[Federal Register Volume 60, Number 128 (Wednesday, July 5, 1995)]
[Notices]
[Pages 35092-35094]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-16385]



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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-21172; International Series Release No. 822; 812-9408]


The Industrial Finance Corporation of Thailand

June 28, 1995.
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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APPLICANT: The Industrial Finance Corporation of Thailand.

RELEVANT ACT SECTIONS: Order requested under section 6(c) of the Act 
that would exempt applicant from all provisions of the Act.

SUMMARY OF APPLICATION: Applicant, a development finance institution 
established by the government of the Kingdom of Thailand (the ``Thai 
Government''), requests an order exempting it from all provisions of 
the Act in connection with the offer and sale of its notes in the 
United States.

FILING DATE: The application was filed on December 30, 1994, and 
amended on May 22, 1995.

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 
applicant with a 

[[Page 35093]]
copy of the request, personally or by mail. Hearing requests should be 
received by the SEC by 5:30 p.m. on July 24, 1995 and should be 
accompanied by proof of service on applicant, 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 may request notification of 
a hearing by writing to the SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 5th Street NW., Washington, DC 20549. 
Applicant, c/o Walter A. Looney, Jr., Simpson Thacher & Bartlett, 32nd 
Floor, Asia Pacific Finance Tower, 3 Garden Road, Central, Hong Kong.

FOR FURTHER INFORMATION CONTACT: Sarah A. Buescher, Staff Attorney, at 
(202) 942-0573, or Robert A. Robertson, 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.

Applicant's Representations

    1. Applicant is a specialized development bank organized by the 
Thai Government in 1959 pursuant to the Industrial Finance Corporation 
of Thailand Act (the ``IFCT Act''). The Thai Government established 
applicant to promote the development of private industrial enterprises 
and to facilitate the growth of domestic capital markets in Thailand by 
carrying out credit and financial transactions. Applicant offers its 
loans with due consideration of specific Thai Government objectives and 
the particular development needs of the Thai economy. Applicant may be 
considered an investment company, and it requests an exemption from all 
provisions of the Act.
    2. Applicant provides financial services to a wide range of 
industries, including manufacturing, agriculture, tourism, and selected 
service and related industries. These services include long-term loans, 
medium-term loans, and loan guarantees to finance investment in fixed 
assets and in office construction for selected industries. Lending 
constitutes the largest part of applicant's operations, with long-term, 
medium-term, and working capital loans comprising approximately 65% of 
applicant's total assets as of December 31, 1994. All of applicant's 
long-term and medium-term loans are held by applicant to maturity. The 
sole source of turnover in applicant's loan portfolio is the maturity 
of existing loans and the making of new loans. Applicant does not buy 
or sell loans in the secondary market.
    3. In addition to its principal business of extending long-term 
loans, applicant has the ability to issue short-term promissory notes 
which are similar to certificates of deposit in term and tenor, and can 
be payable on demand. Promissory notes are an alternative to deposit 
taking as a method of procuring funds from the public in Thailand. 
Applicant also provides concessional loans and financing through equity 
investments, and applicant has established subsidiaries and affiliated 
companies to offer other industrial and financial investment services.
    4. Section 12 of the IFCT Act authorizes applicant to borrow money 
in both the domestic and foreign capital markets in order to lend funds 
to Thai borrowers, and to invest any capital not immediately required 
for its operations in a securities portfolio. Applicant temporarily 
invests funds awaiting disbursement to its clients in short-term debt 
securities such as promissory notes or bills or exchange issued by 
financial institutions and companies. A substantial portion of 
applicant's assets consist of obligations of borrowers to repay loans 
made to them by applicant and investments to facilitate applicant's 
cash flow management.
    5. Applicant is not considered a commercial bank under Thai law. 
Consequently, it is presently prohibited from accepting deposits from 
the public. In February 1995, the Thai Government introduced the first 
Five Year Financial System Master Plan (the ``Master Plan''), which 
would expand the scope of applicant's activities, and allow applicant 
to accept deposits. The Master Plan is a policy statement and its 
implementation will require legislative action.
    6. Applicant is subject to extensive oversight, supervision, and 
regulation by the Thai Government. The IFCT Act sets forth applicant's 
powers, privileges, and operating guidelines. The Thai Ministry of 
Finance (the ``MoF'') oversees and supervises applicant's operations 
and policies through its statutory obligation to administer the IFCT 
Act. The appointment of applicant's president is also subject to the 
MoF's approval. Applicant's annual funding plan, which sets forth its 
basic business strategy and priorities for the upcoming year, must be 
approved by the MoF, and applicant must notify the MoF of the terms and 
conditions of all debt instruments offered by applicant. In addition, 
applicant must submit other reports, statements, and filings to the 
MoF.
    7. Unlike commercial banks which are governed by the Commercial 
Banking Act and are under direct supervision of the Bank of Thailand 
(``BoT''), the Thai central bank, applicant operates under its own act. 
However, as a recipient of funds from the BoT which applicant channels 
to industrial sectors, applicant must submit annual financial reports 
to the BoT and allow the BoT to examine applicant's accounts. Applicant 
is not subject to capital adequacy requirements imposed by the BoT but 
complies with such requirements.
    8. Applicant's shares are listed on the Stock Exchange of Thailand 
(the ``SET''), and applicant publishes all information, including 
annual reports and quarterly interim financial statements, which is 
customarily provided or is required to be published by the SET and the 
Securities and Exchange Commission of Thailand (the ``Thai SEC''). 
Applicant's external independent auditors perform annual audits of 
applicant's financial statements. The Thai SEC also regulates the 
timing and content of all disclosures of information made by applicant.
    9. Applicant proposes to issue and sell in the United States 
medium-term notes (the ``Notes'') in an aggregate principal amount of 
up to US$500,000,000 from time to time outstanding. Notes initially 
issued in the United States will have a minimum maturity of nine months 
and will be direct, unsecured obligations of applicant and rank pari 
passu among themselves and with all other unsecured indebtedness of 
applicant for moneys borrowed. Applicant does not contemplate that its 
obligations under the Notes will be guaranteed by the Thai Government. 
Any offering of Notes may be registered under the Securities Act of 
1933, as amended (the ``Securities Act''), or made pursuant to an 
exemption from the registration requirements of the Securities Act. The 
offer and sale of the Notes will provide applicant with an alternate 
source of funding to supplement its borrowing in Thai and non-U.S. 
international capital markets. Applicant will use the proceeds of the 
sale of the Notes to provide funds for making loans in the ordinary 
course of its business.

