[Federal Register Volume 79, Number 28 (Tuesday, February 11, 2014)]
[Notices]
[Pages 8208-8210]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-02933]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 30908; File No. 812-14211]
The Gabelli Dividend & Income Trust, et al.; Notice of
Application
February 6, 2014.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application under section 17(b) of the Investment
Company Act of 1940 (the ``Act'') requesting an exemption from section
17(a) of the Act, and for an order under section 17(d) of the Act and
rule 17d-1 thereunder permitting certain joint transactions.
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Applicants: The Gabelli Dividend & Income Trust (``Dividend
Trust''), The Gabelli Global Small and Mid Cap Value Trust (``Global
Trust'') (each, a ``Fund'' and together, the ``Funds'') and Gabelli
Funds, LLC (the ``Adviser'').
SUMMARY: Summary of Application: Applicants seek an order to permit
Dividend Trust to transfer a segment of its assets to Global Trust, a
newly formed, wholly-owned subsidiary that is a registered closed-end
investment company, and to distribute the shares of Global Trust common
stock to the holders of Dividend Trust's common stock.
DATES: Filing Dates: The application was filed on September 11, 2013
and amended on January 28, 2014.
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 February 27, 2014 and should be accompanied by proof of
service on the applicants, in the form of an affidavit, or, for
lawyers, a certificate of service. Hearing requests should state the
nature of the writer's interest, the reason for the request, and the
issues contested. Persons who wish to be notified of a hearing may
request notification by writing to the Commission's Secretary.
ADDRESS: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange
Commission, 100 F Street NE., Washington, DC, 20549-1090; Applicants:
Richard T. Prins, Esq., Skadden, Arps, Slate, Meagher & Flom LLP, Four
Times Square, New York, New York 10036.
FOR FURTHER INFORMATION CONTACT: Laura J. Riegel, Senior Counsel, at
(202) 551-6873 or Mary Kay Frech, Branch Chief, at (202) 551-6821
(Division of Investment Management, Chief Counsel's Office).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or an applicant
using the Company name box, at http://www.sec.gov/search/search.htm or
by calling (202) 551-8090.
Applicants' Representations
1. Dividend Trust, a Delaware statutory trust, is registered under
the Act as a diversified closed-end management investment company.
Dividend Trust seeks to provide a high level of total return on its
assets with an emphasis on dividends and income. Under normal market
conditions, Dividend Trust invests at least 80% of its assets in
dividend-paying securities or other income-producing securities, and at
least 50% of its assets in dividend-paying equity securities. Dividend
Trust has a non-fundamental policy that limits investment in securities
of non-United States issuers to 35% of its total assets.
2. Global Trust was organized as a Delaware statutory trust on
August 19, 2013 and is wholly-owned by Dividend Trust. Global Trust
filed a notification of registration on Form N-8A on September 11, 2013
to register under the Act as a diversified closed-end management
investment company. Global Trust filed a registration statement under
the Securities Act of 1933 (the ``1933 Act'') on Form N-14 on September
11, 2013 (the ``Proxy Statement/Prospectus'') and filed a registration
statement on Form N-2 on December 10, 2013. Application will be made to
list Global Trust's common shares for trading on the New York Stock
Exchange. Global Trust seeks to provide long-term capital growth. Under
normal market conditions, Global Trust will invest at least 40% of its
total assets in the equity securities of companies located outside the
United States and in at least three countries. Unlike Dividend Trust,
Global Trust may invest without limitation in the equity securities of
companies located outside the United States.
3. The Adviser, a New York limited liability company, is registered
under the Investment Advisers Act of 1940. The Adviser serves, or will
serve, respectively, as the investment adviser to Dividend Trust and
Global Trust. Applicants represent that the investment advisory fee
structure for Global Trust will be the same as the advisory fee
structure for Dividend Trust.
4. The board of trustees of Dividend Trust consists of ten
trustees, five of whom are also trustees of the six member board of
trustees of Global Trust (each such board of trustees, a ``Board'' and
collectively, the ``Boards''). Seven trustees on the Board of Dividend
Trust are not ``interested persons,'' as defined in section 2(a)(19) of
the Act (the ``Independent Trustees''), and five trustees on the Board
of Global Trust are Independent Trustees. The President and the
Treasurer of Dividend Trust hold the same offices with Global Trust.
5. The Board of Dividend Trust has approved, subject to the
issuance of the requested relief and subsequent shareholder approval,
the contribution of a segment of Dividend Trust's assets having a value
of approximately $100 million to Global Trust, in exchange for
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shares of Global Trust common stock. It is anticipated that the
contributed assets will consist largely or exclusively of cash and
short-term fixed income instruments. All the shares of common stock of
Global Trust will then be distributed by Dividend Trust as a dividend
to its common shareholders at an anticipated rate of one (1) share of
Global Trust common stock for every ten (10) shares held of Dividend
Trust common stock.\1\ The contribution of the Dividend Trust assets to
Global Trust and the subsequent distribution of shares of Global Trust
common stock to Dividend Trust common shareholders are referred to as
the ``Transaction.'' \2\
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\1\ This estimate is based on the number of Dividend Trust
common shares outstanding as of December 31, 2013 and a target
initial net asset value per share of Global Trust common stock of
$12.00.
