[Federal Register Volume 63, Number 49 (Friday, March 13, 1998)]
[Notices]
[Pages 12520-12521]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-6527]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-23062; 812-10858]
INVESCO Global Health Sciences Fund et al.; Notice of Application
March 6, 1998.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for exemption under the Investment
Company Act of 1940 (the ``Act'').
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SUMMARY OF APPLICATION: Applicants request an order under section 6(c)
of the Act for an exemption from section 19(b) of the Act and rule 19b-
1 under the Act to permit the IVESCO Global Health Sciences Fund (the
``Fund'') to make up to four distributions of net long-term capital
gains in any one taxable year, so long as the Fund maintains in effect
a distribution policy calling for quarterly distributions of a fixed
percentage of its net asset value (``NAV'').
APPLICANTS: The Fund and INVESCO Funds Group, Inc. (``IFG'').
FILING DATE: The application was filed on November 3, 1997 and amended
on February 24, 1998. Applicants have agreed to file an amendment
during the notice period, the substance of which is included in this
notice.
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
applicants with a copy of the request, personally or by mail. Hearing
requests should be received by the SEC by 5:30 p.m. on April 2, 1998,
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 SEC's
Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C.
20549. Applicants, c/o Glen A. Payne, Esq., 7800 East Union Avenue,
Denver, CO 80237.
FOR FURTHER INFORMATION CONTACT:
John K. Forst, Attorney Advisor, at (202) 942-0569, or March 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
SEC's Public Reference Branch, 450 Fifth Street, N.W., Washington, D.C.
20549 (tel. 202-942-8090).
Applicants' Representations
1. The Fund is a closed-end diversified management investment
company organized as a Massachusetts business trust and registered
under the Act. The fund's investment objective is capital appreciation
through investment in health sciences related business sectors. IFG, an
investment adviser registered under the Investment Advisers Act of
1940, serves as the Fund's investment adviser.
2. On October 6, 1997, the Fund's board of trustees adopted a
distribution policy (the ``Distribution Policy'') that calls for four
quarterly distributions of 2.5% of the Fund's NAV at the time of the
declaration, for a total of approximately 10% of the NAV per year. If
the total distributions required by the Distribution Policy exceed the
Fund's investment income and net realized capital gains, the excess
will be treated as a return of capital. If the Fund's net investment
income, net short-term realized gains and net long-term realized gains
for any year exceed the amount required to be distributed under its
Distribution Policy, the Fund, in its discretion, may retain and not
distribute net long-term capital gains to the extent of the excess.
3. Applicants state that the Distribution Policy will provide 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. Applicants also believe that the Distribution Policy will
help reduce the discount from NAV at which the Fund's shares typically
trade.
4. Applicants request relief to permit the Fund, so long as it
maintains in effect the Distribution Policy, to make up to four capital
gains distributions (as defined in section 852(b)(3)(C) of the Internal
Revenue Code of 1986, as amended (the ``Code'') in any one taxable
year. Applicants further request that the relief extend to any other
registered closed-end management investment company in the future
advised by IFG or any entity controlling, controlled by, or under
common control (within the meaning of section 2(a)(9) of the Act) with
IFG (``Future Fund''). Applicants state that all registered investment
companies currently intending to rely on this relief have been named as
applicants and any Future Fund that relies on the relief will do so
only in accordance with the terms and conditions of the application.
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 SEC may prescribe, distribute long-term capital gains more often
than once every twelve months. Rule 19b-1(a) 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
Code. Rule 19b-1(a) also permits a supplemental distribution to be made
pursuant to section 855 of the Code not
[[Page 12521]]
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. Applicants assert that the limitation on the number of net long-
term capital gains distributions in rule 19b-1 prohibits the Fund from
including available net long-term capital gains in certain of its fixed
quarterly distributions. As a result, applicants state that the Fund
must fund these quarterly distributions. As a result, applicants state
that the Fund must fund these quarterly distributions with returns of
capital (to the extent net investment income and net realized short-
term capital gains are insufficient to cover a quarterly distribution).
Applicants further assert that, in order to distribute all of the
Fund's long-term capital gains within the limits on the number of long-
term capital gains distributions in rule 19b-1, the Fund may be
required to make certain of its quarterly distributions in excess of
the total annual amount called for by the Distribution Policy.
Alternatively, applicants state that the Fund may be forced to retain
long-term capital gains and pay the applicable taxes. Applicants assert
that the application of rule 19b-1 to the Fund's Distribution Policy
may create pressure on the investment adviser to limit the realization
of long-term capital gains based on considerations unrelated to
investment goals.
3. Applicants submit that the requested exemption from section
19(b) of the Act and rule 19b-1 under the Act would be in the best
interests of the Fund and its shareholders. 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. Applicants state
that the Fund's Distribution Policy will be clearly disclosed to
shareholders in the Fund's quarterly and annual reports. Applicants
state that, in accordance with rule 19a-1 under the Act, a separate
statement showing the source of the distribution will accompany each
distribution (or the confirmation of reinvestment under the Fund's
dividend reinvestment plan). In addition, a statement showing the
amount and source of each quarterly 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). Applicants believe
that the Fund's shareholders will fully understand that their
distributions are not tied to the Fund's net investment income and
realized capital gains and do not represent yield or investment return.
4. Applicants state that 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. Applicants submit that
this concern does not arise with regard to closed-end management
investment companies, such as the Fund, which do not continuously
distribute their shares.
5. The Fund may make transferable rights offerings in the future to
its shareholders to subscribe for additional shares. Applicants contend
that in the case of a rights offering by the Fund, shares would be
offered during the one-month interval which would occur immediately
after payment of a quarterly dividend. Thus, applicants argue that the
concern about selling the dividend will not arise. Applicants also
state that they will comply with the condition to the requested order
with regard to any rights offering.
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
thereunder 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, applicants believe
that the requested relief satisfies this standard.
Applicants' Condition
Applicants agree that the order granting the requested relief shall
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 rights offering to shareholders of
the Fund, provided that: (a) such offering does not include the payment
of solicitation fees to brokers in excess of 3% of the subscription
price per share or the payment of any other commissions or underwriting
fees in connection with the offering or exercise of the rights,\1\ (b)
the rights will not be exercisable between a date a dividend to the
Fund's shareholders is declared and the record date of such dividend,
(c) the Fund has not engaged in more than one rights offering during
any given calendar year, and (d) the subscription price for a share in
such rights offering is not more than $0.50 per share below the closing
market or bid price, as the case may be, on the pricing date for the
rights offering; or (ii) an offering in connection with a merger,
consolidation, acquisition, or reorganization of the Fund; unless the
Fund has received from the staff of the SEC written assurance that the
order will remain in effect.
\1\ Holders of rights who do not wish to exercise any or all of
their rights may instruct the Fund's subscription agent to sell
their unexercised rights. Such shareholders would be responsible for
paying all brokerage commissions incurred by the subscription agent
in selling the unexercised rights.
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For the Commission, by the Division of Investment Management,
under delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 98-6527 Filed 3-12-98; 8:45 am]
BILLING CODE 8010-01-M
