File No.
812-_____
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
APPLICATION
FOR AN ORDER PURSUANT TO SECTION 6(C) OF THE
INVESTMENT
COMPANY ACT OF 1940, AS AMENDED FOR EXEMPTIONS FROM
SECTION
19(B) OF THE ACT AND RULE 19B-1 THEREUNDER
__________________________________________________________
In
the Matter of:
FEDERATED
ENHANCED TREASURY INCOME FUND
FEDERATED
PREMIER INTERMEDIATE MUNICIPAL INCOME FUND
FEDERATED
PREMIER MUNICIPAL INCOME FUND
AND
FEDERATED
INVESTMENT MANAGEMENT COMPANY
__________________________________________________________
Please
direct all communications, notices and orders to:
Clair E.
Pagnano, Esq.
K&L
Gates LLP
State
Street Financial Center
One
Lincoln Street
Boston,
Massachusetts 02111-2950
With
copies to:
Gregory
Dulski
Federated
Investors Tower
1001
Liberty Avenue
Pittsburgh,
Pennsylvania 15222-3779
As filed
with the Securities and Exchange Commission
On
January 14, 2010
UNITED
STATES OF AMERICA
BEFORE
THE
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
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________________________________________________
In
the Matter of
FEDERATED
ENHANCED TREASURY
INCOME
FUND
FEDERATED
PREMIER
INTERMEDIATE
MUNICIPAL
INCOME
FUND
FEDERATED
PREMIER MUNICIPAL
INCOME
FUND
AND
FEDERATED
INVESTMENT
MANAGEMENT
COMPANY
________________________________________________
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APPLICATION
FOR AN ORDER
PURSUANT
TO SECTION 6(c) OF THE
INVESTMENT
COMPANY ACT OF
1940,
AS AMENDED (THE “ACT”), FOR
EXEMPTIONS
FROM SECTION 19(b)
OF
THE ACT AND RULE 19b-1
THEREUNDER
File
No. 812-_____
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Federated Enhanced Treasury Income
Fund, Federated Premier Intermediate Municipal Income Fund, Federated Premier
Municipal Income Fund (the “Current Funds”) and Federated Investment Management
Company (“Federated” or the “Adviser”) and each registered closed-end investment
company created after the granting of the Order (defined below) currently
advised or to be advised in the future by Federated (including any successor in
interest)1 or by an entity
controlling, controlled by or under common control (within the meaning of
Section 2(a)(9) of the Investment Company Act of 1940, as amended (the “Act”))
with Federated (such entities, together with Federated,
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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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the
“Investment Advisers”) that decides in the future to rely on the requested
relief2 (such
investment companies, together with the Current Funds, are referred to as the
“Funds,” and with Federated, the “Applicants”) hereby apply for an order (the
“Order”) of the Securities and Exchange Commission (the “Commission”) pursuant
to Section 6(c) of the Act providing Applicants an exemption from the provisions
of Section 19(b) of the Act (“Section 19(b)”) and Rule 19b-1 thereunder (“Rule
19(b)”), as more fully set forth below.
I. Applicants.
Each
Current Fund is a closed-end management investment company registered under the
Act. Set forth below in tabular format is descriptive information
regarding the Current Funds, each of which is a diversified fund:
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Fund
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Investment Objective
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Summary Strategy
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Enhanced Treasury Income Fund3,
a Delaware statutory trust (7/11/07)
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To
provide current income, with total return as a secondary
objective.
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Invests
at least 80% of its assets in U.S. Treasury securities and may invest up
to 20% of its assets in U.S. government agency securities, including
mortgage-backed securities. The Fund will also write call
options and/or options on futures of U.S. Treasury securities and U.S.
government agency securities and index call options on the value of U.S.
Treasury and U.S. government agency securities on a continuous basis on at
least 50% to 80% of the value of its holdings of U.S. Treasury and U.S.
government agency securities.
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Premier Intermediate Municipal
Income Fund, a Delaware statutory trust
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To
provide current income exempt from federal income tax.
