[Federal Register Volume 78, Number 69 (Wednesday, April 10, 2013)]
[Notices]
[Pages 21424-21428]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-08318]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30448; File No. 812-13880]


Royce Value Trust, Inc., et al.; Notice of Application

April 4, 2013.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order under section 12(d)(1)(J) 
of the Investment Company Act 1940 (the ``Act'') granting an exemption 
from sections 12(d)(1)(A) and 12(d)(1)(C) of the Act, 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.

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APPLICANTS: Royce Value Trust, Inc. (``Value Trust''), Royce Global 
Value Trust, Inc. (``Global Trust'') (each a ``Fund'' and together, the 
``Funds'') and Royce & Associates, LLC (the ``Adviser'').

SUMMARY OF APPLICATION: Applicants seek an order to permit Value 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 
Value Trust's common stockholders.

FILING DATES: The application was filed on March 17, 2011 and amended 
on August 16, 2011, May 22, 2012, and March 6, 2013.

HEARING OR NOTIFICATION OF HEARING: An order granting the application 
will be issued unless the Commission orders a hearing. Interested 
persons may request

[[Page 21425]]

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 29, 
2013 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: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange 
Commission, 100 F Street NE., Washington, DC 20549-1090; Applicants: c/
o Frank P. Bruno, Esq., Sidley Austin LLP, 787 Seventh Avenue, New 
York, New York 10019-6018.

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, Exemptive Applications 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. Value Trust, a Maryland corporation, is registered under the Act 
as a diversified closed-end management investment company. Value Trust 
seeks long-term growth of capital primarily through investment in the 
equity securities of small- and micro-cap companies. Value Trust has a 
non-fundamental investment policy that limits its investment in 
securities of issuers headquartered outside the United States to 25% of 
the Fund's assets.
    2. Global Trust was incorporated in Maryland on February 14, 2011 
and filed a notification of registration on Form N-8A on March 11, 2011 
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 March 16, 
2011 (the ``Proxy Statement/Prospectus'') and filed a registration 
statement on Form N-2 on June 8, 2011. Application will be made to list 
Global Trust's common stock for trading on the New York Stock Exchange. 
Global Trust seeks long-term growth of capital by investing a 
significant portion of its assets in the equity securities of micro-
cap, small-cap, and/or mid-cap companies. Unlike Value Trust, Global 
Trust may invest without limitation in securities of foreign issuers 
and, under normal market circumstances, will invest at least 65% of its 
assets in equity securities of companies located outside of the United 
States.
    3. The Adviser, a Delaware limited liability company, is registered 
under the Investment Advisers Act of 1940 and serves as the investment 
adviser to the Funds. The investment advisory fee structures for Value 
Trust and Global Trust will be different. Value Trust's advisory fee 
consists of a base fee and a fulcrum fee. The base advisory fee of 
Value Trust is a monthly fee equal to 1/12 of 1% (1% on an annualized 
basis) of the average of Value Trust's month-end net assets, including 
the liquidation value of any preferred stock issued and outstanding, 
for the rolling 60-month period ending with such month.\1\ The fulcrum 
fee, determined by fund performance, causes Value Trust's annual 
advisory fee to adjust up to .50% either above or below the base 
advisory fee.\2\ In contrast to Value Trust, Global Trust will pay the 
Adviser a fee at an annual rate of 1.25% of Global Trust's average 
daily net assets, including the liquidation value of any preferred 
stock issued and outstanding, which reflects an advisory fee that is 
0.25% higher than the base advisory fee paid by Value Trust to the 
Adviser. For this reason, the annual advisory fee for Global Trust may 
be higher or lower than that of Value Trust.
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    \1\ The base fee for each month is increased or decreased at the 
rate of 1/12 of .05% for each percentage point that the investment 
performance of Value Trust exceeds, or is exceeded by, the 
percentage change in the investment record of the S&P 600 SmallCap 
Index for the performance period by more than two percentage points.
    \2\ The Adviser is not entitled to receive any fee for any month 
when the investment performance of Value Trust for the rolling 36-
month period ending with such month is negative.
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    4. The board of directors of Value Trust consists of eight 
directors who are also directors on the eight member board of directors 
of Global Trust (each such board of directors, a ``Board'' and 
collectively, the ``Boards''). Six of the eight directors on each Board 
are not ``interested persons,'' as defined in section 2(a)(19) of the 
Act (the ``Independent Directors''). All of the principal officers of 
Value Trust hold the same offices with Global Trust.
    5. The Board of Value Trust has approved, subject to the issuance 
of the requested relief and subsequent stockholder approval, the 
contribution of a segment of Value Trust's assets having a value of 
approximately $100 million to Global Trust, in exchange for shares of 
Global Trust common stock. It is anticipated that the contributed 
assets will consist largely or exclusively of cash, short-term fixed 
income instruments, and/or unappreciated common stock and unappreciated 
preferred stock whose value at the time of the Transaction (as defined 
below) are less than or equal to their cost basis for tax purposes 
(together, such unappreciated common stock and unappreciated preferred 
stock are ``Unappreciated Equity Securities''). All the shares of 
common stock of Global Trust will then be distributed by Value Trust to 
its common stockholders at a rate of one (1) share of Global Trust 
common stock for every seven (7) shares held of Value Trust common 
stock.\3\ The contribution of the Value Trust assets to Global Trust 
and the subsequent distribution of shares of Global Trust common stock 
to Value Trust common stockholders are referred to as the 
``Transaction.''
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    \3\ No fractional shares of Global Trust common stock will be 
issued as part of the distribution. The fractional shares to which 
holders of Value 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 Value Trust stockholders of the Transaction. Prior to the 
effectiveness of the Proxy Statement/Prospectus under the 1933 Act, 
Value Trust will purchase approximately 10,000 shares of Global Trust's 
shares of common stock, par value $0.001, in consideration of Value 
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. Value Trust represents that 
the Seed Capital Shares will be sold only pursuant to a registration 
statement under the 1933 Act or an applicable exemption from 
registration under the 1933 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 stockholders of Value Trust.
    7. Applicants represent that Value Trust's activities in the 
Transaction may be deemed to be underwriting shares of Global Trust's 
common stock. Value Trust has a fundamental investment

