SEC Company Response from Seven Hills Realty Trust (SEVN) (CIK 0001452477) (SEVN) — Jul 29, 2011
Seven Hills Realty Trust (SEVN) (CIK 0001452477)
Date: July 29, 2011 · CIK: 0001452477 · Accession: 0001104659-11-041872
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 333-174736, 811-22234
Letter
VIA EDGAR Division of Investment Management 100 F Street, N.E. Washington, D.C. 20549 RE: RMR Real Estate Income Fund (“RIF”) RMR Asia Pacific Real Estate Fund (“RAP”)
Dear Mr. Hallock:
On behalf of RAP, we are enclosing herewith for filing pursuant to the Securities Act of 1933, as amended (the “Securities Act”), and the General Rules and Regulations of the U.S. Securities and Exchange Commission thereunder, one electronically signed Registration Statement on Form N-14 for RAP (the “Registration Statement”) in connection with the proposed reorganization of RIF into RAP. A fee of $232.20 to cover the registration fee under the Securities Act has been paid.
We wish to note that the Registration Statement enclosed herewith addresses the same substantive transaction as that addressed in a Registration Statement on Form N-14 filed by RIF on June 6, 2011 (Nos. 333-174736 and 811-22234) (the “RIF Registration Statement”) pursuant to the Securities Act regarding the proposed reorganization of RAP into RIF. The Boards of Trustees of RAP and RIF have determined to restructure the proposed reorganization and now propose to merge RIF into RAP. As explained more fully in the Registration Statement, the substantive effect of the reorganization will be as if RAP had merged into RIF.
We would thus like to take this opportunity to respond to your oral comments of June 28, 2011 and July 1, 2011 regarding the RIF Registration Statement. RIF and RAP (the “Funds”) have considered your comments and have authorized us to make the responses discussed below on the Funds’ behalf. These changes have been reflected in the Registration Statement enclosed herewith, which is marked to show the changes made in response to your comments, as well as other changes made to the Registration Statement as compared to the RIF Registration Statement. All changes were conformed throughout the Registration Statement, where applicable.
For ease of reference, we have included your comments below followed by our responses.
Comments and Responses
1. Please provide us with an analysis of why RIF should be the “accounting/performance survivor” in this proposed merger using the factors set forth in North American Security Trust, SEC No-Action Letter (Aug. 5, 1994) (“NAST”).
In NAST, the SEC staff set forth five attributes that it compares when determining the accounting and performance survivor in a business combination involving investment companies: the funds’ (1) investment advisers; (2) investment objectives, policies, and restrictions; (3) expense structures and expense ratios; (4) asset size; and (5) portfolio composition. Each of RIF and RAP have the same investment adviser and the remaining factors indicate that RIF is the proper fund to be treated as the accounting and performance survivor.
First, RIF and RAP have different investment objectives, policies and restrictions, and the reorganized RAP (the “Reorganized Fund”) will use RIF’s investment objectives, policies and restrictions. In addition to retaining RIF’s investment objectives, policies and restrictions, the Reorganized Fund intends to divest its portfolio of all or substantially all of its Asia Pacific portfolio securities formerly attributable to RAP (the “RAP Legacy Assets”) and intends to retain RIF’s investment focus on U.S. REITs and other U.S.-based real estate companies. This aspect of the proposed merger is clearly set forth in the Registration Statement.
Second, the Reorganized Fund will retain the same expense structure as RIF and the Reorganized Fund’s expense ratio will reflect this expense structure, as opposed to RAP’s. In particular, the Reorganized Fund will adopt a leveraged capital structure similar to that of RIF and will seek to increase returns to common shareholders through the use of this leverage. RAP does not use leverage to seek to increase returns to common shareholders. In this respect, the expense structures of RIF and RAP are fundamentally different and the Reorganized Fund will adopt RIF’s leveraged expense structure, which will be further reflected in the Reorganized Fund’s expense ratio. Indeed, the move for RAP shareholders into a leveraged fund such as the Reorganized Fund, where in normal market conditions they may realize the benefit of potentially greater returns offered by the use of leverage, constitutes the singular reason why RAP shareholders are expected to incur higher absolute expenses as shareholders in the Reorganized Fund.(1)
Third, after the consummation of the merger, the assets of the Reorganized Fund will consist of a majority of RIF’s assets. As of June 30, 2011, RIF’s managed assets (net assets attributable to common shares, plus leverage) were $119,892,334 and RAP’s managed assets were $73,183,146. Assuming RAP repurchases 20% of its common shares in a pre-reorganization self-tender offer, RAP’s managed assets would be $58,546,517 immediately prior to the proposed merger based on its managed assets as of June 30, 2011. Thus, based on these June 30, 2011 numbers, the Reorganized Fund’s managed assets would be $178,438,851, only 33% of which would be RAP Legacy Assets.