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Invests
in high-quality, short-term tax exempt money market securities or
high-quality tax-exempt securities with relatively low volatility, such as
pre-refunded and intermediate-term
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The
Current Funds that intend to be able to rely on the requested Order
(defined below) are named as Applicants and any Funds that may rely on the
Order in the future will satisfy each of the representations in the
application except that such representations will be made in respect of
actions by the board of trustees of such future Fund and will be made at a
future time.
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Please
note that Federated Enhanced Treasury Income Fund is currently in
registration and its registration statement has not yet been declared
effective and therefor has not yet commenced operations. It is anticipated
that the fund's registration statement will be become effective at the end
of January 2010 at which time the fund will commence
operations.
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(10/31/02)
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bonds. Under
normal circumstances, the Fund maintains a dollar-weighted average
portfolio maturity of three to ten years and a dollar-weighted average
duration of three to eight years.
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Fund
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Investment Objective
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Summary Strategy
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Premium Municipal Income
Fund, a Delaware statutory trust (10/16/02)
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To
provide current income exempt from federal income tax.
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Invests
in high-quality, short-term tax-exempt money market securities and
high-quality tax-exempt securities with relatively low volatility, such as
pre-refunded and intermediate-term bonds. Under normal
circumstances, the Fund maintains a dollar-weighted average portfolio
maturity of 15 to 30 years and a dollar-weighted average duration of 7 to
13 years.
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The
Premier Intermediate Municipal Income Fund and Premier Municipal Income Fund
have issued two classes of shares: (1) common shares of beneficial interest; and
(2) preferred shares. The Enhanced Treasury Income Fund has not yet
commenced operations, but currently intends to issue only common
shares.
Federated,
a registered investment adviser under the Investment Advisers Act of 1940, as
amended, acts as the Current Funds’ investment adviser and
administrator. Federated (or its affiliates) currently serves as the
investment adviser to investment companies and various individual and
institutional clients with combined assets under management of approximately
$392.3 billion as of September 30, 2009. Federated is a wholly-owned
subsidiary of Federated Investors, Inc.
Objectives of the Distribution
Plan. The objectives of the distribution plan (defined below)
are two-fold: (1) to give investors an investment that provides regular
distribution and steady cash flow; and (2) to help address discounts to net
asset value (“NAV”) that many closed-end funds, including the Current Funds
experience.
Additionally,
Applicants intend that over the long-term the rate of a Fund’s distributions
will approximately equal the average annual total returns of that
Fund.
Applicants
believe that investors in the common shares of the Current Funds may prefer an
investment vehicle that provides regular/monthly distributions and a steady cash
flow. Accordingly, certain such investors may generally expect a
similar distribution policy.
In addition,
the common stock of closed-end funds generally tends to trade in the marketplace
at a discount to their NAVs. At times, shareholders of certain
closed-end funds trading at discounts have made it increasingly clear to the
boards of directors and management of their funds that serious steps need to be
taken toward addressing the discount. To try to reduce the persistent
discounts at which their shares trade, many closed-end funds have adopted
managed distribution plans, which call for monthly or quarterly distributions to
shareholders. Some of these funds have successfully narrowed their
discounts as a result. In the view of the Applicants, the discount at
which such closed-end Funds’ common stock may trade also may be reduced if such
Funds similarly adopt a managed distribution plan that will require such Funds
to pay capital gains dividends with respect to their common stock more
frequently than is permitted under Rule 19b-1.
II.
Relief Requested.