[[Page 21426]]

restriction that it will not underwrite the securities of other 
issuers, or invest in restricted securities unless such securities are 
redeemable shares issued by money market funds registered under the Act 
(the ``Underwriting Restriction''). Accordingly, Value Trust's 
activities in the Transaction may be deemed to be in violation of the 
Underwriting Restriction.
    8. Applicants state that Value Trust's Underwriting Restriction 
cannot be changed without the affirmative vote of the majority of the 
outstanding voting securities of Value Trust. Applicants undertake that 
they will not rely on the requested order until the amendment to the 
Underwriting Restriction \4\ is approved by the affirmative vote of the 
holders of a majority of Value Trust's outstanding voting securities.
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    \4\ Value Trust intends to seek stockholder approval to amend 
the Underwriting Restriction to state that Value Trust may not 
underwrite the securities of other issuers, except insofar as the 
Fund may be deemed an underwriter under the 1933 Act in selling 
portfolio securities and in connection with mergers, acquisitions, 
spin-off and other reorganization transactions involving the Fund.
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    9. The Board of Value Trust, including the Independent Directors, 
concluded that the Transaction will result in the following benefits to 
Value Trust stockholders: (a) Stockholders will receive shares of an 
investment company with a different risk-return profile than Value 
Trust; (b) stockholders 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) stockholders will be 
able to seek capital appreciation opportunities presented by Global 
Trust's ability to invest at least 65% of its net assets in non-U.S. 
securities.
    10. Shortly before the date of the Transaction, the Adviser will 
review with the Boards of Global Trust and Value Trust, including the 
Independent Directors: (a) the Unappreciated Securities, if any, it 
recommends contributing in the Transaction; (b) the methodology used by 
the Adviser in selecting Unappreciated Equity Securities to be 
contributed to Global Trust and those to be retained by Value Trust; 
(c) the cost basis and current fair market value of each Unappreciated 
Equity Security to be contributed; (d) the aggregate amount of 
Unappreciated Equity Securities to be contributed and the percentage of 
Value Trust's entire portfolio and of its unappreciated common stock 
and preferred stock that the Unappreciated Equity Securities to be 
contributed constitute; and (e) the percentage of Global Trust's 
portfolio that the Unappreciated Equity Securities will constitute.\5\ 
The Boards of Global Trust and Value Trust, including a majority of the 
Independent Directors, will approve the contribution of the 
Unappreciated Equity Securities by Value Trust to Global Trust, 
including the methodology of selecting Unappreciated Equity Securities 
to be contributed, and the deliberations of the Boards will be set 
forth in the minutes of the Funds.
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    \5\ In selecting Unappreciated Equity Securities to be 
contributed to Global Trust in the Transaction, the Adviser will 
select only Unappreciated Equity Securities that are consistent with 
Global Trust's investment goal, policies and restrictions.
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    11. Global Trust has been advised by counsel that the distribution 
of shares of Global Trust to the common stockholders of Value Trust 
likely will be a taxable event for Value Trust stockholders to some 
extent and a taxable event for Value Trust, but only to the extent that 
the value of Global Trust shares distributed exceeds Value Trust's cost 
of such shares. Specifically, the value of Global Trust shares will 
