[Federal Register Volume 64, Number 116 (Thursday, June 17, 1999)]
[Notices]
[Pages 32561-32563]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-15360]


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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-23869; 812-11318]


Strategic Global Income Fund, Inc.; Notice of Application

June 10, 1999.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of an application for an order under section 6(c) of the 
Investment Company Act of 1940 (the ``Act'') for an exemption from 
section

[[Page 32562]]

19(b) of the Act and rule 19b-1 under the Act.

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SUMMARY OF APPLICATION: The Strategic Global Income Fund, Inc. (the 
``Fund'') requests an order to permit it to make up to twelve 
distributions of net long-term capital gains in any one taxable year, 
so long as it maintains in effect a distribution policy with respect to 
its common stock calling for monthly distributions of a fixed 
percentage of its net asset value (``NAV'').

FILING DATES: The application was filed on September 23, 1998 and 
amended on February 26, 1999.

HEARING OR NOTIFICATION OF HEARING: An order granting the application 
will be issued unless the SEC orders a hearing. Interested persons may 
request a hearing by writing to the SEC's Secretary and serving 
applicant with a copy of the request, personally or by mail. Hearing 
requests should be received by the SEC by 5:30 p.m. on July 6, 1999, 
and should be accompanied by proof of service on the applicant, 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 SEC's 
Secretary.

Addresses: Secretary, SEC, 450 Fifth Street, N.W., Washington D.C. 
20549-0609. Fund, c/o Dianne E. O'Donnell, Vice President and 
Secretary, 1285 Avenue of the Americas, 18th floor, New York, NY 10019.

FOR FURTHER INFORMATION CONTACT: John K. Forst, Attorney Advisor, at 
(202) 942-0569, or Michael W. Mundt, Branch Chief, at (202) 942-0564 
(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 
SEC's Public Reference Branch, 450 Fifth Street, N.W., Washington, D.C. 
20549-0102 (tel. 202-942-8090).

Applicant's Representations

    1. The Fund is organized as a Maryland corporation and registered 
under the Act as a closed-end, non-diversified management investment 
company. The Fund's primary investment objective is to maintain a high 
level of current income, primarily through investment in income 
producing securities of issures in at least three different countries. 
The Fund's shares are listed on the New York Stock Exchange and have 
historically traded at a discount to NAV. Mitchell Hutchins Asset 
Management Inc. is the investment adviser to the Fund and is registered 
under the Investment Advisers Act of 1940.
    2. On May 13, 1998, the Fund's board of directors adopted a 
distribution policy (``Distribution Policy'') that calls for regular 
monthly distributions at an annualized rate of 8% of the Fund's NAV. 
Any amount paid under the Distribution Policy which exceeds the sum of 
the Fund's investment income and net realized capital gains will be 
treated as a return of capital. The Fund states that the Distribution 
Policy provides a steady cash flow to the Fund's shareholders and, 
during periods when its per share NAV is increasing, a means for the 
shareholders to receive, on a periodic basis, some of the appreciation 
in the value of their shares. The Fund states that a distribution 
policy can have a moderating effect on market discounts to NAV and is 
in the best interests of its shareholders.
    3. The Fund requests relief to permit it, so long as it maintains 
in effect the Distribution Policy, to make up to twelve capital gains 
distributions in any one taxable year.

Applicant's Legal Analysis

    1. Section 19(b) of the Act provides that a registered investment 
company may not, in contravention of such rules, regulations, or orders 
as the SEC may prescribe, distribute long-term capital gains more often 
than once every twelve months. Rule 19b-1(a) under the Act permits a 
registered investment company, with respect to any one taxable year, to 
make one capital gains distribution, as defined in section 852(b)(3)(C) 
of the Internal Revenue Code of 1986, as amended (the ``Code''). Rule 
19b-1(a) also permits a supplemental distribution to be made pursuant 
to section 855 of the Code not exceeding 10% of the total amount 
distributed for the year. Rule 19b-1(f) permits one additional long-
term capital gains distribution to be made to avoid the excise tax 
under section 4982 of the Code.
    2. The Fund asserts that rule 19b-1, by limiting the number of net 
long-term capital gains distributions the Fund may make with respect to 
any one year, would prohibit the Fund from including available net 
long-term capital gains in certain of its fixed monthly distributions. 
As a result, the Fund states that it could be required to fund these 
monthly distributions with returns of capital (to the extent net 
investment income and net realized short-term capital gains are 
insufficient to cover a monthly distribution). The Fund further asserts 
that, in order to distribute all of its long-term capital gains within 
the limits in rule 19b-1, the Fund may be required to make total 
distributions in excess of the annual amount called for by the 
Distribution Policy or retain and pay taxes on the excess amount. The 
Fund asserts that the application of rule 19b-1 to the Fund's 
Distribution Policy may create pressure to limit the realization of 
long-term capital gains based on considerations unrelated to investment 
goals.
    3. The Fund submits that the concerns underlying section 19(b) and 
rule 19b-1 are not present in the Fund's situation. One of the concerns 
leading to the adoption of section 19(b) and rule 19b-1 was that 
shareholders might be unable to distinguish between frequent 
distributions of capital gains and dividends from investment income. 
The Fund states that its Distribution Policy has been described in the 
Fund's periodic communications to its shareholders. The Fund states 
that, in accordance with rule 19a-1 under the Act, a separate statement 
showing the source of the distribution accompanies each distribution. 
In addition, a statement showing the amount and source of each monthly 
distribution during the year will be included with the Fund's IRS Form 
1099-DIV report sent to each shareholder who received distributions 
during the year (including shareholders who have sold shares during the 
year).
    4. Another concern underlying section 19(b) and rule 19b-1 is that 
frequent capital gains distributions could facilitate improper 
distribution practices including, in particular, the practice of urging 
an investor to purchase shares of a fund on the basis of an upcoming 
dividend (``selling the dividend''), when the dividend results in an 
immediate corresponding reduction in NAV and is, in effect, a return of 
the investor's capital. The Fund submits that this concern does not 
arise with regard to closed-end management investment companies, such 
as the Fund, that do not continuously distribute their shares.
    5. The Fund states that increased administrative costs also are a 
concern underlying section 19(b) and rule 19b-1. The Fund asserts that 
this concern is not present because the Fund will continue to make 
fixed distributions regardless of whether the capital gains are 
included in any particular distribution.
    6. Section 6(c) of the Act provides that the SEC 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

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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 stated above, the Fund 
believes that the requested relief satisfies this standard.

Applicant's Condition

    The Fund agrees that the order granting the requested relief will 
terminate upon the effective date of a registration statement under the 
Securities Act of 1933 for any future public offering by the Fund of 
its common shares other than: (i) A non-transferable rights offering to 
shareholders of the Fund, provided that such offering does not include 
solicitation by brokers or the payment of any commissions or 
underwriting fee; and (ii) an offering in connection with a merger, 
consolidation, acquisition or reorganization; unless the Fund has 
received from the staff of the SEC written assurance that the order 
will remain in effect.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-15360 Filed 6-16-99; 8:45 am]
BILLING CODE 8010-01-M