Section
19(b) provides that it shall be unlawful in contravention of such rules,
regulations, or orders as the Commission may prescribe as necessary or
appropriate in the public interest or for the protection of investors for any
registered investment company to
distribute
long-term capital gains, as defined in the Internal Revenue Code of 1986 (the
"Code"), more often than once every twelve months. Rule 19b-1 of the
Act provides that no registered investment company, which is a "regulated
investment company" as defined in Section 851 of the Code shall make more than:
(i) one "capital gain dividend," as defined in Section 852(b)(3)(C) of the Code,
in any one taxable year of the company; (ii) one additional capital gain
distribution made in whole or in part to avoid payment of excise tax under
Section 4982 of the Code, plus (iii) one supplemental "clean-up" capital gain
dividend pursuant to Section 855 of the Code, which amount may not exceed 10% of
the total amount distributed for the year.
The
Applicants believe that Rule 19b-1 should be interpreted to permit each Fund to
pay an unlimited number of distributions on its common and preferred shares, if
applicable, so long as it makes the designation necessary under the Code and
Rule 19b-1 to transform such distributions into "capital gain dividends"
restricted by Rule 19b-1 only as often as is permitted by Rule 19b-1, even if
the Code would then require retroactively spreading the capital gain resulting
from such designation over more than the permissible number of
distributions. However, in order to obtain certainty for
the Funds' proposed distribution policies, in the absence of such an
interpretation, Applicants hereby request an Order pursuant to Section 6(c) of
the Act (see below) granting an exemption from Section 19(b) and Rule
19b-1. The Order would permit each Fund to make periodic capital gain
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 shares and as often as
specified by or determined in accordance with the terms thereof in respect of
its preferred shares.
III. Representation of the
Applicants.
Applicants
make the following representations regarding the requested relief:
Prior to
implementing a distribution plan in reliance on the Order, the Board of Trustees
(the “Board”) of a Fund, including a majority of the members who are not
“interested persons” of such Fund as defined in Section 2(a)(19) of the Act (the
“Independent Trustees”), shall have requested, and the Adviser shall have
provided, such information as is reasonably necessary to make an informed
determination of whether the Board should adopt a proposed distribution
policy. In particular, the Board and the Independent Trustees shall
have 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 NAV per common share) and the
relationship between such Fund’s distribution rate on its common shares under
the policy and such Fund’s total return (in relation to NAV 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 shall also
have 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. Only after considering
such information shall the Board, including the Independent Trustees, of a Fund
approve a distribution policy with respect to such Fund’s common shares (the
“Plan”) and in connection with such approval shall have determined that such
Plan is consistent with a Fund’s investment objectives and in the best interests
of a Fund’s common shareholders.
Generally, the purpose of a Plan would
be to permit a 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. It is anticipated that under the Plan of a Fund, such Fund
would distribute to its respective common shareholders a fixed monthly
percentage of the market price of such Fund’s common shares 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. It is anticipated that under a Plan, the minimum annual
distribution rate with respect to such Fund’s common shares would be independent
of a Fund’s performance during any particular period but would be expected to
correlate with a Fund’s performance over time. Except for
extraordinary distributions and potential increases or decreases in the final
dividend periods in light of a Fund’s performance for an entire calendar year
and to enable a Fund to comply with the distribution requirements of Subchapter
M of the Code for the fiscal year, it is anticipated that each distribution on
the common shares would be at the stated rate then in effect.
In
addition, prior to the implementation of a Plan for a Fund, the Board shall have
adopted policies and procedures under Rule 38a-1 under the Act
that:
(i) 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 4 below (each a “19(a) Notice”) include the disclosure required by
Rule 19a-1 and by condition 2(a) below, and that all other written
communications by the Current
Funds or
its agents described in condition 3(a) below about the distributions under the
Plan include the disclosure required by condition 3(a) below; and
(ii) require
each of the Funds to keep records that demonstrate its compliance with all of
the conditions of the Order and that are necessary for such Fund to form the
basis for, or demonstrate the calculation of, the amounts disclosed in its 19(a)
Notices.
The records of the actions of the Board
of Trustees of a Fund shall summarize the basis for its approval of a Plan,
including its consideration of the factors described above. Such
records will be maintained for a period of at least six years from the date of
such meeting, the first two years in an easily accessible place, or for such
longer period as may otherwise be required by law.