Finally, after the proposed merger the Reorganized Fund will divest its portfolio of all or substantially all of the RAP Legacy Assets and reinvest the proceeds in U.S. REITs and other U.S.-based real estate companies. Thus, the Reorganized Fund’s portfolio will most closely resemble that of RIF’s.
The Funds thus believe that RIF is the proper fund to be treated as the accounting and performance survivor of the proposed merger.
2. Please explain to us why you believe the merger of RAP into RIF will satisfy the “continuity of business enterprise” test. Please also address the status of your Private Letter Ruling request as of the date of your response to us.
(1) See response to comment 7, infra.
As discussed above, the reorganization has been restructured such that RIF will merge into RAP. The Funds withdrew their Private Letter Ruling request by letter to the Internal Revenue Service dated July 22, 2011 and will obtain an opinion of counsel regarding the characterization of the merger of RIF into RAP as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.
3. In the first bullet point of the President’s Letter, please explicitly state that, subsequent to the closing of the merger, the Reorganized Fund will liquidate all of the RAP Legacy Assets, that the Reorganized Fund will reinvest the proceeds from this liquidation in securities of U.S.-based real estate companies, and that, as a result, RAP shareholders will be invested in a different fund with a different portfolio of investments. Please generally make this point of disclosure more prominent throughout the Registration Statement.
We made the requested changes.
4. Please add disclosure in relevant portions of the Registration Statement addressing the fact that the Reorganized Fund’s dividend following the merger will consist in substantial part of a return of capital.
Historically, RIF has earned net investment income (i.e., distributions received on RIF’s portfolio investments less its operating expenses) from its investments in excess of what it has paid in dividends to its common shareholders even though RIF’s financial statements show that its distributions to common shareholders include a return of capital component. As explained in more detail below, RIF’s financial statements indicate that its distributions to common shareholders include a return of capital due to an accounting requirement rather than due to RIF making distributions in excess of its net investment income (i.e., RIF’s distributions received less its operating expenses).
RIF invests, and the Reorganized Fund will invest, primarily in the common and preferred securities of REITs, which are generally not subject to U.S. federal income taxes. Distributions that RIF receives, and the Reorganized Fund expects to receive, from REITs in which it invests can be classified as ordinary income, capital gain income or return of capital for U.S. federal income tax purposes by the REITs that make these distributions to RIF. As required under GAAP, RIF
excludes from investment income the portions of the distributions it receives from REITs classified by those REITs as capital gain income and return of capital income in preparing its financial statements. RIF includes in its financial statements as “net realized gain on investments” that portion of the distributions received from REITs that is classified by those REITs as capital gain income. RIF credits “net change in unrealized appreciation/(depreciation) on investments” in its financial statements with that portion of the distributions received from REITs that is classified by those REITs as return of capital. These accounting adjustments have the effect of reducing the amount of dividend income and net investment income reported in RIF’s financial statements and are clearly disclosed in Note A(7) to RIF’s financial statements as of and for the year ended December 31, 2010. The Reorganized Fund expects to make the same types of adjustments to its financial statements.
As shown in the following table, the amount of these accounting adjustments for the years ended December 31, 2010 and 2009 were in excess of the portion of distributions to common shareholders reflected as a return of capital in RIF’s financial statements. In other words, absent the requirement to make these adjustments in RIF’s financial statements under GAAP, none of RIF’s 2010 or 2009 distributions to common shareholders would have been considered a return of capital.
Capital gain adjustment (1)
$
393,318
$
297,951
Return of capital adjustment (2)
1,543,336
657,416
1,938,664
957,376
Return of capital distributions (3)
1,478,064
947,954
Excess
$
460,600
$
9,422
(1) Represents adjustment for portion of distributions received by RIF from REITs classified by those REITs as capital gain.