\2\ No fractional shares of Global Trust common stock will be
issued as part of the Transaction. The fractional shares to which
holders of Dividend Trust common stock would otherwise be entitled
will be aggregated and an attempt to sell them in the open market
will be made at then-prevailing prices on behalf of such holders,
and such holders will receive instead a cash payment in the amount
of their pro rata share of the total sales proceeds.
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6. The Proxy Statement/Prospectus of the Funds will be used,
following the issuance of the requested relief, to solicit approval of
the Dividend Trust shareholders of the Transaction. Prior to the
effectiveness of the Proxy Statement/Prospectus under the 1933 Act,
Dividend Trust will purchase shares of Global Trust's common stock in
consideration of Dividend Trust's contribution to Global Trust of at
least $100,000 initial net asset value (the ``Seed Capital Shares''),
in order to satisfy the requirements of section 14(a) of the Act.
Applicants intend that the Seed Capital Shares will be included in the
distribution of Global Trust's shares of common stock to the common
shareholders of Dividend Trust, and, accordingly, will be sold pursuant
to a registration statement under the 1933 Act.
7. The Board of Dividend Trust, including all the Independent
Trustees, concluded that the Transaction will result in the following
benefits to Dividend Trust common shareholders: (a) shareholders will
receive shares of an investment company with a different risk-return
profile than Dividend Trust; (b) shareholders will acquire the shares
of Global Trust common stock at a much lower transaction cost than is
typically the case for a newly-organized closed-end equity fund since
there will be no underwriting discounts or commissions; and (c)
shareholders will be afforded the opportunity to seek the capital
growth opportunities presented by substantial foreign securities
exposure.
8. The Board of Dividend Trust has been advised by counsel that the
distribution of common shares of Global Trust to the common
shareholders of Dividend Trust likely will be a taxable event for
Dividend Trust common shareholders to some extent and, under certain
circumstances, also will be a taxable event for Dividend Trust.
Dividend Trust does not expect that it will recognize significant
taxable gain on its distribution of Global Trust common shares because
it does not expect any of the contributed short-term debt securities to
have a value at the time of their contribution to Global Trust
significantly in excess of Dividend Trust's tax basis for those
securities. Further, the Transaction is not expected to increase
significantly the total amount of taxable distributions received by
Dividend Trust common shareholders for the year in which the
Transaction is consummated because Dividend Trust has adopted a policy
of distributing to shareholders monthly substantially all of its
taxable income and, accordingly, any taxable income included in the
distribution of Global Trust common shares would be distributed at some
point during the year. The Board of Dividend Trust, including all of
the Independent Trustees, has considered the tax consequences of the
Transaction and has determined that the benefits of the Transaction
outweigh any adverse tax consequences to Dividend Trust and its common
shareholders, particularly because such adverse tax consequences are
expected to be minimal.
9. The costs of organizing Global Trust and effecting the
distribution of Global Trust's shares to Dividend Trust's common
shareholders, including the fees and expenses of counsel and
accountants and printing, listing and registration fees, the costs of
soliciting shareholder approval of the Transaction, and the costs
incurred in connection with the application for relief, are estimated
to be approximately $750,000, and will be borne by Dividend Trust.
Global Trust will incur operating expenses on an ongoing basis,
including legal, auditing, transfer agency, and custodian expenses
that, when aggregated with the fees payable by Dividend Trust for
similar services after the distribution, will likely exceed the fees
and expenses currently payable by Dividend Trust for those services.
The Board of Dividend Trust, including all of the Independent Trustees,
concluded that it is appropriate for Dividend Trust to bear the
Transaction's costs inasmuch as the benefits of the Transaction will be
for Dividend Trust's common shareholders and because absorption of such
expenses will eliminate any deficit in the net asset value of Global
Trust common shares in comparison to the amount of the distribution,
which may support the pricing of Global Trust common shares in trading
on the New York Stock Exchange. It is not expected that the Transaction
will have a significant effect on the annual expenses of Dividend Trust
as a percentage of its assets.
Applicants' Legal Analysis
1. Applicants request an order under section 17(b) of the Act
granting an exemption from section 17(a) of the Act and under section
17(d) of the Act and rule 17d-1 thereunder permitting certain joint
transactions.
2. Section 17(a) of the Act generally prohibits sales or purchases
of securities between a registered investment company and an affiliated
person. Section 2(a)(3) of the Act defines an ``affiliated person'' of
another person to include (a) 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, (b) any person 5% or
more of whose voting securities are directly or indirectly owned
controlled or held with the power to vote by the other person, and (c)
any person directly or indirectly controlling, controlled by, or under
common control with, the other person. Dividend Trust may be viewed as
an affiliated person of Global Trust under section 2(a)(3) because
Dividend Trust will own 100 percent of the Global Trust's voting
securities until the consummation of the Transaction. Dividend Trust
and Global Trust also may be viewed as affiliated persons of each other
to the extent that they may be deemed to be under the common control of
the Adviser. As a result of the affiliation between Dividend Trust and
Global Trust, section 17(a) would prohibit the Transaction.