In order to rely on the Order, a future
Fund must satisfy each of the foregoing representations, except that such
representations will be made in respect of actions by the board of directors of
such future Fund and will be made at a future time and except that the purpose
of its distribution policy may differ from the purpose of the Plans by the
Current Funds in that such distribution policy may be to distribute a fixed
amount or a fixed percentage of NAV or NAV per share without regard to the level
of income, appreciation or total return of such Fund over particular series of
dividend periods or with regard to only one or a combination of such elements
over such period of time and may exclude reference to distributions of capital
received from portfolio companies. Notwithstanding the foregoing, under any such
distribution policy such future Fund would expect that its distributions would
correlate with its total return over time plus, if applicable, distributions of
capital received from such future Fund’s portfolio companies.
IV. Justification for the Requested
Relief.
Section
6(c) of the Act provides that the Commission may exempt any person or
transaction from any provision of the Act or any rule under the Act 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. For the reasons set forth
below, Applicants submit that the requested exemption from Section 19(b) and
Rule 19b-1 would be consistent with the standards set forth in Section 6(c) of
the Act and in the best interests of the Applicants and their respective
shareholders.
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1. |
Receipt of the Order would
serve shareholder
interests. |
Applicants
believe that the shareholders of the Current Funds may prefer an investment
vehicle that provides regular/monthly distributions and a steady cash flow
through a fixed distribution plan.
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2.
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Each Fund's shareholders would
receive information sufficient to clearly inform them of the nature of the
distributions they are
receiving.
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One of
the concerns leading to the enactment of Section 19(b) and adoption of Rule
19b-1 was that shareholders might be unable to distinguish between frequent
distributions of capital gains and dividends from investment income.4 However,
Rule 19a-1 under the Act effectively addresses this concern by requiring that
distributions (or the confirmation of the reinvestment thereof) estimated to be
sourced in part from capital gains or capital be accompanied by a separate
statement showing the sources of the
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See
Securities and Exchange Commission 1966 Report to Congress on Investment
Company Growth (H.R. Rep. No. 2337, 89th Cong., 2d Sess. 190-95 (1966));
S. Rep. No. 91-184, 91st Cong., 1st Sess. 29 (1969); H.R. Rep. No.
91-1382, 91st Cong., 2d Sess. 29 (1970) (the
"Report").
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distribution
(e.g., estimated net
income, net short-term capital gains, net long-term capital gains and/or return
of capital). Similar information is included in the Current Funds’ annual
reports to shareholders and on Internal Revenue Service (“IRS”) Form 1099-DIV,
which is sent to each common and preferred shareholder who received
distributions during a particular year (including shareholders who have sold
shares during the year).
In
addition, each of Current Funds will make the additional disclosures required by
the conditions set forth in Part IV below, and each of them has adopted
compliance policies and procedures in accordance with Rule 38a-1 under the Act
to ensure that all required notices and disclosures are sent to
shareholders.
Rule
19a-1, the Plans and the compliance policies ensure that each Current Fund's
shareholders would be provided sufficient information to understand that their
periodic distributions are not tied to a Current Fund's net investment income
(which for this purpose is a Current Fund's taxable income other than from
capital gains) and realized capital gains to date, and may not represent yield
or investment return. Accordingly, continuing to subject the Funds to
Section 19(b) and Rule 19b-1 would afford shareholders no extra
protection. In addition, the Funds will undertake to request
intermediaries to forward 19(a) Notices to their customers and to reimburse them
for the costs of forwarding. Such forwarding may occur in any manner
permitted by statute, rule, order or the staff.
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3.
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Under certain circumstances,
Rule 19b-1 gives rise to improper influence on portfolio management
decisions, with no offsetting benefit to
shareholders.
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Rule
19b-1, when applied to a Plan, actually gives rise to one of the concerns that
Rule 19b-1 was intended to avoid: inappropriate influence on portfolio
management decisions. Funds that pay long-term capital gains
distributions only once per year in
accordance
with Rule 19b-1 impose no pressure on management to realize capital gains at any
time when purely investment considerations do not dictate doing
so. In the absence of an exemption from Rule 19b-1, the adoption of a
periodic distribution 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.