(2) Represents adjustment for portion of distributions received by RIF from REITs classified by those REITs as return of capital.
(3) Represents portion of distributions to common shareholders reflected as a return of capital in RIF’s financial statements.
The Funds therefore believe that no changes are necessary in response to this comment. The Funds have, however, added disclosure to the Registration Statement under the heading “Proposals 1, 2 and 3: Reorganization Related Proposals — Additional Information About Common Shares of the Funds — Dividends and Distributions” summarizing the foregoing.
5. In the third bullet point of the President’s Letter, please disclose that RAP’s expense ratio, assuming the use of leverage by the Reorganized Fund on a pro forma basis, will increase on a pro forma basis as a result of the merger.
We made the requested change.
6. In our experience any benefit in respect of a narrowing of a market trading discount to net asset value is generally realized upon the announcement of a planned fund merger. We note that the announcement of the planned merger of the Funds has not resulted in any material narrowing of the Funds’ market trading discount to net asset value. Please clarify in the fourth bullet point in the President’s Letter (and elsewhere where relevant) why the Funds believe that the merger may result in a narrower market trading discount to net asset value for the Reorganized Fund.
The Funds respectfully submit that no change is necessary in response to this comment. The Funds state throughout the Registration Statement that the expanded common shareholder base for the Reorganized Fund and the potential increase in current income for Reorganized Fund common shareholders after the consummation of the merger may lead to a narrower market trading discount to net asset value for the Reorganized Fund’s common shares. The Funds’ boards of trustees continue to believe that, after the consummation of the merger, these factors may lead to a narrower market trading discount to net asset value for the Reorganized Fund’s common shares.
The Funds believe that the failure of their respective market trading discounts to net asset value to narrow upon the announcement of the merger is not dispositive of the question as to how market forces will unfold post-merger. The Funds believe that an equally reasonable explanation is that market participants have not acted on what might be viewed as the risky assumption that the merger will occur — particularly given the complex nature of this particular reorganization, the uncertainty regarding the number of RAP shareholders who may seek to tender in RAP’s pre-Reorganization self-tender offer and the necessity of obtaining three separate approvals from RAP’s shareholders.
7. Please remove the various discussions in the Registration Statement regarding the pro forma results of the proposed merger that do not reflect the Reorganized Fund’s use of leverage. We believe that this disclosure is confusing. For example, on page iv of the “Q&A” under the question “How Will the Reorganization Affect Fund Fees and Expenses,” the first paragraph need say nothing more in respect of RAP other than RAP shareholders will realize an expense ratio increase of 34 basis points if they approve their reorganization related proposals.
We have made the disclosure in the Registration Statement regarding the pro forma results of the proposed merger reflecting the Reorganized Fund’s use of leverage more prominent. A discussion of the pro forma results of the proposed merger reflecting the Reorganized Fund’s use of leverage will come immediately prior to any discussion of the pro forma results of the proposed merger that do not reflect the Reorganized Fund’s use of leverage.
The difference in the Reorganized Fund’s expenses when leverage is reflected versus when leverage is not reflected is a material fact that RAP’s Board of
Trustees considered in approving the proposed merger and should be considered by RAP’s shareholders when determining whether to approve their reorganization related proposals. This disclosure allows RAP’s shareholders to directly evaluate the cost of the Reorganized Fund’s leverage. Absent this disclosure, RAP’s shareholders will not be able to evaluate this aspect of an investment in the Reorganized Fund, which RAP believes is material to making a decision regarding whether to approve RAP’s reorganization related proposals.
