Applications, hearings, determinations, etc.: Eaton Vance Senior Income Trust, et al.,

[Federal Register: September 14, 2005 (Volume 70, Number 177)]

[Notices]

[Page 54417-54420]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr14se05-113]

SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 27058; 812-12893]

Eaton Vance Senior Income Trust, et al.; Notice of Application

September 7, 2005. AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order under section 12(d)(1)(J) of the Investment Company Act of 1940 (``Act'') for an exemption from sections 12(d)(1)(A) and (B) of the Act, under sections 6(c) and 17(b) for an exemption from section 17(a) of the Act, and under section 17(d) of the Act and rule 17d-1 under the Act to permit certain joint transactions.

Summary of Application: Applicants request an order to permit certain registered management investment companies (``Investing Funds'') to use cash collateral received in connection with a securities lending program (``Cash Collateral'') to purchase shares of affiliated money market funds or an affiliated cash management vehicle that relies on section 3(c)(1) or 3(c)(7) of the Act.

Applicants: Eaton Vance Senior Income Trust, Eaton Vance Floating-Rate Income Trust, Eaton Vance Short Duration Diversified Income Fund, Eaton Vance Enhanced Equity Income Fund, Eaton Vance Enhanced Equity Income Fund II, Eaton Vance California Municipal Income Trust, Eaton Vance Florida Municipal Income Trust, Eaton Vance Massachusetts Municipal Income Trust, Eaton Vance Michigan Municipal Income Trust, Eaton Vance Municipal Income Trust, Eaton Vance New Jersey Municipal Income Trust, Eaton Vance New York Municipal Income Trust, Eaton Vance Ohio Municipal Income Trust, Eaton Vance Pennsylvania Municipal Income Trust, Eaton Vance Advisers Senior Floating-Rate Fund, Eaton Vance Prime Rate Reserves, EV Classic Senior Floating-Rate Fund, Eaton Vance Institutional Senior Floating-Rate Fund, Eaton Vance Growth Trust, Eaton Vance Investment Trust, Eaton Vance Municipals Trust, Eaton Vance Municipals Trust II, Eaton Vance Mutual Funds Trust, Eaton Vance Series Trust, Eaton Vance Series Trust II, Eaton Vance Special Investment Trust, Eaton Vance Variable Trust, Growth Portfolio, Global Growth Portfolio, Cash Management Portfolio, Government Obligations Portfolio, High Income Portfolio, Tax-Managed Growth Portfolio, Strategic Income Portfolio, Large-Cap Value Portfolio, Special Equities Portfolio, Utilities Portfolio, Senior Debt Portfolio, Floating-Rate Portfolio, Tax-Managed Small-Cap Growth Portfolio, Tax-Managed International Equity Portfolio, Tax-Managed Value Portfolio, Boston Income Portfolio, Tax-Managed Multi-Cap Opportunity Portfolio, Tax-Managed Mid-Cap Core Portfolio, Investment Grade Income Portfolio, Small-Cap Portfolio, Large-Cap Growth Portfolio, Large-Cap Core Portfolio, Small-Cap Growth Portfolio, Tax-Managed Small-Cap Value Portfolio, Eaton Vance Limited Duration Income Fund, Investment Portfolio, Capital Growth Portfolio, Eaton Vance Insured California Municipal Bond Fund, Eaton Vance Insured California Municipal Bond Fund II, Eaton Vance Insured Florida Municipal Bond Fund, Eaton Vance Insured Massachusetts Municipal Bond Fund, Eaton Vance Insured Michigan Municipal Bond Fund, Eaton Vance Insured Municipal Bond Fund, Eaton Vance Insured Municipal Bond Fund II, Eaton Vance Tax-Managed Buy-Write Income Fund, Eaton Vance Insured New Jersey Municipal Bond Fund, Eaton Vance Insured New York Municipal Bond Fund, Eaton Vance Insured New York Municipal Bond Fund II, Eaton Vance Insured Ohio Municipal Bond Fund, Eaton Vance Insured Pennsylvania Municipal Bond Fund, Eaton Vance Senior Floating-Rate Trust, Eaton Vance Tax-Advantaged Dividend Income Fund, Eaton Vance Tax-Advantaged Global Dividend Income Fund, Eaton Vance Tax-Advantaged Global Dividend Opportunities Fund, on behalf of themselves or their series (each, a ``Fund,'' and collectively, the ``Funds'');

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Eaton Vance Management (``EVM''), Boston Management & Research, Atlanta Capital Management Company, LLC, Fox Asset Management, Inc., and Parametric Portfolio Associates LLC (each, an ``Adviser'' and together with EVM, the ``Advisers'').

