[Federal Register Volume 64, Number 78 (Friday, April 23, 1999)]
[Notices]
[Pages 20031-20033]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-10139]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 23788; 812-11398]
INVESCO Bond Funds, Inc., et al.; Notice of Application
April 16, 1999.
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 of 1940 (``Act'') for an exemption from
sections 12(d)(1)(A) and (B) of the Act, under sections 6(c) and 17(b)
of the Act for an exemption from section 17(a) of the Act, and under
section 17(d) of the Act and rule 17d-1 under the Act to permit certain
joint transactions.
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SUMMARY OF APPLICATION: Applicants request an order to permit certain
registered management investment companies to invest uninvested cash in
affiliated money market funds.
APPLICANTS: INVESCO Bond Funds, Inc., INVESCO Combination Stock and
Bond Funds, Inc., INVESCO Diversified Funds, Inc., INVESCO Emerging
Opportunity Funds, Inc., INVESCO Global Health Sciences Fund, INVESCO
Growth Funds, Inc., INVESCO Industrial Income Fund, Inc., INVESCO
International Funds, Inc., INVESCO Sector Funds, Inc., INVESCO
Specialty Funds, Inc., INVESCO Stock Funds, Inc., INVESCO Tax-Free
Income Funds, Inc., INVESCO Treasurer's Series Trust, INVESCO Value
Trust, INVESCO Variable Investment Funds, Inc., INVESCO Money Market
Funds, Inc. (collectively, the ``Funds''), and INVESCO Funds Group,
Inc. (``INVESCO'').
FILING DATES: The application was filed on November 13, 1998, and
amended on April 4, 1999. Applicants have agreed to file an amendment
during the notice period, the substance of which is reflected in this
notice.
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 11, 1999, and should be accompanied by proof of service on
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, 7800 East Union Avenue, Denver, Colorado 80237.
FOR FURTHER INFORMATION CONTACT: Lawrence W. Pisto, Senior Counsel, at
(202) 942-0527, or George J. Zornada, Branch Chief, at (202) 942-0564,
Office of Investment Company Regulation, Division of Investment
Management.
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, (tel. (202) 942-8090).
Applicants' Representatives
1. The Funds, with the exceptions noted below, are registered under
the Act as open-end management investment companies and organized as
Maryland corporations. INVESCO Treasurer's Series Trust and INVESCO
Value Trust are registered under the Act as open-end management
investment companies and organized as Massachusetts business trusts.
INVESCO Global Health Sciences Fund is registered under the Act as a
closed-end management investment company and organized as a
Massachusetts business trust. INVESCO, a wholly-owned subsidiary of
AMVESCAP PLC, is registered under the Investment Advisers Act of 1940
and serves as the investment adviser for each of the Funds. Applicants
also request relief for any other registered management investment
company or series thereof that is currently, or in the future becomes,
advised by INVESCO or an entity controlling, controlled by, or under
common control with INVESCO (INVESCO and all such entities,
collectively, ``INVESCO'').\1\
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\1\ All investment companies that currently intend to rely on
the order have been named as applicants. Any other existing or
future registered management investment company that relies on the
order will comply with the terms and conditions of the application.
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2. Each Fund has, or may be expected to have, uninvested cash
(``Uninvested Cash'') held by its custodian. Uninvested Cash may result
from a variety of sources, including dividends or interest received on
portfolio securities, unsettled securities transactions, reserves held
for investment strategy purposes, scheduled maturity of investments,
liquidation of investment securities to meet anticipated redemptions,
dividend payments, or new monies received from investors. Currently,
the Funds can invest Uninvested Cash directly in money market
instruments. The policies of certain Funds permit them to purchase
shares of a money market fund. The trustees and directors of the Funds
that have investment restrictions currently prohibiting the investment
in shares of other open-end management investment companies have
determined that such policies should be changed to permit such
investments and plan to recommend to shareholders the adoption of such
policies.