This disclosure is particularly important for RAP’s shareholders to consider in determining whether to approve the merger because RAP is unleveraged and RIF is, and the Reorganized Fund will be, leveraged. RAP believes that its shareholders cannot make an informed decision with respect to whether to approve RAP’s reorganization related proposals without understanding the incremental cost of holding an investment in a leveraged fund. The only way for RAP’s shareholders to directly assess that cost is to compare the expenses they would bear as shareholders in the Reorganized Fund if it were unleveraged with the expenses they would bear as shareholders in the Reorganized Fund with its pro forma leverage. It also enables RAP shareholders to better compare the fees and expenses paid by RIF, and to
Show Raw Text
CORRESP 1 filename1.htm SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP FOUR TIMES SQUARE NEW YORK 10036-6522 FIRM/AFFILIATE OFFICES TEL: (212) 735-3000 BOSTON FAX: (212) 735-2000 CHICAGO www.skadden.com HOUSTON LOS ANGELES PALO ALTO WASHINGTON, D.C. WILMINGTON BEIJING July 29, 2011 BRUSSELS FRANKFURT HONG KONG LONDON MOSCOW MUNICH PARIS SÃO PAULO SHANGHAI SINGAPORE VIA EDGAR SYDNEY H.R. Hallock, Jr. TOKYO U.S. Securities and Exchange Commission Division of Investment Management 100 F Street, N.E. Washington, D.C. 20549 RE: RMR Real Estate Income Fund (“RIF”) RMR Asia Pacific Real Estate Fund (“RAP”) Dear Mr. Hallock: On behalf of RAP, we are enclosing herewith for filing pursuant to the Securities Act of 1933, as amended (the “Securities Act”), and the General Rules and Regulations of the U.S. Securities and Exchange Commission thereunder, one electronically signed Registration Statement on Form N-14 for RAP (the “Registration Statement”) in connection with the proposed reorganization of RIF into RAP. A fee of $232.20 to cover the registration fee under the Securities Act has been paid. We wish to note that the Registration Statement enclosed herewith addresses the same substantive transaction as that addressed in a Registration Statement on Form N-14 filed by RIF on June 6, 2011 (Nos. 333-174736 and 811-22234) (the “RIF Registration Statement”) pursuant to the Securities Act regarding the proposed reorganization of RAP into RIF. The Boards of Trustees of RAP and RIF have determined to restructure the proposed reorganization and now propose to merge RIF into RAP. As explained more fully in the Registration Statement, the substantive effect of the reorganization will be as if RAP had merged into RIF. We would thus like to take this opportunity to respond to your oral comments of June 28, 2011 and July 1, 2011 regarding the RIF Registration Statement. RIF and RAP (the “Funds”) have considered your comments and have authorized us to make the responses discussed below on the Funds’ behalf. These changes have been reflected in the Registration Statement enclosed herewith, which is marked to show the changes made in response to your comments, as well as other changes made to the Registration Statement as compared to the RIF Registration Statement. All changes were conformed throughout the Registration Statement, where applicable. For ease of reference, we have included your comments below followed by our responses. Comments and Responses 1. Please provide us with an analysis of why RIF should be the “accounting/performance survivor” in this proposed merger using the factors set forth in North American Security Trust, SEC No-Action Letter (Aug. 5, 1994) (“NAST”). In NAST, the SEC staff set forth five attributes that it compares when determining the accounting and performance survivor in a business combination involving investment companies: the funds’ (1) investment advisers; (2) investment objectives, policies, and restrictions; (3) expense structures and expense ratios; (4) asset size; and (5) portfolio composition. Each of RIF and RAP have the same investment adviser and the remaining factors indicate that RIF is the proper fund to be treated as the accounting and performance survivor. First, RIF and RAP have different investment objectives, policies and restrictions, and the reorganized RAP (the “Reorganized Fund”) will use RIF’s investment objectives, policies and restrictions. In addition to retaining RIF’s investment objectives, policies and restrictions, the Reorganized Fund intends to divest its portfolio of all or substantially all of its Asia Pacific portfolio securities formerly attributable to RAP (the “RAP Legacy Assets”) and intends to retain RIF’s investment focus on U.S. REITs and other U.S.-based real estate companies. This aspect of the proposed merger is clearly set forth in the Registration Statement. 2 Second, the Reorganized Fund will retain the same expense structure as RIF and the Reorganized Fund’s expense ratio will reflect this expense structure, as opposed to RAP’s. In particular, the Reorganized Fund will adopt a leveraged capital structure similar to that of RIF and will seek to increase returns to common shareholders through the use of this leverage. RAP does not use leverage to seek to increase returns to common shareholders. In this respect, the expense structures of RIF and RAP are fundamentally different and the Reorganized Fund will adopt RIF’s leveraged expense structure, which will be further reflected in the Reorganized Fund’s expense ratio. Indeed, the move for RAP shareholders into a leveraged fund such as the Reorganized Fund, where in normal market conditions they may realize the benefit of potentially greater returns offered by the use of leverage, constitutes the singular reason why RAP shareholders are expected to incur higher absolute expenses as shareholders in the Reorganized Fund.