Filing Dates: The application was filed on October 4, 2002, and amended on September, 2, 2005.

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 October 3, 2005, 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 may request notification of a hearing by writing to the Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-9303. Applicants, c/o Robert A. Wittie, Esq., Kirkpatrick & Lockhart, LLP, 1800 Massachusetts Avenue, NW., Washington, DC 20036.

FOR FURTHER INFORMATION CONTACT: Marc R. Ponchione, Senior Counsel, at (202) 551-6874, or Nadya B. Roytblat, Assistant Director, 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 for a fee at the Commission's Public Reference Branch, 100 F Street, NE., Washington DC 20549-0102 (tel. 202-551-5850).

Applicants' Representations

1. Each Investing Fund is registered under the Act as an open-end or closed-end management investment company and is organized as a business trust formed under the laws of Massachusetts or a trust formed under the laws of New York. Each Adviser is registered as an investment adviser under the Investment Advisers Act of 1940. EVM is a direct wholly-owned subsidiary of Eaton Vance Corp. (``EV Corp.'') and Boston Management & Research is a direct wholly-owned subsidiary of EVM. Atlanta Capital Management Company, LLC, Fox Asset Management, Inc., and Parametric Portfolio Associates LLC each are indirect majority- owned subsidiaries of EV Corp. Each Investing Fund has entered into a management or advisory and service contract with one of the Advisers pursuant to which the Adviser provides investment management advice and manages the Investing Fund's business affairs.\1\ Applicants request that the relief extend to any entity controlling, controlled by, or under common control with EVM (included in the term ``Adviser'') and any other registered management investment company or series thereof that is advised by an Adviser (included in the term ``Funds'').\2\

   \1\ Under their respective management or advisory contracts, certain closed-end Investing Funds will calculate their advisory fees on a gross assets basis, which includes Cash Collateral, to reflect investment leverage. These closed-end Investing Funds, and any other Investing Fund that calculates its advisory fee on a basis that includes Cash Collateral are referred to as the ``Cash Collateral Fee Investing Funds.''

   \2\ All entities that currently intend to rely on the requested relief have been named as applicants. Any entity that relies on the requested relief will do so only in accordance with the terms and conditions of the application.

2. The Investing Funds have the ability to increase their income by lending portfolio securities to borrowers, such as registered broker- dealers or other institutional investors deemed by the Adviser to be of good credit standing, through a securities lending program (``Securities Lending Program''). Loans will be continuously secured by collateral, the value of which will range from between 100% and 105%, depending on the type of collateral posted and securities loaned, plus any interest accrued to date. Collateral will consist of cash and other types of instruments such as U.S. Government securities or irrevocable letters of credit. The Securities Lending Program, including the investment of any Cash Collateral, will comply with all present and future applicable Commission and staff positions regarding securities lending arrangements.

3. Applicants request relief to permit: (a) Each Investing Fund to use its Cash Collateral to purchase shares of money market Funds that are in the same group of investment companies (as defined in section 12(d)(1)(G) of the Act) as the Investing Fund and comply with rule 2a-7 under the Act (``Money Market Funds'') and a cash management vehicle that is excluded from the definition of investment company under section 3(c)(1) or 3(c)(7) of the Act and is advised by an Adviser (``Private Fund,'' and together with the Money Market Funds, the ``Central Funds''), and the Central Funds to sell their respective shares to and to purchase (or redeem) such shares from the Investing Funds; and (b) the Advisers to effect such purchases and sales.

