[Federal Register Volume 72, Number 86 (Friday, May 4, 2007)]
[Notices]
[Pages 25344-25346]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-8504]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 27808; 812-13373]


The Gabelli Equity Trust Inc., et al.; Notice of Application

April 30, 2007.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application under section 17(b) of the Investment 
Company Act of 1940 (the ``Act'') for 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.

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Applicants: The Gabelli Equity Trust Inc. (the ``Trust''), The Gabelli 
Healthcare & WellnessRX Trust (the ``Healthcare Trust''), 
and Gabelli Funds, LLC (``Gabelli'').

Summary of Application: Applicants seek an order to permit the Trust to 
transfer a portion of its assets to the Healthcare Trust, a newly 
formed, wholly-owned subsidiary that is a registered closed-end 
investment company, and to distribute to the Trust's shareholders the 
shares of the Healthcare Trust.

Filing Dates: The application was filed on April 2, 2007 and amended on 
April 16, 2007 and April 26, 2007.

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 May 21, 2007, 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, U.S. Securities and Exchange Commission, 100 F 
Street, NE., Washington, DC, 20549-1090; Applicants, c/o Rose F. 
DiMartino, Esq., Willkie Farr & Gallagher LLP, 787 Seventh Avenue, New 
York, New York 10019-6099.

FOR FURTHER INFORMATION CONTACT: Shannon Conaty, Senior Counsel, at 
(202) 551-6827, or Julia K. Gilmer, Branch Chief, at (202) 551-6821 
(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, 100 F Street, NE., Washington, 
DC, 20549-0102 (tel. (202) 551-8090).

Applicants' Representations

    1. The Trust is a non-diversified, closed-end management investment

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company registered under the Act. The Healthcare Trust was formed on 
February 20, 2007, and filed a notification of registration on Form N-
8A on February 28, 2007 to register under the Act as a non-diversified, 
closed-end management investment company. The Healthcare Trust will 
file a registration statement under the Act on Form N-2 within 90 days 
after the filing of the Form N-8A. Application will be made to list the 
Healthcare Trust's common shares for trading on the New York Stock 
Exchange. Gabelli is registered as an investment adviser under the 
Investment Advisers Act of 1940 and serves as the investment adviser to 
the Trust and the Healthcare Trust.
    2. The Trust owns a single share of the Healthcare Trust's common 
shares of beneficial interest which was issued in consideration of the 
Trust's contribution to the Healthcare Trust of the $8 initial net 
asset value. Five of the eight persons who currently serve as the 
Trust's directors are also trustees of the eight-member Healthcare 
Trust's board of directors and four of the Trust's principal executive 
officers hold the same offices with the Healthcare Trust.
    3. The Board of Directors (``Board'') of the Trust has approved, 
subject to the requested relief and subsequent shareholder approval, 
the contribution of a segment of the Trust's net assets having a value 
of approximately $70 million to the Healthcare Trust in exchange for 
additional shares of common stock of the Healthcare Trust, which 
together with the share currently held by the Trust, will constitute 
all of the shares of common stock of the Healthcare Trust. It is 
anticipated that the contributed assets will consist largely or 
exclusively of cash and short-term fixed income instruments. All the 
common shares of the Healthcare Trust then will be distributed by the 
Trust as a dividend to its shareholders at a rate of one share of the 
Healthcare Trust common share for every 20 common shares held of the 
Trust. The contribution of the Trust assets to the Healthcare Trust and 
the subsequent distribution of the Healthcare Trust common shares to 
the Trust shareholders are referred to as the ``Transaction.''
    4. The Board, including all of the directors who are not 
``interested persons'' as defined by section 2(a)(19) of the Act (the 
``Disinterested Directors''), concluded, among other things, that the 
Transaction will result in the following benefits to Trust 
shareholders: (a) Shareholders will receive shares of an investment 
company with a different risk-return profile than the Trust; (b) 
shareholders will acquire the Healthcare Trust common shares 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 able to seek capital 
appreciation opportunities presented by the Healthcare Trust market 
segment.
    5. The Trust does not expect that it will recognize significant 
taxable gain on its contribution of cash and securities to the 
Healthcare Trust in exchange for shares of the Healthcare Trust. The 
Healthcare Trust has been advised by counsel that the distribution of 
shares of the Healthcare Trust to Trust shareholders likely will be a 
taxable event for Trust shareholders and, under certain circumstances, 
will be a taxable event for the Trust. However, the Transaction is not 
expected to increase significantly the total amount of taxable 
distributions received by the Trust's common shareholders for the year 
in which the Transaction is consummated and is not expected to result 
in the recognition of significant taxable gain by the Trust. The Board, 
including all of the Disinterested Directors, considered the tax 
consequences of the Transaction and believes that the benefits of the 
Transaction outweigh any adverse tax consequences to the Trust and its 
shareholders.
    6. The costs of organizing the Healthcare Trust and effecting the 
distribution of the Healthcare Trust's shares to the Trust's 
shareholders, including the fees and expense of counsel and accountants 
and printing, listing, and registration fees, are estimated to be 
approximately $700,000 and will be borne by the Trust. The Trust will 
bear the costs of soliciting its shareholders' approval of the 
Transaction and the costs incurred in connection with this application 
for exemptive relief. In addition, the Healthcare 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 the Trust for similar services after the distribution, 
will likely exceed the fees currently payable by the Trust for those 
services. The Board, including the Disinterested Directors, concluded 
that it is appropriate for the Trust to bear the Transaction's cost 
inasmuch as the benefits of the Transaction will be for the Trust's 
common shareholders and because absorption of such expenses will 
eliminate any decrease in the net asset value of the Healthcare Trust's 
shares in comparison to the amount of the distribution, which may 
support the pricing of the Healthcare Trust shares on the New York 
Stock Exchange. It is not expected that the Transaction will have 
significant effect on the annual expenses of the Trust as a percentage 
of its assets.