(1) Third, after the consummation of the merger, the assets of the Reorganized Fund will consist of a majority of RIF’s assets. As of June 30, 2011, RIF’s managed assets (net assets attributable to common shares, plus leverage) were $119,892,334 and RAP’s managed assets were $73,183,146. Assuming RAP repurchases 20% of its common shares in a pre-reorganization self-tender offer, RAP’s managed assets would be $58,546,517 immediately prior to the proposed merger based on its managed assets as of June 30, 2011. Thus, based on these June 30, 2011 numbers, the Reorganized Fund’s managed assets would be $178,438,851, only 33% of which would be RAP Legacy Assets. Finally, after the proposed merger the Reorganized Fund will divest its portfolio of all or substantially all of the RAP Legacy Assets and reinvest the proceeds in U.S. REITs and other U.S.-based real estate companies. Thus, the Reorganized Fund’s portfolio will most closely resemble that of RIF’s. The Funds thus believe that RIF is the proper fund to be treated as the accounting and performance survivor of the proposed merger. 2. Please explain to us why you believe the merger of RAP into RIF will satisfy the “continuity of business enterprise” test. Please also address the status of your Private Letter Ruling request as of the date of your response to us. (1) See response to comment 7, infra. 3 As discussed above, the reorganization has been restructured such that RIF will merge into RAP. The Funds withdrew their Private Letter Ruling request by letter to the Internal Revenue Service dated July 22, 2011 and will obtain an opinion of counsel regarding the characterization of the merger of RIF into RAP as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended. 3. In the first bullet point of the President’s Letter, please explicitly state that, subsequent to the closing of the merger, the Reorganized Fund will liquidate all of the RAP Legacy Assets, that the Reorganized Fund will reinvest the proceeds from this liquidation in securities of U.S.-based real estate companies, and that, as a result, RAP shareholders will be invested in a different fund with a different portfolio of investments. Please generally make this point of disclosure more prominent throughout the Registration Statement. We made the requested changes. 4. Please add disclosure in relevant portions of the Registration Statement addressing the fact that the Reorganized Fund’s dividend following the merger will consist in substantial part of a return of capital. Historically, RIF has earned net investment income (i.e., distributions received on RIF’s portfolio investments less its operating expenses) from its investments in excess of what it has paid in dividends to its common shareholders even though RIF’s financial statements show that its distributions to common shareholders include a return of capital component. As explained in more detail below, RIF’s financial statements indicate that its distributions to common shareholders include a return of capital due to an accounting requirement rather than due to RIF making distributions in excess of its net investment income (i.e., RIF’s distributions received less its operating expenses). RIF invests, and the Reorganized Fund will invest, primarily in the common and preferred securities of REITs, which are generally not subject to U.S. federal income taxes. Distributions that RIF receives, and the Reorganized Fund expects to receive, from REITs in which it invests can be classified as ordinary income, capital gain income or return of capital for U.S. federal income tax purposes by the REITs that make these distributions to RIF. As required under GAAP, RIF 4 excludes from investment income the portions of the distributions it receives from REITs classified by those REITs as capital gain income and return of capital income in preparing its financial statements. RIF includes in its financial statements as “net realized gain on investments” that portion of the distributions received from REITs that is classified by those REITs as capital gain income. RIF credits “net change in unrealized appreciation/(depreciation) on investments” in its financial statements with that portion of the distributions received from REITs that is classified by those REITs as return of capital. These accounting adjustments have the effect of reducing the amount of dividend income and net investment income reported in RIF’s financial statements and are clearly disclosed in Note A(7) to RIF’s financial statements as of and for the year ended December 31, 2010. The Reorganized Fund expects to make the same types of adjustments to its financial statements. As shown in the following table, the amount of these accounting adjustments for the years ended December 31, 2010 and 2009 were in excess of the portion of distributions to common shareholders reflected as a return of capital in RIF’s financial statements. In other words, absent the requirement to make these adjustments in RIF’s financial statements under GAAP, none of RIF’s 2010 or 2009 distributions to common shareholders would have been considered a return of capital. 