exceed Value Trust's cost of those shares only to the extent that the 
value of the short-term fixed income instruments and Unappreciated 
Equity Securities, if any, contributed to Global Trust exceeds Value 
Trust's cost of such short-term fixed income instruments and 
Unappreciated Equity Securities. Applicants state that no significant 
excess is expected. Further, the Transaction is not expected to 
increase significantly the total amount of taxable distributions 
received by Value Trust common stockholders for the year in which the 
Transaction is consummated because Value Trust distributes to 
stockholders each year substantially all of its taxable income and 
accordingly, any taxable income included in the distribution of Global 
Trust shares would be distributed at some point during the year in any 
event. The Board of Value Trust, including all of the Independent 
Directors, has considered the tax consequences of the Transaction and 
has determined that the benefits of the Transaction outweigh any 
adverse tax consequences to Value Trust and its common stockholders, 
particularly because such adverse tax consequences are expected to be 
minimal.
    12. The costs of organizing Global Trust and effecting the 
distribution of Global Trust's shares to Value Trust's common 
stockholders, including the fees and expenses of counsel and 
accountants and printing, listing, and registration fees, the costs of 
soliciting Value Trust's stockholders' approval of the Transaction, and 
the costs incurred in connection with the application for relief, are 
estimated to be approximately $700,000, and will be borne by the 
Adviser. Global Trust will incur operating expenses on an ongoing 
basis, including investment advisory fees, and legal, auditing, 
transfer agency, and custodian expenses that, when aggregated with the 
fees payable by Value Trust for similar services after the 
distribution, will likely exceed the fees currently payable by Value 
Trust for those services. It is not expected that the Transaction will 
have a significant effect on the annual expenses of Value Trust as a 
percentage of its assets.

Applicants' Legal Analysis

    1. Applicants request an order under section 12(d)(1)(J) of the Act 
granting an exemption from sections 12(d)(1)(A) and 12(d)(1)(C) of the 
Act, 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 rule17d-1 
thereunder permitting certain joint transactions.
    2. Section 12(d)(1)(A) of the Act prohibits a registered investment 
company from acquiring shares of an investment company if the 
securities represent more than 3% of the total outstanding voting stock 
of the acquired company, more than 5% of the total assets of the 
acquiring company, or, together with the securities of any other 
investment companies, more than 10% of the total assets of the 
acquiring company. Section 12(d)(1)(C) of the Act prohibits an 
investment company from acquiring any security issued by a registered 
closed-end investment company if such acquisition would result in the 
acquiring company, any other investment companies having the same 
investment adviser, and companies controlled by such investment 
companies, collectively, owning more than 10% of the outstanding voting 
stock of the registered closed-end investment company.
    3. Applicants state that the proposed Transaction may be viewed as 
violating sections 12(d)(1)(A) and 12(d)(1)(C). At the time of the 
purchase of Seed Capital Shares and at the time of the transfer of 
Value Trust's assets in return for shares of Global Trust common stock, 
Value Trust will acquire 100% of the voting stock of Global Trust, a 
closed-end investment company, and the value of Value Trust's holdings 
of Global Trust common stock will exceed 5% of Value Trust's assets for 
a momentary period.
    4. Section 12(d)(1)(J) of the Act provides that the Commission may 
exempt any person, security, or

