[Federal Register Volume 66, Number 47 (Friday, March 9, 2001)]
[Notices]
[Pages 14230-14231]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-5793]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 24885; 812-12066]


Global High Income Dollar Fund Inc.; Notice of Application

March 2, 2001.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application under section 6(c) of the Investment 
Company Act of 1940 (the ``Act'') for an exemption from section 19(b) 
of the Act and rule 19b-1 under the Act.

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    Summary of Application: Global High Income Dollar 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 April 18, 2000 and 
amended on January 22, 2001.
    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 applicant with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on March 27, 2001, 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 Commission's Secretary.

ADDRESSES: Secretary, Commission, 450 Fifth Street, NW., Washington, DC 
20549-0609; Applicant, c/o Dianne E. O'Donnell, Vice President and 
Secretary, Global High Income Dollar Fund Inc., 1285 Avenue of the 
Americas, New York, New York 10019-6028.

FOR FURTHER INFORMATION CONTACT: Jean E. Minarick, Senior Counsel, at 
(202) 942-0527, or Christine Y. Greenlees, 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 
Commission's Public Reference Branch, 450 Fifth Street, NW., 
Washington, DC 20549-0102 (telephone (202) 942-8090).

Applicant's Representations

    1. The Fund is registered under the Act as a closed-end, non-
diversified management investment company and organized as a Maryland 
corporation. The Fund's primary investment objective is to achieve a 
high level of current income; as a secondary objective, the Fund seeks 
capital appreciation, to the extent consistent with its primary 
objective. 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., an investment adviser registered under the 
Investment Advisers Act of 1940, serves as the Fund's investment 
adviser.
    2. On December 17, 1999, the Fund's board of directors (``Board''), 
including all of the directors who are not ``interested persons'' of 
the Fund, as defined in section 2(a)(19) of the Act, adopted a 
distribution policy (``Distribution Policy'') with respect to the 
Fund's common stock. Under the Distribution Policy, the Fund will make 
regular monthly distributions at an annualized rate equal to 11% 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. The Fund further states that the 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 Commission 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

[[Page 14231]]

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, 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 further 
states that, to the extent required under rule 19a-1 under the Act, a 
separate statement showing the source of the distribution will 
accompany 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 sold shares during the year).
    4. The Fund submits that another concern underlying section 19(b) 
and rule 19b-1 is that frequent capital gains distributions could 
facilitate improper fund 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 
states that this concern does not apply to a closed-end management 
investment company, such as the Fund, that does not continuously 
distribute its 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 
monthly distributions regardless of whether capital gains are included 
in any particular distribution.
    6. 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 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, spin-off or reorganization;

unless the Fund has received from the staff of the Commission 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. 01-5793 Filed 3-8-01; 8:45 am]
BILLING CODE 8010-01-M