No
purpose is served by the distortion in the normal operation of a periodic
distribution plan required in order to comply with Rule 19b-1. There
is no reason or logic in requiring any fund that adopts a periodic distribution
plan either to retain (and pay taxes on) long-term capital gains (with the
resulting additional tax return complexities for the fund's shareholders) or to
avoid designating its distributions of long-term gains as capital gains
dividends for tax purposes (thereby avoiding a Rule 19b-1 problem but providing
distributions taxable at ordinary income rates rather than the much lower
long-term capital gains rates and being required to pay income tax on the amount
of such income). The desirability of avoiding these anomalous results
creates pressure to limit the realization of long-term capital gains that
otherwise would be taken for purely investment considerations.
The Order
requested by the Applicants would minimize these anomalous 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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4.
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Other concerns leading to
adoption of Rule 19b-1 are not
applicable.
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Another
concern that led to the enactment of Section 19(b) and adoption of Rule 19b-1
was that frequent capital gains distributions could facilitate improper fund
share 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 submit that this concern should
not apply to closed-end investment companies, such as the Current Funds, which
do not continuously distribute shares. Furthermore, if the underlying
concern extends to secondary market purchases of shares of closed-end fund that
are subject to a large upcoming capital gains dividend, adoption of a periodic
distribution plan actually helps minimize the concern by avoiding, through
periodic distributions, any buildup of large end-of-the-year
distributions.
The
Applicants also submit that the "selling the dividend" concern is not applicable
to preferred stock, if any, which entitles a holder to no more than a specified
periodic dividend and, like a debt security, is initially sold at a price based
upon its liquidation preference, credit quality, dividend rate and frequency of
payment. Investors buy preferred shares for the purpose of receiving
specific payments at the frequency bargained for, and any application of Rule
19b-1 to preferred stock would be contrary to the expectation of
investors. There is also currently a tax rule that provides that any
loss on the sale of shares held for six months or less will be treated as a
long-term capital loss
to the
extent of any capital gains distributions received with respect to such shares,
and this rule discourages selling the dividend.
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5.
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Further limitations of Rule
19b-1.
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Subparagraphs
(a) and (f) of Rule 19b-1 limit the number of capital gains dividends, as
defined in Section 852(b)(3)(C) of the Code, 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.
Applicants
assert that by limiting the number of capital gain dividends that a fund may
make with respect to any one year, Rule 19b-1 may prevent the normal and
efficient operation of a periodic distribution 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 this
rule. Rule 19b-1 thus may force the fixed regular periodic
distributions to be funded with returns of capital5 (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 would 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 periodic
distribution plan or to retain and pay taxes on the excess
amount. Applicants believe that the application of Rule 19b-1 to a
fund's periodic distribution plan may create pressure to
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These
would be returns of capital for financial accounting purposes and not for
tax accounting purposes.
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limit the
realization of long-term capital gains based on considerations unrelated to
investment goals.
Revenue
Ruling 89-81 under the Code requires that a fund that seeks to qualify as a
regulated investment company under the Code and 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. 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 Rule 19b-1 for a tax year and
still need to distribute additional capital gains allocated to the preferred
stock to comply with Revenue Ruling 89-81.
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. Such
distributions are either fixed or are 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 the long term capital gains.
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, dividend rate, credit quality, and
frequency of payment. 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.
The
proposed Order will assist the Current Funds in avoiding these Rule 19b-1
problems.
The
relief requested is that the Commission permit the Current Funds to make
periodic distributions in respect of their common shares as often as monthly and
in respect of their preferred shares as specified by or determined in accordance
with the terms thereof. Granting this relief would provide the
Current Funds with flexibility in meeting investor interest in receiving more
frequent distributions. By reducing the amount of individual periodic
distributions even further, implementation of the additional relief would
actually ameliorate the concerns that gave rise to Section 19(b) and Rule 19b-1
and help avoid the "selling of dividends" problem, which Section 19(b) and Rule
19b-1 are not effective in preventing.
