INVESCO is planning to merge at least seven of its 41 funds out of existence. The company says the small asset size and in some cases lackluster investment performances of the funds have prompted the whittling down of funds.

While fund mergers are routine, the number of mergers planned at one time in a complex the size of INVESCO is unusual, said Christine Benz, an equity fund analyst at Morningstar.

INVESCO plans to merge a variety of domestic and international, equity and fixed-income funds. In at least one instance, the proposed merger seemingly would put investors into a new fund with an investment objective which differs from that of their original investment.

The boards of directors of the funds are scheduled to meet Wednesday to vote on the proposals. If the boards agree, INVESCO will then ask shareholders to approve the mergers at meetings scheduled May 20.

A spokesperson for INVESCO last week declined to comment until the fund boards act on the proposals. INVESCO described the proposed moves in a series of SEC filings last month.

Fund mergers are routine in the mutual fund industry as fund advisers drop smaller funds that are unable to attract assets. The mergers can benefit shareholders, who have a better chance of seeing expenses reduced by investing in a fund with larger assets. Mergers also can cut costs for fund advisers who are subsidizing the expenses of funds with small assets.

INVESCO, in fact, in several instances, said it planned to stop subsidizing expenses if the mergers are not approved. In one case of a fund slated for merging, the Short-Term Bond fund, INVESCO said it has been subsidizing expenses for five years.

In at least one instance, the mergers also seem to put shareholders into a fund with a different investment objective, said Benz of Morningstar. INVESCO is proposing to merge its Small Company Value fund into its Small Company Growth fund. Benz said the performance of Small Company Value had been "pretty lackluster." In its SEC filing, INVESCO acknowledged that Small Company Growth had a better performance record than the value fund.

Other proposed mergers described last month in SEC filings include: Short-Term Bond fund into Select Income fund; European Small Company fund into European fund; International Growth fund into International Blue Chip fund; Multi-Asset Allocation fund into Balanced fund; Asian Growth fund into the Pacific Basin fund; and Intermediate Government Bond fund into U.S. Government Securities fund.

The equity performance of INVESCO funds generally has been above to well-above average, Benz said. That has helped increase assets. INVESCO's assets under management for open-end funds have risen from approximately $14.9 billion as of Dec. 31, 1996 to $18.8 billion as of Oct. 31, 1998, according to Dalbar, a Boston fund research firm. During that time, however, INVESCO's market share dipped slightly from .46 percent to .41 percent, Dalbar said.

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