[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