The
potential issues under Rule 19b-1 are basically not relevant to distributions on
preferred shares. Not only are such distributions fixed or determined
in periodic auctions or remarketings by reference to short-term interest rates
rather than by reference to performance of the issuer but also the long-term
capital gain component is mandated by the IRS to be the same proportion as the
proportion of long-term gain dividends bears to the total distributions in
respect of the common shares and consequently the long-term gain component
cannot even be known until the last dividend of the year. In these
circumstances, it would be very difficult for any of the potential abuses
reflected in Rule 19b-1's restrictions to occur.
In
summary, Rule 19b-1 in the circumstances referred to above distorts the
effective and proper functioning of the Current Funds' distributions and gives
rise to the very pressures on portfolio management decisions that Rule 19b-1 was
intended to avoid. These distortions forced by Rule 19b-1 serve no
purpose and are not in the best interests of shareholders.
V. 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:
1. 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 its Adviser have complied
with the conditions of the Order; and (ii) a material compliance
matter (as defined in Rule 38a-1(e)(2) under the Act) has occurred with respect
to such conditions; and (b) review the adequacy of the policies and procedures
adopted by the Board no less frequently than annually.
2. Disclosures to Fund
Shareholders
(a) Each
19(a) Notice to the holders of the Fund's common shares, in addition to the
information required by Section 19(a) and Rule 19a-1:
(i) Will
provide, in a tabular or graphical format:
(1) the
amount of the distribution, on a per share basis, together with the amounts of
such distribution amount, on a per 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;
(2) the
fiscal year-to-date cumulative amount of distributions, on a per share basis,
together with the amounts of such cumulative amount, on a per 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;
(3) the
average annual total return in relation to the change in NAV per common share
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 ended immediately prior to the
most recent distribution declaration 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 declaration date;
and
(4) 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 declaration 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 declaration 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
(ii) will
include the following disclosure:
(1) "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";
(2) "The
Fund estimates that it has distributed more than its income and 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'";6
and
(3) "The
amounts and sources of distributions reported in this 19(a) Notice are only
estimates and are not being provided for tax reporting purposes. The actual
amounts and sources of the amounts for 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.";
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The
disclosure in this condition 2(a)(ii)(2) will be included only if the
current distribution or the fiscal year-to-date cumulative distributions
are estimated to include a return of capital.
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Such
disclosure shall be made in a type size at least as large as and as prominent as
any other information in the 19(a) 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 shareholders under Rule 30e-1 under the
Act, the Fund will:
(i) describe
the terms of the Plan (including the fixed amount or fixed percentage of the
distributions and the frequency of the distributions);
(ii) include
the disclosure required by condition 2(a)(ii)(1) above;
(iii) state,
if applicable, that the Plan provides that the Board may amend or terminate the
Plan at any time without prior notice to Fund shareholders; and
(iv) describe
any reasonably foreseeable circumstances that might cause the Fund to terminate
the Plan and any reasonably foreseeable consequences of such termination;
and
(c) Each
report provided to shareholders under Rule 30e-1 under the Act 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.
3. Disclosure to Shareholders,
Prospective Shareholders and Third Parties
(a) The Fund will include
the information contained in the relevant 19(a) Notice, including the disclosure
required by condition 2(a)(ii) above, in any written communication (other than a
communication on 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 shareholder, prospective shareholder or
third-party information provider;
(b) The
Fund will issue, contemporaneously with the issuance of any 19(a) Notice, a
press release containing the information in the 19(a) Notice and filed with the
Commission the information contained in such 19(a) Notice, including the
disclosure required by condition 2(a) (ii) above, as an exhibit to its next
filed Form N-CSR; and
(c) The
Fund will post prominently a statement on its (or the Adviser's) Web site
containing the information in each 19(a) Notice, including the disclosure
required by condition 2(a)(ii) above, and maintain such information on such
Web site for at least 24 months.
