[Federal Register Volume 67, Number 57 (Monday, March 25, 2002)]
[Notices]
[Pages 13670-13671]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-7039]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 25465; 812-12420]


Delaware Investments Dividend and Income Fund, Inc. and Delaware 
Investments Global Dividend and Income Fund, Inc.; Notice of 
Application

March 18, 2002.
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: Delaware Investments Dividend and Income Fund, 
Inc. (``DDF'') and Delaware Investments Global Dividend and Income 
Fund, Inc. (``DGF'') (DDF and DGF each, a ``Fund'' and collectively, 
the ``Funds'') request an order to permit them to make up to twelve 
distributions of long-term capital gains in any one taxable year, so 
long as they maintain in effect their distribution policies with 
respect to their common stock calling for fixed monthly distributions.

FILING DATES: The application was filed on January 24, 2001 and amended 
on March 14, 2002.

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 April 12, 2002, 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.

ADDRESSES: Secretary, Commission, 450 Fifth Street, NW, Washington, DC 
20549-0609; Applicants, c/o Bruce G. Leto, Stradley Ronon Stevens & 
Young, LLP., 2600 One Commerce Square, Philadelphia, PA 19103-7098.

FOR FURTHER INFORMATION CONTACT: Keith A. Gregory, Senior Counsel, at 
(202) 942-0611, or Mary Kay Frech, 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).

Applicants' Representations

    1. The Funds are registered under the Act as closed-end, 
diversified management investment companies and organized as Maryland 
corporations. Each Fund's primary investment objective is high current 
income; capital appreciation is a secondary objective. The Funds seek 
to achieve their goals by investing in a wide variety of income-
generating equity securities, including dividend-paying common stocks, 
convertible securities, preferred stocks and other equity related 
securities. The Funds' shares are listed on the New York Stock Exchange 
and have historically traded at a discount to net asset value 
(``NAV''). Delaware Management Company, an investment adviser 
registered under the Investment Advisers Act of 1940 (``Advisers 
Act''), serves as the Funds'' investment adviser. Delaware 
International Advisers, Ltd., an investment adviser registered under 
the Advisers Act, serves as the sub-adviser for the foreign component 
of DGF's investment portfolio.
    2. On July 20, 1995 and November 16, 1995, respectively, the boards 
of directors of DGF and DDF (the ``Boards''), including a majority of 
the directors who are not ``interested persons'' of each Fund, as 
defined in section 2(a)(19) of the Act, adopted a distribution policy 
(each, a ``Distribution Policy'' and collectively, the ``Distribution 
Policies'') with respect to each Fund's shares of common stock. The 
Boards considered that the Distribution Policies would provide a 
consistent income stream to the Funds' shareholders and might help 
support the market price of the Funds' common stock. The Boards review 
and approve the level of the distribution for each respective Fund at 
each quarterly Board

[[Page 13671]]

meeting. Pursuant to the Distribution Policies, the shareholders of 
each Fund currently receive a fixed distribution of 12.5 cents per 
share on a monthly basis. If for any taxable year, the total 
distributions required by the Distribution Policies exceed the sum of 
each Fund's net investment income and net realized capital gains, the 
excess generally will be treated as a return of capital (up to the 
amount of the shareholder's adjusted tax basis in his shares). 
Applicants state that the Distribution Policies provide a steady cash 
flow to the Funds' shareholders and are a method to reduce the trading 
discount from NAV.
    3. Applicants request relief to permit the Funds, so long as they 
maintain in effect the Distribution Policies, to make up to twelve 
long-term capital gains distributions in any one taxable year.

Applicants' 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 Funds assert that rule 19b-1, by limiting the number of net 
long-term capital gains distributions the Funds may make with respect 
to any one year, would prohibit the Funds from including available net 
long-term capital gains in certain of their fixed monthly 
distributions. As a result, the Funds state that they 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 Funds further 
assert that, to distribute all of their long-term capital gains within 
the limits in rule 19b-1, the Funds may be required to make total 
distributions in excess of the annual amount called for by the 
Distribution Policies or retain and pay taxes on the excess amount. The 
Funds assert that the application of rule 19b-1 to their Distribution 
Policies may create pressure to limit the realization of long-term 
capital gains based on considerations unrelated to investment goals.
    3. The Funds submit that the concerns underlying section 19(b) and 
rule 19b-1 are not present in their 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 Funds state that the Distribution Policies have been described in 
the Funds' periodic communications to their shareholders. The Funds 
further state that, as required by rule 19a-1 under the Act, a separate 
statement showing the source of the distribution will accompany any 
distribution. The Funds also state that a statement showing the amount 
and source of each monthly distribution during the year will be 
included with each 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 Funds submit 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 Funds 
state that this concern does not apply to closed-end investment 
companies, such as the Funds, that do not continuously distribute their 
shares.
    5. The Funds state that increased administrative costs also are a 
concern underlying section 19(b) and rule 19b-1. The Funds assert that 
this concern is not present because the Funds 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 Funds believe 
that the requested relief satisfies this standard.

Applicants' Condition

    The Funds agree that the order granting the requested relief will 
terminate upon the effective date of a registration statement under the 
Securities Act of 1933, as amended, for any future public offering by 
the Funds of their common shares other than:
    (i) A non-transferable rights offering to shareholders of the 
Funds, 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 Funds have 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. 02-7039 Filed 3-22-02; 8:45 am]
BILLING CODE 8010-01-P