
    3. 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 multiple classes of shares of the Periodic 
Repurchase 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.
    4. 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 or regulation 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(a)(2), 18(c) and 18(i) to permit the 
Periodic Repurchase Funds to issue multiple classes of shares.
    5. Applicants submit that the proposed allocation of expenses 
relating to distribution 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 Periodic Repurchase Fund to facilitate the distribution of its 
securities 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 state that each Periodic Repurchase Fund will 
comply with the provisions of rule 18f-3 as if it were an open-end 
investment company.

Early Withdrawal Charges

    1. Section 23(c) of the Act provides, in relevant part, that no 
registered closed-end investment company shall purchase 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 Commission may 
permit by rules and regulations or orders for the protection of 
investors.
    2. Rule 23c-3 under the Act permits 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

[[Page 8553]]

pursuant to a fundamental policy of the interval fund. Rule 23c-3(b)(1) 
under the Act permits an interval fund to deduct from repurchase 
proceeds only a repurchase fee, not to exceed two percent of the 
proceeds, that is paid to the interval fund and is reasonably intended 
to compensate the fund for expenses directly related to the repurchase.
    3. Section 23(c)(3) provides that the Commission 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.
    4. Applicants request relief under section 6(c), discussed above, 
and section 23(c)(3) from rule 23c-3 to the extent necessary for the 
Periodic Repurchase Funds to impose EWCs on shares of the Periodic 
Repurchase Funds submitted for repurchase that have been held for less 
than a specified period.
    5. Applicants state that the EWCs they intend to impose are 
functionally similar to CDSLs imposed by open-end investment companies 
under rule 6c-10 under the Act. Rule 6c-10 permits open-end investment 
companies to impose CDSLs, subject to certain conditions. Applicants 
note that rule 6c-10 is grounded in policy considerations supporting 
the employment of CDSLs where there are adequate safeguards for the 
investor and state that the same policy considerations support 
imposition of EWCs in the interval fund context. In addition, 
applicants state that EWCs may be necessary for the distributor to 
recover distribution costs. Applicants represent that any EWC imposed 
by the Periodic Repurchase Funds will comply with rule 6c-10 under the 
Act as if the rule were applicable to closed-end investment companies. 
The Periodic Repurchase Funds will disclose EWCs in accordance with the 
requirements of Form N-1A concerning CDSLs.

Asset-Based Distribution and/or Service Fees

    1. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
an affiliated person of a registered investment company, or an 
affiliated person of such person, 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 Commission issues an order permitting the 
transaction. In reviewing applications submitted under section 17(d) 
and rule 17d-1, the Commission considers whether the participation of 
the investment 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.
    2. 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 under the Act. 
Applicants request an order under section 17(d) and rule 17d-1 under 
the Act to the extent necessary to permit a Periodic Repurchase Fund to 
impose asset-based distribution and/or service fees. Applicants have 
agreed to comply with rules 12b-1 and 17d-3 as if those rules applied 
to closed-end investment companies, which they believe will resolve any 
concerns that might arise in connection with a Periodic Repurchase Fund 
financing the distribution of its shares through asset-based 
distribution fees.
    3. For the reasons stated above, applicants submit that the 
exemptions requested under section 6(c) are necessary and appropriate 
in the public interest and are consistent with the protection of 
investors and the purposes fairly intended by the policy and provisions 
of the Act. Applicants further submit that the relief requested 
pursuant to section 23(c)(3) will be consistent with the protection of 
investors and will insure that applicants do not unfairly discriminate 
against any holders of the class of securities to be purchased. 
Finally, applicants state that the Periodic Repurchase Funds' 
imposition of asset-based distribution and/or service fees is 
consistent with the provisions, policies and purposes of the Act and 
does not involve participation on a basis different from or less 
advantageous than that of other participants.

Applicants' Condition

    Applicants agree that any order granting the requested relief will 
be subject to the following condition:
    Each Periodic Repurchase Fund relying on the order will comply with 
the provisions of rules 6c-10, 12b-1, 17d-3, 18f-3, 22d-1, and, where 
applicable, 11a-3 under the Act, as amended from time to time, as if 
those rules applied to closed-end management investment companies, and 
will comply with the FINRA Sales Charge Rule, as amended from time to 
time, as if that rule applied to all closed-end management investment 
companies.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-04265 Filed 3-7-19; 8:45 am]
BILLING CODE 8011-01-P