   Applicants' Legal Analysis

1. Section 12(d)(1)(A) of the Act provides that no registered investment company may acquire securities of another investment company representing more than 3% of the acquired company's outstanding voting stock, more than 5% of the acquiring company's total assets, or, together with the securities of other investment companies, more than 10% of the acquiring company's total assets. Section 12(d)(1)(B) of the Act prohibits a registered open-end investment company, its principal underwriter, and any broker or dealer from selling any security of the investment company to another investment company if the sale will cause the acquiring company to own more than 3% of the acquired company's voting stock, or if the sale will cause more than 10% of the acquired company's voting stock to be owned by investment companies. Section 12(d)(1)(J) of the Act provides that the Commission may exempt any person or transaction from any provision of section 12(d)(1) if and to the extent that the exemption is consistent with the public interest and the protection of investors.

2. Applicants request an exemption under section 12(d)(1)(J) to permit the Investing Funds to use Cash Collateral to purchase shares of the Money Market Funds in excess of the limits imposed by section 12(d)(1)(A), and each Money Market Fund, its principal underwriter, and any broker or dealer to sell the Money Market Fund's shares to the Investing Funds in excess of the limits in section 12(d)(1)(B). Applicants represent that the proposed transactions will not result in an inappropriate layering of fees because shares of the Central Funds sold to the Investing Funds will not be subject to a sales load, redemption fee, distribution fee under a plan adopted in accordance with rule 12b-1 under the Act, or service fee (as defined in Rule 2830(b)(9) of the Conduct Rules of the National Association of Securities Dealers (``NASD Conduct Rules''), or if such shares are subject to any such sales load, redemption fee, distribution fee, or service fee, the Adviser will waive its advisory fee for each Investing Fund in an amount that offsets the amount of such fees incurred by the Investing Fund. For Cash Collateral Fee Investing Funds, before the next meeting of the board of trustees (``Board'') of a Cash Collateral Fee Investing Fund is held for

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   the purpose of voting on an advisory contract with the Adviser under section 15 of the Act, the Adviser will provide the Board with specific information regarding the approximate cost to the Adviser of, or the portion of the advisory fee under the existing advisory contract with the Adviser attributable to, managing the Cash Collateral of the Cash Collateral Fee Investing Fund that can be expected to be invested in the Central Funds. Before approving any advisory contract with the Adviser for a Cash Collateral Fee Investing Fund, the Board, including a majority of the trustees who are not ``interested persons,'' as defined in section 2(a)(19) of the Act (``Independent Trustees''), shall consider to what extent, if any, the advisory fees charged to the Cash Collateral Fee Investing Fund by the Adviser should be reduced to account for reduced services provided to the Cash Collateral Fee Investing Fund as a result of Cash Collateral being invested in the Central Funds. Applicants also represent that the Central Funds will not acquire securities of any investment company or company relying on section 3(c)(1) or 3(c)(7) of the Act in excess of the limits contained in section 12(d)(1)(A) of the Act, except that a Money Market Fund may acquire shares of another Money Market Fund in reliance on section 12(d)(1)(E) of the Act. Applicants further state that the Money Market Funds will be managed specifically to maintain a highly liquid portfolio and, therefore, will not be susceptible to control through the threat of large scale redemptions. For these reasons, applicants believe that the proposed transactions will not give rise to the abuses that sections 12(d)(1)(A) and (B) under the Act were designed to prevent.

3. Sections 17(a)(1) and 17(a)(2) of the Act prohibit an affiliated person of a registered investment company, or any affiliated person of the affiliated person (``second-tier affiliate'') from selling any security to, or purchasing any security from, the registered investment company. Section 2(a)(3) of the Act defines an ``affiliated person'' of another person to include: any person directly or indirectly owning, controlling, or holding with power to vote 5% or more of the outstanding voting securities of the other person; any person 5% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote, by such other person; any person directly or indirectly controlling, controlled by, or under common control with, the other person; and, in the case of an investment company, its investment adviser. Control is defined in section 2(a)(9) of the Act to mean ``the power to exercise a controlling influence over the management or policies of a company, unless such power is solely the result of an official position with such company.''