5 2010 2009 Capital gain adjustment (1) $ 393,318 $ 297,951 Return of capital adjustment (2) 1,543,336 657,416 1,938,664 957,376 Return of capital distributions (3) 1,478,064 947,954 Excess $ 460,600 $ 9,422 (1) Represents adjustment for portion of distributions received by RIF from REITs classified by those REITs as capital gain. (2) Represents adjustment for portion of distributions received by RIF from REITs classified by those REITs as return of capital. (3) Represents portion of distributions to common shareholders reflected as a return of capital in RIF’s financial statements. The Funds therefore believe that no changes are necessary in response to this comment. The Funds have, however, added disclosure to the Registration Statement under the heading “Proposals 1, 2 and 3: Reorganization Related Proposals — Additional Information About Common Shares of the Funds — Dividends and Distributions” summarizing the foregoing. 5. In the third bullet point of the President’s Letter, please disclose that RAP’s expense ratio, assuming the use of leverage by the Reorganized Fund on a pro forma basis, will increase on a pro forma basis as a result of the merger. We made the requested change. 6. In our experience any benefit in respect of a narrowing of a market trading discount to net asset value is generally realized upon the announcement of a planned fund merger. We note that the announcement of the planned merger of the Funds has not resulted in any material narrowing of the Funds’ market trading discount to net asset value. Please clarify in the fourth bullet point in the President’s Letter (and elsewhere where relevant) why the Funds believe that the merger may result in a narrower market trading discount to net asset value for the Reorganized Fund. 6 The Funds respectfully submit that no change is necessary in response to this comment. The Funds state throughout the Registration Statement that the expanded common shareholder base for the Reorganized Fund and the potential increase in current income for Reorganized Fund common shareholders after the consummation of the merger may lead to a narrower market trading discount to net asset value for the Reorganized Fund’s common shares. The Funds’ boards of trustees continue to believe that, after the consummation of the merger, these factors may lead to a narrower market trading discount to net asset value for the Reorganized Fund’s common shares. The Funds believe that the failure of their respective market trading discounts to net asset value to narrow upon the announcement of the merger is not dispositive of the question as to how market forces will unfold post-merger. The Funds believe that an equally reasonable explanation is that market participants have not acted on what might be viewed as the risky assumption that the merger will occur — particularly given the complex nature of this particular reorganization, the uncertainty regarding the number of RAP shareholders who may seek to tender in RAP’s pre-Reorganization self-tender offer and the necessity of obtaining three separate approvals from RAP’s shareholders. 7. Please remove the various discussions in the Registration Statement regarding the pro forma results of the proposed merger that do not reflect the Reorganized Fund’s use of leverage. We believe that this disclosure is confusing. For example, on page iv of the “Q&A” under the question “How Will the Reorganization Affect Fund Fees and Expenses,” the first paragraph need say nothing more in respect of RAP other than RAP shareholders will realize an expense ratio increase of 34 basis points if they approve their reorganization related proposals. We have made the disclosure in the Registration Statement regarding the pro forma results of the proposed merger reflecting the Reorganized Fund’s use of leverage more prominent. A discussion of the pro forma results of the proposed merger reflecting the Reorganized Fund’s use of leverage will come immediately prior to any discussion of the pro forma results of the proposed merger that do not reflect the Reorganized Fund’s use of leverage. The difference in the Reorganized Fund’s expenses when leverage is reflected versus when leverage is not reflected is a material fact that RAP’s Board of 7 Trustees considered in approving the proposed merger and should be considered by RAP’s shareholders when determining whether to approve their reorganization related proposals. This disclosure allows RAP’s shareholders to directly evaluate the cost of the Reorganized Fund’s leverage. Absent this disclosure, RAP’s shareholders will not be able to evaluate this aspect of an investment in the Reorganized Fund, which RAP believes is material to making a decision regarding whether to approve RAP’s reorganization related proposals. This disclosure is particularly important for RAP’s shareholders to consider in determining whether to approve the merger because RAP is unleveraged and RIF is, and the Reorganized Fund will be, leveraged. RAP believes that its shareholders cannot make an informed decision with respect to whether to approve RAP’s reorganization related proposals without understanding the incremental cost of holding an investment in a leveraged fund. The only way for RAP’s shareholders to directly assess that cost is to compare the expenses they would bear as shareholders in the Reorganized Fund if it were unleveraged with the expenses they would bear as shareholders in the Reorganized Fund with its pro forma leverage. It also enables RAP shareholders to better compare the fees and expenses paid by RIF, and to