Applicant's Legal Analysis

    1. Section 3(a)(3) of the Act defines an investment company to 
include any issuer engaged in the business of investing, reinvesting, 
owning, holding or trading in securities, and that owns or proposes to 
acquire investment securities having a value exceeding 40% 

[[Page 35094]]
of the issuer's total assets. As of December 31, 1994, approximately 
65% of applicant's assets consisted of obligations of borrowers to 
repay loans made to them by applicant, and approximately 25% of 
applicant's assets consisted of other debt securities and equity 
investments. Such obligations and investments could be deemed to be 
``investment securities'' within the meaning of section 3(a)(3). As a 
result, applicant may be deemed to be an ``investment company'' under 
the Act.
    2. 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 in the public 
interest and consistent with the protection of investors and the 
purposes fairly intended by the policy and provisions of the Act. 
Applicant requests an order under section 6(c) exempting it from all 
provisions of the Act.
    3. Rule 3a-6 under the Act exempts foreign banks from the 
definition of investment company for all purposes under the Act. A 
``foreign bank'' is defined to include a banking institution ``engaged 
substantially in commercial banking activity'' which, in turn, is 
defined to include ``extending commercial and other types of credit, 
and accepting demand and other types of deposits.'' Although applicant 
conducts several of the activities associated with traditional 
commercial banks, presently applicant does not technically ``accept 
demand and other types of deposits'' and therefore may not be eligible 
for the exemption provided by rule 3a-6. Applicant believes that it is 
functionally equivalent to a foreign bank because it offers financial 
services and issues financial products similar to those offered and 
issued by banks, and it is subject to extensive oversight, supervision, 
and regulation by the Thai Government.
    4. Applicant also believes that the rationale of Congress and the 
SEC in promulgating rules under the Act in exempting foreign financial 
institutions applies to applicant. The development loans made by 
applicant are not completely liquid, mobile, and readily negotiable, 
and applicant is not in the business of investing, reinvesting, owning, 
holding, or trading securities. Applicant does not consider itself to 
be an investment company, and believes that it is within the category 
of institutions for which the SEC sought to provide relief. Applicant 
represents that its operations do not lend themselves to the abuses 
against which the Act is directed, and it believes that it satisfies 
the standards of relief under section 6(c).

Condition

    Applicant agrees that the order of the SEC granting the requested 
relief shall be subject to the condition that in connection with any 
offering by applicant of Notes in the United States applicant will 
appoint an agent in the United States to accept service of process in 
any suit, action or proceeding brought with respect to such Notes 
instituted in any state or federal court in The City or State of New 
York. Applicant will expressly submit to the jurisdiction of the New 
York State and United States Federal courts sitting in The City of New 
York with respect to any such suit, action or proceeding. Such 
appointment of an agent to accept service of process and such consent 
to jurisdiction shall be irrevocable until all amounts due and to 
become due in respect thereof have been paid. No such submission to 
jurisdiction or appointment of agent for service of process will affect 
the right of a holder of any such security to bring suit in any court 
which shall have jurisdiction over applicant by virtue of the offer and 
sale of such securities or otherwise.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-16385 Filed 7-3-95; 8:45 am]
BILLING CODE 8010-01-M