4. Applicants state that because the Advisers will serve as investment advisers of the Investing Funds and the Central Funds, the Advisers could be deemed to control the Investing Funds and the Central Funds, and the Advisers are under common control. Accordingly, the Investing Funds and the Central Funds may be deemed to be under common control and affiliated persons of each other. In addition, if an Investing Fund acquires 5% or more of the outstanding voting securities of a Central Fund, the Central Fund could be deemed an affiliated person of the Investing Fund. As a result, applicants state that the sale of shares of the Central Funds to the Investing Funds, and the redemption of such shares in connection with the investment of Cash Collateral may be prohibited under Section 17(a).

5. Section 17(b) of the Act authorizes the Commission to exempt a transaction from section 17(a) if the terms of the proposed transaction, including the consideration to be paid or received, are reasonable and fair and do not involve overreaching on the part of any person concerned, and the proposed transaction is consistent with the policy of each registered investment company concerned and with the general purposes of the Act. Section 6(c) of the Act provides that the Commission may exempt any person, security, or transaction from any provision of the Act if 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.

6. Applicants request an order under sections 6(c) and 17(b) of the Act to permit the Investing Funds to use Cash Collateral to purchase shares of the Central Funds, and the Central Funds to sell their respective shares to and to purchase (or redeem) such shares from the Investing Funds. Applicants state that the Investing Funds will retain their ability to invest Cash Collateral directly in money market instruments as authorized by their respective investment objectives and policies if they can achieve a higher return or for any other reason. Applicants state that the Investing Funds will invest in the Central Funds on the same basis as any other holder of Central Fund shares. Applicants state that an Investing Fund will invest its Cash Collateral in a Central Fund only if the Central Fund has been approved for investment by the Investing Fund. For these reasons, applicants believe that the terms of the proposed transactions are reasonable and fair and are consistent with the general purposes of the Act as well as with the policy of each Investing Fund.

7. Section 17(d) of the Act and rule 17d-1 under the Act prohibit an affiliated person of a registered investment company, 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 has approved the joint arrangement. Under rule 17d-1, in passing on applications for orders under section 17(d), the Commission considers whether the participation of the registered investment company 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.

8. Applicants state that the Investing Funds, by purchasing shares of the Central Funds, the Advisers, by managing the assets of the Investing Funds invested in the Central Funds, and the Central Funds, by selling shares to and redeeming shares from the Investing Funds, could be deemed to be participants in a joint enterprise or other joint arrangement within the meaning of section 17(d) and rule 17d-1. Applicants request an order pursuant to rule 17d-1 under the Act to permit certain joint transactions in accordance with section 17(d) of the Act and rule 17d-1 thereunder.

9. In considering whether to approve a joint transaction under rule 17d-1, the Commission considers whether the investment company's participation in the proposed transaction 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. Applicants state that the investment by the Investing Funds in shares of the Central Funds would be on the same basis and indistinguishable from any other shareholder account maintained by the Central Fund. Accordingly, applicants believe that the conditions for relief under rule 17d-1 under the Act are satisfied.

   Applicants' Conditions

   Applicants agree that any order of the Commission granting the requested

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   relief will be subject to the following conditions:

1. Before an Investing Fund may participate in the Securities Lending Program, a majority of the Board, including a majority of the Independent Trustees, will approve the Investing Fund's participation in the Securities Lending Program. The Board also will evaluate the securities lending arrangement and its results no less frequently than annually and determine that any investment of Cash Collateral in the Central Funds is in the best interest of the shareholders of the Investing Fund.

2. Investment of Cash Collateral in shares of the Central Funds will be in accordance with each Investing Fund's respective investment restrictions and policies as recited in the Investing Fund's prospectus and statement of additional information. An Investing Fund will invest Cash Collateral in a Central Fund only if the Central Fund has been approved for investment by the Investing Fund.

