[Federal Register Volume 64, Number 209 (Friday, October 29, 1999)]
[Notices]
[Pages 58462-58464]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-28356]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-24110, 812-11754]
AIM Advisors, Inc., et al., Notice of Application
October 25, 1999.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for an order under section 6(c) of the
Investment Company Act of 1940 (``Act'') for an exemption from sections
18(c) and 18(i) of the Act, under sections 6(c) and 23(c)(3) of the Act
for an exemption from rule 23c-3 under the Act, and pursuant to section
17(d) of the Act and rule 17d-1 under the Act.
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SUMMARY OF APPLICATION: Applicants request an order to permit certain
registered closed-end management investment companies to issue multiple
classes of shares, and impose asset-based distribution fees and early
withdrawal charges.
APPLICANTS: AIM Advisors, Inc. (``Advisers''), GT Global Floating Rate
Fund, Inc., d/b/a/ AIM Floating Rate Fund (``Fund''), and AIM
Distributors, Inc. (``Distributor'').
FILING DATES: The application was filed on August 19, 1999. Applicants
have agreed to file an amendment during the
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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 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 November 19,
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
SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, DC
20549-0609; Applicants, 11 Greenway Plaza, Suite 100, Houston, TX,
77046.
FOR FURTHER INFORMATION CONTACT: Paula L. Kashtan, Senior Counsel, at
(202) 942-0615, or Mary 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, DC
20549-0102 (telephone (202) 942-8090).
Applicants' Representations
1. The Fund is a closed-end management investment company
registered under the Act and organized as a Maryland corporation. The
Adviser is registered under the Investment Advisers Act of 1940 and
will serve as investment adviser to the Fund. The Distributor, a
broker-dealer registered under the Securities Exchange Act of 1934,
will distribute the Fund's shares. Applicants request that the order
also apply to any other registered closed-end investment company
established in the future for which the Adviser, or any entity
controlling, controlled by, or under common control (as the term
``control'' is defined in section 2(a)(9) of the Act) with the Adviser,
acts as principal underwriter, investment adviser, or administrator.\1\
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\1\ Any registered closed-end investment company relying on this
relief in the future will do so in a manner consistent with the
terms and conditions of the application.
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2. The Fund's investment objective is to provide a high level of
current income and preservation of capital. The Fund invests primarily
in senior secured floating and adjustable rate loans made by commercial
banks, investment banks, finance companies and other lenders to
commercial and industrial borrowers (``Loans''). Under normal
circumstances, at least 80% of the Fund's total assets are invested in
Loans. Up to 20% of the Fund's assets may be held in cash or cash
equivalents, or invested grade, short-term debt obligations, or
invested in unsecured loans.
3. The Fund continuously offers its shares to the public at net
asset value. The Fund's shares are not offered or traded in the
secondary market and are not listed on any exchange or quoted on any
quotation medium. The Fund intends to operate as an ``interval fund''
pursuant to rule 23c-3 under the Act and make periodic repurchase
offers to its shareholders.\2\
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\2\ Since it commenced operations in May, 1997, the Fund has
been the sole feeder fund in a master-feeder structure and has
invested all of its investable assets in the Floating Rate
Portfolio, a master fund with the same investment objective as the
Fund. Pursuant to a planned restructuring of the Fund, the master
feeder structure will be collapsed and the Fund will own its
portfolio securities directly. As part of the restructuring, the
Fund intends to operate as an ``interval fund,'' following receipt
of shareholder approval.
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4. The Fund seeks the flexibility to be structured as multiple-
class fund and currently intends to offer two classes of shares. The
Fund will offer Class B shares with no front-end sales charge but
subject to an early withdrawal charge (``EWC'') on shares that are
repurchased by the Fund within four years from when they were
purchased. The Fund will offer Class C shares with no front-end sales
charge but subject to an EWC on shares that are repurchased by the Fund
within one year from when they were purchased. Class B and Class C
shares will be subject to an annual asset-based distribution fee of up
to .25% and .75%, respectively, of average daily net assets. The Fund
may in the future offer other classes of shares with different
distribution structures, including Class A shares with a front-end
sales charge but with no EWC. Applicants represent that the
distribution fees will comply with the provisions of rule 2830(d) of
the Conduct Rules of the National Association of Securities Dealers,
Inc. (``NASD'') as if the Fund was an open-end investment company.
Applicants also represent that the Fund will disclose in its prospectus
the fees, expenses and other characteristics of each class of shares
offered for sale by the prospectus, as is required for open-end multi-
class funds under Form N-1A.
5. All expenses incurred by the Fund will be allocated among the
various classes of shares based on the net assets of the Fund
attributable to each class, except that the net asset value and
expenses of each class will reflect distribution fees, service fees,
and any other incremental expenses of that class. Expenses of the Fund
allocated to a particular class of shares will be borne on a pro rata
basis by each outstanding share of that class. The Fund may create
additional classes of shares in the future that may have different
terms from Class B and Class C shares. Applicants state that the Fund
will comply with the provisions of rule 18f-3 under the Act as if it
were an open-end investment company.
6. The Fund may waive the EWC for certain categories of
shareholders or transactions to be established from time to time. With
respect to any waiver of, scheduled variation in, or elimination of the
EWC, the Fund will comply with rule 22d-1 under the Act as if it were
an open-end investment company.