3. Applicants request relief to permit Funds that are not money
market funds (the ``Investing Funds'') to invest their Uninvested Cash
in one of more series of INVESCO Money Market Funds, Inc. or any other
money market series of any of the Funds (collectively, the ``Money
Market Funds'') and the Money Market Funds to sell to and purchase
shares from the Investing Funds. The Money
[[Page 20032]]
Market Funds are subject to rule 2a-7 under the Act. Any investment by
an Investing Funds of Uninvested Cash in shares of the Money Market
Funds will be in accordance with each Investing Fund's investment
restrictions and will be consistent with each Investing Fund's
policies. Applicants believe that the proposed investments may reduce
transaction costs, create more liquidity, increase returns, and further
diversify holdings.
Applicants' Legal Analysis
1. Section 12(d)(1)(A) of the Act provides that no registered
investment company may acquire securities of another investment company
if such securities represent more than 3% of the acquired company's
outstanding voting stock, more than 5% of the acquiring company's total
assets, or if such securities, together with the securities of other
investment companies, represent more than 10% of the acquiring
company's total assets. Section 12(d)(1)(B) of the Act provides that no
registered open-end investment company may sell its securities to
another investment company if the sale will cause the acquiring company
to own more than 3% of the acquired company's voting stock, or if the
sale will cause more than 10% of the acquired company's stock to be
owned by investment companies.
2. Section 12(d)(1)(J) of the Act provides that the Commission may
exempt persons or transactions from any provision of section 12(d)(1)
of the Act, and to the extent that, the exemption is consistent with
the public interest and the protection of investors. Applicants request
relief under section 12(d)(1)(J) of the Act from the limitations of
sections 12(d)(1)(A) and (B) of the Act to permit an Investing Fund to
invest its Uninvested Cash in Money Market Funds, provided that in all
cases the Investing Fund's aggregate investment of uninvested Cash in
shares of the Money Market Funds will not exceed 25% of the Investing
Fund's total assets at any time.
3. Applicants believe that the proposed arrangement does not result
in the abuses that sections 12(d)(1)(A) and (B) were intended to
prevent. Applicants state that the Money Market Funds will have a
highly liquid portfolio, and will enhance the Investing Funds' ability
to manage Uninvested Cash. Applicants also represent that the proposed
arrangement will not result in an inappropriate layering of fees
because shares of the Money Market Funds sold to the Investing Funds
will not be subject to a sales load, redemption fee, asset-based
distribution fee or service fee. In addition, the board of director or
trustees of each Investing Fund (the ``Board''), including a majority
of the directors or trustees who are not ``interested persons'' of the
Fund, as defined in Section 2(a)(19) of the Act, (``Independent
Directors or Trustees'') will consider to what extent the advisory fees
charged by INVESCO should be reduced to account for reduced services
provided such Investing Fund by INVESCO as a result of Uninvested Cash
being invested in a Money Market Fund.
4. Section 17(a) of the Act makes it unlawful for any affiliated
person of a registered investment company, acting as principal, to sell
or purchase any security to or from the company. Section 2(a)(3) of the
Act defines an ``affiliated person'' of an investment company to
include the investment adviser, any person that owns 5% or more of the
outstanding shares of that company, and any person directly or
indirectly controlling, controlled by, or under common control with the
investment company. Applicants state that, because the Funds have a
common investment adviser and identical Boards, each Fund may be deemed
to be under common control with the other Funds and could be deemed an
affiliated person or an affiliated person of an affiliated person of
each other Fund. In addition, applicants state that a Fund could become
an affiliated person of a Money Market Fund by owning more than 5% of a
Money Market Fund. Accordingly, applicants state that the sale of
shares of the Money Market Funds to the Investing Funds, and the
redemption of such shares by the Funds, may be prohibited under section
17(a) of the Act.
5. Section 17(b) of the Act authorizes the Commission to exempt a
transaction from section 17(a) of the Act if the terms of the proposed
transaction, including the consideration to be paid or received, are
fair and reasonable and do not involve overreaching on the part of any
person concerned, the proposed transaction is consistent with the
policy of each investment company concerned, and with the general
purposes of the Act. Section 6(c) of the Act permits the Commission to
exempt persons or transactions from any provision of the Act if, and to
the extent that, the exemption is necessary or appropriate in the
public interest and is consistent with the protection of investors and
the purposes fairly intended by the policy and provisions of the Act.