3. Applicants request an exemption pursuant to section 17(b) of the
Act from the provisions of section 17(a) in order to permit applicants
to effect the Transaction. Section 17(b) authorizes the Commission to
issue such an exemptive order if the Commission finds that the terms of
the proposed transaction are fair and reasonable and do not involve
overreaching on the part of any persons concerned, and the proposed
transaction is consistent with the policy of each registered investment
company and the general purposes of the Act.
4. Applicants assert that the terms of the Transaction, including
the
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consideration to be paid or received, are fair and reasonable and do
not involve overreaching by any person concerned. Applicants state that
the proposed contribution by Dividend Trust of a portion of its assets
to Global Trust in exchange for shares of Global Trust common stock
will be based on the fair value of such assets computed as of the close
of trading on the New York State Exchange on a business day to be
selected by the Board of Dividend Trust (such business day, the
``Valuation Date''), in the same manner as for purposes of the daily
net asset valuation for Dividend Trust. The Transaction will occur
after the close of trading on the New York Stock Exchange on the
Valuation Date. Applicants anticipate that such assets will consist
largely or exclusively of cash and short-term fixed income instruments
and thus will pose no issues with respect to valuation. Shares of
Global Trust common stock distributed by Dividend Trust in the
Transaction will be valued based on the value of Global Trust's assets.
``Value'' for those purposes will be determined in accordance with the
provisions of section 2(a)(41) of the Act and rule 2a-4 under the Act.
5. With respect to the Transaction, each Board, including a
majority of the Independent Trustees, determined that participation in
the Transaction is in the best interests of Dividend Trust or Global
Trust, as applicable, and that the interests of the existing
shareholders of Dividend Trust or Global Trust, as applicable, will not
be diluted as a result of the Transaction. These findings, and the
basis upon which the findings were made, will be recorded fully in the
minute book of Dividend Trust or Global Trust, as applicable.
6. Applicants state that the Transaction will be consistent with
the stated investment policies of Dividend Trust and Global Trust as
disclosed to shareholders. The distribution of shares of Global Trust
common stock will not initially change the position of Dividend Trust's
shareholders with respect to the underlying investments that they then
own. The Proxy Statement/Prospectus will be used to solicit the
approval of Dividend Trust's shareholders of the Transaction at a vote
to take place following the issuance of the requested order. Dividend
Trust's shareholders will have the opportunity to vote on the
Transaction after having received disclosure concerning the
Transaction.
7. Applicants also seek an order under section 17(d) of the Act and
rule 17d-1 under the Act. Section 17(d) and rule 17d-1 prohibit
affiliated persons from participating in joint arrangements with a
registered investment company unless authorized by the Commission. In
passing on applications for these orders, rule 17d-1 provides that the
Commission will consider whether the participation of the 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 the other participants.
Applicants request an order pursuant to rule 17d-1 to the extent that
the participation of applicants in the Transaction may be deemed to
constitute a prohibited joint transaction.
8. Applicants state that the Transaction will not place any of
Dividend Trust, Global Trust, or existing shareholders of Dividend
Trust in a position less advantageous than that of any other person.
The value of Dividend Trust's assets transferred to Global Trust (and
the shares of Global Trust common stock received in return) will be
based on the fair value of such assets computed as of the close of
trading on the New York Stock Exchange on the Valuation Date in
accordance with the requirements of the Act and pursuant to valuation
procedures adopted by the Board of Dividend Trust. The shares of Global
Trust common stock will be distributed to Dividend Trust's common
shareholders, leaving the shareholders in the same investment posture
immediately following the Transaction as before, subject only to
changes in market price of the underlying assets subsequent to the
Transaction.
9. Applicants assert that the Transaction has been proposed in
order to benefit the shareholders of Dividend Trust as well as Global
Trust. Applicants state that neither the Adviser nor any other
affiliated person of Dividend Trust or Global Trust will receive
additional fees solely as a result of the Transaction. In addition,
applicants state that although it is possible that the creation of
Global Trust may benefit the Adviser by providing it with an additional
managed fund, the Board of Dividend Trust has determined that such
result does not supply a benefit that could not have otherwise been
achieved through an initial public offering of a global equity
securities fund and that such benefit is both marginal and hypothetical
because the assets of Dividend Trust to be contributed to Global Trust
pursuant to the Transaction represent only approximately 5.0% of
Dividend Trust's net assets as of December 31, 2013. In addition, by
creating Global Trust through the Transaction, Dividend Trust is
effectively enabling its common shareholders to receive securities
without the costs associated with a public offering.
For the Commission, by the Division of Investment Management,
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-02933 Filed 2-10-14; 8:45 am]
BILLING CODE 8011-01-P