7. The Fund will offer its shareholders an exchange feature under
which shareholders of the Fund may, during the Fund's quarterly
repurchase periods, exchange their shares for shares of the same class
of other funds in the AIM group of investment companies. Fund shares so
exchanged will be counted as part of the repurchase offer amount as
specified in rule 23c-3 under the Act. Any exchange option will comply
with rule 11a-3 under the Act as if the Fund were an open-end
investment company subject to that rule. In complying with rule 11a-3,
the Fund will treat the EWC as if it were a contingent deferred sales
charge (``CDSC'').
Applicants' Legal Analysis
Multiple Classes of Shares
1. Section 18(c) of the Act provides, in relevant part, that a
closed-end investment company may not issue or sell any senior security
if, immediately thereafter, the company has outstanding more than one
class of senior security. Applicants state that the creation of
multiple classes of shares of the Fund may be prohibited by section
18(c).
2. Section 18(i) of the Act provides that each share of stock
issued by a registered management investment company will be a voting
stock and have equal voting rights with every other outstanding voting
stock. Applicants state that multiple classes of shares of the Fund may
violate section 18(i) of the Act because each class would be entitled
to exclusive voting
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rights with respect to matters solely related to that class.
3. Section 6(c) of the Act provides that the SEC may exempt any
person, security or transaction from any provision of the Act, if and
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.
Applicants request an exemption under section 6(c) of the Act from
sections 18(c) and 18(i) of the Act to permit the Fund to issue
multiple classes of shares.
4. Applicants submit that the proposed allocation of expenses and
voting rights among multiple classes is equitable and will not
discriminate against any group or class of shareholders. Applicants
submit that the proposed arrangements would permit the Fund to
facilitate the distribution of its securities and provide investors
with a broader choice of shareholder services. Applicants assert that
their proposal does not raise the concerns underlying section 18 of the
Act to any greater degree than open-end investment companies' multiple
class structures that are permitted by rule 18f-3 under the Act.
Applicants state the Fund will comply with the provisions of rule 18f-3
as if it were an open-end investment company.
Early Withdrawal Charges
5. Section 23(c) of the Act provides, in relevant part, that no
registered closed-end investment company will purchase any securities
of which it is the issuer, except: (i) on a securities exchange or
other open market; (ii) pursuant to tenders, after reasonable
opportunity to submit tenders given to all holders of securities of the
class to be purchased; or (iii) under other circumstances as the SEC
may permit by rules and regulations or orders for the protection of
investors.
6. Rule 23c-3 under the Act permits a registered closed-end
investment company (an ``interval fund'') to make repurchase offers of
between five and twenty-five percent of its outstanding shares at net
asset value at periodic intervals pursuant to a fundamental policy of
the interval fund. Rule 23c-3(b)(1) under the Act provides that an
interval fund may deduct from repurchase proceeds only a repurchase
fee, not to exceed two percent of the proceeds, that is reasonably
intended to compensate the fund for expenses directly related to the
repurchase.
7. Section 23(c)(3) provides that the SEC may issue an order that
would permit a closed-end investment company to repurchase its shares
in circumstances in which the repurchase is made in a manner or on a
basis which does not unfairly discriminate against any holders of the
class or classes of securities to be purchased. As noted above, section
6(c) provides that the SEC may exempt any person, security or
transaction from any provision of the Act, if and to the extent that
the 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. Applicants request
relief under sections 6(c) and 23(c) from rule 23c-3 to permit them to
impose EWCs on shares submitted for repurchase that have been held for
less than a specified period.
8. Applicants believe that the requested relief meets the standards
of sections 6(c) and 23(c)(3). Rule 6c-10 under the Act permits open-
end investment companies to impose CDSCs, subject to certain
conditions. Applicants state that EWCs are functionally similar to
CDSCs imposed by open-end investment companies under rule 6c-10 under
the Act. Applicants state that EWCs may be necessary for the
Distributor to recover distribution costs and that EWCs may discourage
investors from moving their money quickly in and out of the Fund, a
practice that applicants submit imposes costs on all shareholders.
Applicants will comply with rule 6c-10 under the Act as if that rule
applied to closed-end investment companies. The Fund also will disclose
EWCs in accordance with the requirements of form N-1A concerning CDSCs.
Applicants further state that the Fund will apply the EWC (and any
waivers or scheduled variations of the EWC) uniformly to all
shareholders in a given class and consistent with the requirements of
rule 22d-1 under the Act.
Asset-Based Distribution Fees
9. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
an affiliated person of a registered investment company or an
affiliated person of such person, 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 unless the SEC issues an order permitting the transaction.
In reviewing applications submitted under section 17(d) and rule 17d-1,
the SEC considers whether the participation of the investment company
in a joint enterprise or joint arrangement 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 other participants.
10. Rule 17d-3 under the Act provides an exemption from section
17(d) and rule 17d-1 to permit open-end investment companies to enter
into distribution arrangements pursuant to rule 12b-1 under the Act.
Applicants request an order under section 17(d) and rule 17d-1 to
permit the Fund to impose asset-based distribution fees. Applicants
have agreed to comply with rules 12b-1 and 17d-3 as if those rules
applied to closed-end investment companies.
Applicants' Condition
Applicants agree that any order granting the requested relief will
be subject to the following condition:
Applicants will comply with the provisions of rules 6c-10, 11a-3,
12b-1, 17d-3, and 22d-1 under the Act and NASD conduct Rule 2830(d), as
amended from time to time, as if those rules applied to closed-end
investment companies.
For the SEC, by the Division of Investment Management, pursuant
to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-28356 Filed 10-28-99; 8:45 am]
BILLING CODE 8010-01-M