3. The Central Funds shall not acquire securities of any investment company or company relying on section 3(c)(1) or 3(c)(7) of the Act in excess of the limits contained in section 12(d)(1)(A) of the Act, except that a Money Market Fund may acquire the shares of another Money Market Fund in reliance on section 12(d)(1)(E) of the Act.

4. Shares of the Central Funds sold to the Investing Funds either will not be subject to a sales load, redemption fee, distribution fee under a plan adopted in accordance with rule 12b-1 under the Act, or service fee (as defined in Rule 2830(b)(9) of the NASD Conduct Rules) or, if such shares are subject to any such sales load, redemption fee, distribution fee, or service fee, the Adviser will waive its advisory fee for each Investing Fund in an amount that offsets the amount of such fees incurred by the Investing Fund.

5. Each Investing Fund will purchase and redeem shares of the Private Fund as of the same time and at the same price, and will receive dividends and bear its proportionate share of expenses on the same basis, as other shareholders of the Private Fund. A separate account will be established in the shareholder records of the Private Fund for the account of each Investing Fund.

6. The Private Fund will comply with sections 17(a), (d), and (e) and section 18 of the Act as if the Private Fund were a registered open-end investment company. With respect to all redemption requests made by an Investing Fund, the Private Fund will comply with section 22(e) of the Act. The Adviser, as sole trustee or managing member of the Private Fund, will adopt procedures designed to ensure that the Private Fund complies with sections 17(a), (d), and (e), 18 and 22(e) of the Act. The Adviser to the Private Fund will periodically review and update, as appropriate, such procedures and will maintain books and records describing such procedures, and maintain the records required by rules 31a-1(b)(1), 31a-1(b)(2)(ii), and 31a-1(b)(9) under the Act. All books and records required to be made pursuant to this condition will be maintained and preserved for a period of not less than six years from the end of the fiscal year in which any transaction occurred, the first two years in an easily accessible place, and will be subject to examination by the Commission and its staff.

7. The Private Fund will use the amortized cost method of valuation as defined in rule 2a-7 under the Act and will comply with rule 2a-7. The Adviser to the Private Fund will adopt and monitor the procedures described in rule 2a-7(c)(7) under the Act and will take such other actions as are required to be taken under those procedures. An Investing Fund may only purchase shares of the Private Fund if the Adviser determines on an ongoing basis that the Private Fund is in compliance with rule 2a-7 under the Act. The Adviser will preserve for a period not less than six years from the date of determination, the first two years in an easily accessible place, a record of the determination and the basis upon which the determination was made. This record will be subject to examination by the Commission and the staff.

8. Each Investing Fund and each Central Fund that may rely on the order shall be advised by an Adviser. Each Investing Fund and Money Market Fund will be in the same group of investment companies as defined in section 12(d)(1)(G) of the Act.

9. Before the next meeting of the Board of a Cash Collateral Fee Investing Fund is held for the purpose of voting on an advisory contract with the Adviser under section 15 of the Act, the Adviser will provide the Board with specific information regarding the approximate cost to the Adviser of, or the portion of the advisory fee under the existing advisory contract with the Adviser attributable to, managing the Cash Collateral of the Cash Collateral Fee Investing Fund that can be expected to be invested in the Central Funds. Before approving any advisory contract with the Adviser for a Cash Collateral Fee Investing Fund, the Board, including a majority of the Independent Trustees, shall consider to what extent, if any, the advisory fees charged to the Cash Collateral Fee Investing Fund by the Adviser should be reduced to account for reduced services provided to the Cash Collateral Fee Investing Fund as a result of Cash Collateral being invested in the Central Funds. In addition, the Cash Collateral Fee Investing Fund's minute books will record fully the Board's consideration in approving the advisory contract with the Adviser, including the considerations relating to fees referred to above.

10. The Board of any Investing Fund will satisfy the fund governance standards as defined in Rule 0-1(a)(7) under the Act by the compliance date for the rule.

    For the Commission, by the Division of Investment Management, under delegated authority. Jonathan G. Katz, Secretary.

    [FR Doc. E5-5005 Filed 9-13-05; 8:45 am]

    BILLING CODE 8010-01-P