4. 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 19(a) 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 19(a) 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 19(a) Notice to each beneficial owner of
the Fund's shares; and (c) upon the request of any financial intermediary,
or its agent, that receives copies of the 19(a) Notice, will pay the financial
intermediary, or its agent, the reasonable expenses of sending the 19(a) Notice
to such beneficial owners.
5. Special Board Review for Funds Whose
Common Stock Trades at a Premium
If:
(a) The
Fund's common shares have traded on the stock exchange that they
primarily trade on 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 shares 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:
(i) 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:
(1) will
request and evaluate, and the Fund's 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;
(2) will
determine whether continuation, or continuation after amendment, of the Plan is
consistent with the Fund's investment objective(s) and policies and is in the
best interests of the Fund and its
shareholders,
after considering the information in condition 5(b)(i)(1) above; including,
without limitation:
(A) whether
the Plan is accomplishing its purpose(s);
(B) the
reasonably foreseeable material 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
shares; and
(C) the
Fund's current distribution rate, as described in condition 5(b) above, compared
with the Fund's average annual taxable income or total return over the 2-year
period, as described in condition 5(b), or such longer period as the Board deems
appropriate; and
(3) based
upon that determination, will approve or disapprove the continuation, or
continuation after amendment, of the Plan; and
(ii) The
Board will record the information considered by it, including its consideration
of the factors listed in condition 5(b)(i)(2) above, 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.
6. Public Offerings
The Fund
will not make a public offering of the Fund's common shares other
than:
(a) a
rights offering below NAV to holders of the Fund's common shares;
(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 6(a) and 6(b) above,
provided that, with respect to such other offering:
(i) 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
declaration date, 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; and
(ii) 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 by or
determined in accordance with the terms of any outstanding preferred stock as
such Fund may issue.
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7.
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Amendments to Rule
19b-1
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The
requested Order will expire on the effective date of any amendments 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.
VI. Applicable
Precedent.
The
Commission has granted relief identical to the relief sought here in the
following orders: In the Matter of MFS Government Markets Income
Trust, et al.,
Release
No. 29063 (November 24, 2009); In the Matter of Pioneer Diversified High Income
Trust, et al., Release No. 28995 (November 10, 2009); In the Matter of Neuberger
Berman Management LLC, et al., Release No. 28994 (November 10, 2009); In the
Matter of Evergreen Income Advantage Fund, et al., Release No. 28985 (October
27, 2009); In the Matter of Alpine Global Dynamic Dividend Fund, et al., Release
No. 28937 (September 30, 2009); In the Matter of Clough Global Allocation Fund,
et al., Release No. 28904 (September 21, 2009); In the Matter of Reaves Utility
Income Fund, et al., Release No. 28843 (August 11, 2009); In the Matter of
BlackRock international Growth and Income Trust, et al., Release No. 28719 (May
5, 2009); In the Matter of Eaton Vance Enhanced Equity Income Fund, et al.,
Release No. 28643 (March 10, 2009); In the Matter of SunAmerica Focused Alpha
Growth Fund, Inc., et al., Release No. 28612 (February 3, 2009); In the Matter
of Macquarie Global Infrastructure Total Return Fund Inc., et al., Release No.
28611 (February 3, 2009); In the Matter of Boulder Total Return Fund, Inc., et
al., Release No. 28486 (November 17, 2008); In the Matter of The Zweig Total
Return Fund, Inc., et al., Release No. 28485 (November 17, 2008); In the Matter
of Calamos Convertible Opportunities and Income Fund, et al., Release No. 38483
(November 4, 2008); In the Matter of PIMCO Municipal Income Fund, et al.,
Release No. 28412 (September 29, 2008); In the Matter of John Hancock Income
Securities Trust, et al., Release No. 28389 (September 24, 2008); In the Matter
of DNP Select Income Fund Inc., et al., Release No. 28368 (August 26, 2008); In
the Matter of Cohen & Steers Advantage Income Realty Fund, Inc., et al.,
Release No. 28358 (August 19, 2008); In the Matter of The Mexico Fund, et al.,
Release No. 28357 (August 12, 2008); and In the
Matter of
ING Clarion Real Estate Income Fund, et al., Release No. 28352 (August 5,
2008).