[[Page 21427]]

transaction, or any class or classes of persons, securities or 
transactions, from any provision of section 12(d)(1) if the exemption 
is consistent with the public interest and the protection of investors. 
Applicants request an exemption under section 12(d)(1)(J) of the Act 
from the provisions of sections 12(d)(1)(A) and 12(d)(1)(C) of the Act.
    5. Applicants submit that the structure of the Transaction 
adequately addresses the concerns underlying the limits in section 
12(d)(1), which include concerns about control by a fund of funds over 
underlying funds and a layering of costs to investors in terms of 
duplication of administrative expenses, sales charges and advisory 
fees. Applicants submit that there is no danger of control over Global 
Trust by Value Trust or of a layering of costs to stockholders of Value 
Trust. Applicants note that ownership of Global Trust by Value Trust 
(other than the Seed Capital Shares) will exist for only an instant. In 
addition, applicants state the Transaction involves no layering of 
costs to stockholders, since Global Trust will not incur any advisory, 
administrative, transfer agency, custody, or similar fees until after 
completion of the Transaction.
    6. 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. Value Trust may be viewed as an 
affiliated person of Global Trust under section 2(a)(3) because Value 
Trust will own 100 percent of the Global Trust's voting securities 
until the consummation of the Transaction. Value 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 Value Trust and Global Trust, 
section 17(a) would prohibit the Transaction.
    7. 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.
    8. 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. Applicants state 
that the proposed contribution by Value Trust of a portion of its 
assets to Global Trust in exchange for shares of Global Trust common 
stock will be based on the 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 Value Trust (such business day, the 
``Valuation Date''), in the same manner as for purposes of the daily 
net asset valuation for Value 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, short-term fixed income instruments and/or 
Unappreciated Equity Securities and thus will pose no issues with 
respect to valuation.\6\ Shares of Global Trust common stock 
distributed by Value 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.
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    \6\ Since market quotations will exist for the Unappreciated 
Equity Securities, if any, to be contributed by Value Trust to 
Global Trust, such securities will be valued at market value.
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    9. With respect to the Transaction, each Board, including a 
majority of the Independent Directors, determined that participation in 
the Transaction is in the best interests of Value Trust or Global 
Trust, as applicable, and that the interests of the existing 
stockholders of Value 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 Value Trust or Global Trust, as applicable. In addition, the 
Adviser, in selecting Unappreciated Equity Securities to be contributed 
to Global Trust, will, in the exercise of its fiduciary 
responsibilities, act in a manner it believes to be in the best 
interests of both Funds.
    10. Applicants state that the Transaction will be consistent with 
the stated investment policies of Value Trust and Global Trust as 
disclosed to stockholders. The distribution of shares of Global Trust 
common stock will not initially change the position of Value Trust's 
stockholders with respect to the underlying investments that they then 
own. The Proxy Statement/Prospectus will be used to solicit the 
approval of Value Trust's stockholders of the Transaction at a vote to 
take place following the issuance of the requested order. Value Trust's 
stockholders will have the opportunity to vote on the Transaction after 
having received disclosure concerning the Transaction.
    11. 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.
    12. Applicants state that the Transaction will not place any of 
Value Trust, Global Trust, or existing shareholders of Value Trust in a 
position less advantageous than that of any other person. The value of 
Value Trust's assets transferred to Global Trust (and the shares of 
Global Trust common stock received in return) will be based on their 
value as computed on 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 
Value Trust. The shares of Global Trust common stock will be 
distributed to Value Trust's common stockholders, leaving the 
stockholders 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.
    13. Applicants assert that the Transaction has been proposed in 
order to benefit the stockholders of Value Trust as well as Global 
Trust. Although the advisory fee for Global Trust will be

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different from Value Trust, and may at times be higher than that of 
Value Trust, neither the Adviser nor any other affiliated person of 
Value Trust or Global Trust will receive additional fees solely as a 
result of the Transaction. Applicants state that although it is 
possible that the creation of Global Trust may benefit the Adviser by 
providing it with a higher advisory fee in certain circumstances, the 
Board of Value 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 Value 
Trust to be contributed to Global Trust pursuant to the Transaction 
represent only approximately 9.2% of Value Trust's net assets as of 
December 30, 2012. In addition, by creating Global Trust through the 
Transaction, Value Trust is effectively enabling its common 
stockholders 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. 2013-08318 Filed 4-9-13; 8:45 am]
BILLING CODE 8011-01-P