6. Applicants submit that the request for relief satisfies the
standards of sections 17(b) and 6(c) of the Act. Applicants state that
the relief requested is fair and reasonable and would not involve
overreaching because shares of the Money Market Funds will be sold and
redeemed at their net asset values, the same consideration paid and
received by any other shareholder. In addition, the Investing Funds
will retain their ability to invest their cash balances directly into
money market instruments if they believe that they can obtain a higher
return or any other reason. Any Money Market Fund has the right to
discontinue selling shares to any of the Investing Funds if its Board
determines that such sales would adversely affect the portfolio
management and operations of the Money Market Fund.
7. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
an affiliated person of an investment company, acting as principal,
from participating in or effecting any transaction in connection with
any joint enterprise or joint arrangement in which the investment
company participates. Applicants state that each Investing Fund, by
purchasing shares of the Money Market Funds, and INVESCO, by managing
the assets of the Investing Funds invested in the Money Market Funds,
could be participants in a joint enterprise within the meaning of
section 17(d)(1) of the Act and rule 17d-1 under the Act.
8. Rule 17d-1 under the Act permits the Commission to approve a
joint transaction covered by the terms of section 17(d) of the Act. In
determining whether to approve a transaction, the Commission considers
whether the proposed transaction is consistent with the provisions,
policies, and purposes of the Act, and the extent to which the
participation of the investment companies is on a basis different from
or less advantageous than that of the other participants. Applicants
submit that the Funds will participate in the proposed transactions on
a basis not different from or less advantageous than that of any other
participants. Applicants submit that the Funds will participate in the
proposed transaction on a basis not different from or less advantages
than that of any other participant and that the transactions will be
consistent with the Act.
Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. Shares of the Money Market Funds sold to and redeemed by the
Investing Funds will not be subject to a sales load, redemption fee,
distribution fee under a plan adopted in accordance with rule 12b-1
under the Act, or service fee (as
[[Page 20033]]
defined in rule 2830 of the NASD's Conduct Rules).
2. Before the next meeting of an Investing Fund's Board held for
the purpose of voting on an advisory contract under section 15 of the
Act, INVESCO will provide the Board with specific information regarding
the approximate cost to INVESCO of, or portion of the advisory fee
under the existing advisory contract attributable to, managing the
Uninvested Cash of such Investing Fund that can be expected to be
invested in the Money Market Funds. Before approving any advisory
contract for an Investing Fund, the Board, including a majority of the
Independent Directors or Trustees, shall consider to what extent, if
any, the advisory fees charged to the Investing Fund by INVESCO should
be reduced to account for the reduced services provided to the
Investing Fund by INVESCO as a result of Uninvested Cash being invested
in the Money Market Funds. An Investing Fund's minute books will record
fully the Board's consideration in approving the advisory contract,
including the considerations relating to fees referred to above.
3. Each of the Investing Funds will be permitted to invest
Uninvested Cash in, and hold shares of, a Money Market Fund only to the
extent that the Investing Fund's aggregate investment in the Money
Market Funds does not exceed 25% of the Investing Fund's total assets.
For purposes of this limitation, each Investing Fund or series thereof
will be treated as a separate investment company.
4. Investment in shares of the Money Market Funds will be in
accordance with each Investing Fund's respective investment
restrictions and will be consistent with each Investing Fund's policies
as set forth in its prospectus and statement of additional information.
5. Each Investing Fund, Money Market Fund, and any future Fund that
may rely on the order requested will be advised by INVESCO.
6. No Money Market Fund will acquire securities of any other
investment company in excess of the limits contained in section
12(d)(1)(A) of the Act.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 99-10139 Filed 4-22-99; 8:45 am]
BILLING CODE 8010-01-M