II. Procedural
Compliance.
At a
meeting duly held on December 18, 2009, the Board of the Current Funds adopted
the following resolution authorizing the execution and filing of this
Application.
RESOLVED, to approve the
filing of an exemptive order application with the Securities and Exchange
Commission (“SEC”) to permit all current closed-end funds and hereinafter
created registered closed-end investment companies advised by Federated
Investment Management Company (“Federated”) or an adviser controlling,
controlled by or under common control with Federated (collectively, the “Funds”)
to adopt a managed distribution plan (the “Plan”) that would allow the Funds to
implement a fixed distribution policy by distributing long-term capital gains as
frequently as monthly.
Pursuant
to Rule 0-2(c) under the Act, each Applicant hereby states that the person
signing and filing this Application on its behalf is fully authorized to do so,
that under the provisions of the Articles of Incorporation or the Declaration of
Trust, as the case may be, of such Applicant responsibility for the management
of the affairs of such Applicant is vested in its Board, and that such Applicant
has complied with all requirements for the execution and filing of this
Application in its name and on its behalf.
These
verifications required by Rule 0-2(d) under the Act are attached to this
Application as Exhibit A.
Pursuant
to Rule 0-2(f) under the Act, the Applicants further state that:
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1.
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The
address of each of the Applicants is as
follows:
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Federated
Investors Tower
1001
Liberty Avenue
Pittsburgh,
Pennsylvania 15222-3779
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2.
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Any
questions regarding this Application should be directed
to:
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Clair E.
Pagnano, Esq.
K&L
Gates LLP
State
Street Financial Center
One
Lincoln Street
Boston,
Massachusetts 02111-2950
and
Gregory
Dulski
Federated
Investors Tower
1001
Liberty Avenue
Pittsburgh,
Pennsylvania 15222-3779
III. Conclusion.
On the
basis of the foregoing, the Applicants respectfully request that the Commission
enter an Order pursuant to Section 6(c) of the Act exempting the Funds from the
provisions of Section 19(b) of the Act and Rule 19b-1 thereunder to permit each
Fund to make distributions on its common shares consisting in whole or in part
of capital gain dividends as frequently as once per month so long as it complies
with the conditions of the Order and maintains in effect a distribution policy
with respect to its common shares calling for periodic distributions of an
amount equal to a fixed amount per share, a fixed percentage of market price per
share or a fixed percentage of such Fund's NAV per share.
* * * *
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FEDERATED
ENHANCED TREASURY INCOME FUND
FEDERATED
PREMIER INTERMEDIATE MUNICIPAL INCOME FUND
FEDERATED
PREMIER MUNICIPAL INCOME FUND
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By: |
/s/ G. Andrew
Bonnewell |
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Name: |
G. Andrew
Bonnewell |
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Title: |
Assistant
Secretary |
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Date: |
January 14,
2010 |
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FEDERATED INVESTMENT MANAGEMENT
COMPANY
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By: |
/s/ G. Andrew
Bonnewell |
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Name: |
G. Andrew
Bonnewell |
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Title: |
Vice President,
Secretary |
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Date: |
January 14,
2010 |
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LIST OF ATTACHMENTS AND
EXHIBITS
Exhibit
A
| 1. |
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Verification of
Federated Enhanced Treasury Income Fund, Federated Premier Intermediate
Municipal Income Fund, and Federated Premier Municipal Income
Fund |
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| 2. |
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Verification of
Federated Investment Management Company |
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Exhibit
B - Resolution
29