Applicants' Legal Analysis

    1. 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. The Trust may be viewed as an 
affiliated person of the Healthcare Trust under section 2(a)(3) since 
the Trust will own 100 percent of the Healthcare Trust's voting 
securities until the consummation of the Transaction. The Healthcare 
Trust may similarly be considered an affiliated person of the Trust 
since 100 percent of the Healthcare Trust's voting securities will be 
owned by the Trust. The Trust and the Healthcare 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 Gabelli and because five of 
the same persons serve as the directors and four of the same persons 
serve as officers of both companies. As a result of the affiliation 
between the Trust and the Healthcare Trust, section 17(a) would 
prohibit the Transaction.
    2. Applicants request an exemption pursuant to section 17(b) of the 
Act from the provisions of section 17(a) in order to permit the Trust 
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.
    3. Applicants assert that the terms of the Transaction, including 
the consideration to be paid or received, are fair and reasonable and 
do not involve overreaching by any person concerned.

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Applicants state that the proposed sale by the Trust of a portion of 
its assets to the Healthcare Trust in exchange for the securities of 
the Healthcare Trust will be based on the fair value of those assets 
computed on the day of the proposed transfer in the same manner as for 
purposes of the daily net asset valuation for the Trust. Applicants 
further state that such assets are anticipated to consist largely or 
exclusively of cash and short-term fixed income instruments and thus 
will likely pose few, if any, issues with respect to valuation. The 
Healthcare Trust shares distributed by the Trust in the Transaction 
will be valued based on the value of the Healthcare 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.
    4. With respect to the Transaction, each of the Trust's Board and 
the Healthcare Trust's Board, including a majority of the Disinterested 
Directors of each Board, determined that the participation in the 
Transaction is in the best interests of the Trust or the Healthcare 
Trust, as applicable, and that the interests of the existing 
shareholders of the Trust or the Healthcare 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 the Trust or the Healthcare Trust, as applicable.
    5. Applicants state that the Transaction will be consistent with 
the stated investment policies of the Trust and the Healthcare Trust as 
disclosed to shareholders. The distribution of the Healthcare Trust 
shares will not initially change the position of the Trust's 
shareholders with respect to the underlying investments that they then 
own. A proxy statement/prospectus of the Trust and the Healthcare Trust 
is being used to solicit the approval of the Trust's shareholders of 
the Transaction at a vote to take place following the issuance of the 
exemptive order. The Trust's shareholders will have the opportunity to 
vote on the Transaction after having received disclosure concerning the 
Transaction.
    6. 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 the applicants in the Transaction may be deemed to 
constitute a prohibited joint transaction.
    7. Applicants state that the Transaction will not place any of the 
Trust, the Healthcare Trust, or existing shareholders of the Trust in a 
position less advantageous than that of any other person. As noted, the 
value of the Trust's assets transferred to the Healthcare Trust (and 
the common shares received in return) will be based on their fair value 
as computed on the day of the transfer in accordance with the 
requirements of the Act. The shares of the Healthcare Trust will be 
distributed as a dividend to the 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.
    8. Applicants assert that the Transaction has been proposed in 
order to benefit the shareholders of the Trust as well as the 
Healthcare Trust, and neither Gabelli nor any other affiliated person 
of the Trust or the Healthcare Trust will receive fees solely as a 
result of the Transaction. The fee indirectly payable to Gabelli by the 
Healthcare Trust's shareholders will be the same as the fee currently 
indirectly payable to Gabelli by the Trust's shareholders. In addition, 
by creating the Healthcare Trust through the Transaction, the Trust is 
effectively enabling its shareholders to receive securities without the 
costs associated with a public offering.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-8504 Filed 5-3-07; 8:45 am]
BILLING CODE 8010-01-P