[Federal Register Volume 59, Number 77 (Thursday, April 21, 1994)] [Unknown Section] [Page 0] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 94-9634] [[Page Unknown]] [Federal Register: April 21, 1994] ======================================================================= ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Rel. No. IC--20221; 812-8790] Harbor Fund; Notice of Application April 15, 1994. AGENCY: Securities and Exchange Commission (``SEC''). ACTION: Notice of Application for Exemption under the Investment Company Act of 1940 (the ``Act''). ----------------------------------------------------------------------- APPLICANT: Harbor Fund. RELEVANT ACT SECTION: Order requested under sections 6(c) and 17(b) that would grant an exemption from section 17(a). SUMMARY OF APPLICATION: Applicant seeks an order to permit Owens- Illinois Master Retirement Trust (the ``Retirement Trust''), a shareholder of the Fund who is an ``affiliated person'' of the Fund, to redeem Fund shares for payment in-kind. FILING DATE: The application was filed on January 24, 1994, and amended on April 4, 1994. 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 copy of the request, personally or by mail. Hearing requests should be received by the SEC by 5:30 p.m. on May 10, 1994 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, One SeaGate, Toledo, Ohio 43666. FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Staff Attorney, at (202) 942-0574, 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 Delaware business trust registered under the Act as an open-end management investment company. The Harbor Growth Fund (the ``Fund''), one of eight investment portfolios of applicant, commenced operations on November 19, 1986. Harbor Capital Advisors, Inc. serves as the Fund's investment adviser and administrator, and is an indirect wholly-owned subsidiary of Owens-Illinois, Inc. Nicholas- Applegate Capital Management serves as subadviser to the Fund. 2. The Retirement Trust is organized and operated as an investment vehicle for several qualified pension plans maintained by Owens- Illinois and its affiliates. Assets of these pension plans are invested in one or more investment accounts of the Retirement Trust, and each investment account has a different investment objective. As of December 31, 1993, one of these accounts (the ``Account'') owned beneficially and of record 65% of the outstanding shares of the Fund. The Retirement Trust also includes another account, which is managed by Nicholas- Applegate, the investment objectives of which are substantially identical to those of the Fund. 3. Owens-Illinois, acting pursuant to its fiduciary obligation under the Employee Retirement Income Security Act of 1974, as amended, has concluded that the assets of the Account invested in the Fund should be consolidated with the Nicholas-Applegate account. Consequently, the Retirement Trust, on behalf of the Account, has advised the Fund that it expects, on a periodic basic over a three year period, to redeem approximately $36 million worth of its shares of the Fund and reinvest the proceeds in the Nicolas-Applegate account. 4. Applicant's prospectus and statement of additional information provide that redemption requests generally will be paid in cash. If, however, applicant's trustees determine that it would be detrimental to the shareholders of the Fund to pay a redemption price wholly or partly in cash, redemptions will be paid in-kind on a pro rata basis. The securities distributed in-kind would be valued by the same method as is used to calculate the Fund's net asset values per share. This method, in the case of securities traded on a public securities market for which quotations are available, is the last quoted sales price or, if there is no such reported sale, is at the mean between the bid and asked prices prior to valuation. Securities to be distributed to the Retirement Trust will be limited to securities that are traded on a public securities market or that have quoted bid and asked prices available. 5. Applicant requests an exemption to permit the Fund to effect the proposed in-kind redemptions. In order to reduce the impact of these redemptions upon the Fund and its shareholders, the trustees, in accordance with the Fund's redemption policies, propose to pay the first $250,000 of such redemptions in cash and cash equivalents and the remainder in the form of a proportionate distribution of each of the Fund's portfolio securities. These proposed in-kind redemptions will be effected only if the trustees determine that it would be detrimental to the shareholders of the Fund to pay the redemption price wholly or partly in cash. Legal Analysis 1. Section 17(a)(2) of the Act generally makes it unlawful for an affiliated person of a registered investment company to purchase any securities from the company. Because the Retirement Trust holds 5% or more of the voting securities of the Fund, the Retirement Trust is an affiliated person of the Fund under section 2(a)(3)(A) of the Act. Consequently, the Retirement Trust would be prohibited from redeeming its shares of the Fund in-kind. 2. Section 17(b) provides that the SEC shall exempt a proposed transaction from section 17(a) if evidence establishes that: (a) The terms of the proposed transaction are reasonable and fair and do not involve overreaching; (b) The proposed transaction is consistent with the policies of the registered investment company involved; and (c) The proposed transaction is consistent with the general provisions of the Act. Under section 6(c), the SEC may exempt classes of transactions 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. 3. Applicant believes that the proposed transactions satisfy the requirements of sections 6(c) and 17(b). Applicant believes that the use of an objective, verifiable standard for the selection and valuation of any securities to be distributed in connection with a redemption in-kind will ensure that the redemptions will be on terms that are reasonable and fair to the Fund and its shareholders and will not involve overreaching on the part of any person. Similarly, the proposed transactions are consistent with the investment policy of the Fund, which expressly allows redemptions in-kind. Finally, because Retirement Trust shareholders would receive the same in-kind distribution of securities and cash as non-affiliated shareholders redeeming shares, applicant believes that the terms of the proposed transactions are reasonable and fair to all parties and are consistent with the protection of investors and the provisions, policies and purposes of the Act. Applicant's Conditions In-kind redemptions by the Retirement Trust, on behalf of the Account, will be effected subject to the following conditions: 1. The securities distributed to the Retirement Trust shareholders pursuant to a redemption in-kind (the ``In-Kind Securities'') will be limited to securities that are traded on a public securities market or for which quoted bid and asked prices are available. 2. The trustees, including a majority of the trustees who are not ``interested persons'' (as defined in section 2(a)(19) of the Act), will determine no less frequently than annually: (a) Whether the In-Kind Securities have been distributed in accordance with condition 1; and (b) whether the distribution of any In-Kind Securities was and continues to be consistent with the policies of the Fund as reflected in the prospectus of the Fund. In addition, the trustees shall make and approve such changes as they deem necessary in their procedures for monitoring compliance by the applicant with the terms and conditions of this application. 3. The Fund will maintain and preserve for a period of not less than six years from the end of the fiscal year in which any redemption in-kind by the Retirement Trust occurred, the first two years in an easily accessible place, a written record of each such redemption setting forth a description of each security distributed, the terms of the distribution, and the information or materials upon which the valuation was made. For the Commission, by the Division of Investment Management, pursuant to delegated authority. Margaret H. McFarland, Deputy Secretary. [FR Doc. 94-9634 Filed 4-20-94; 8:45 am] BILLING CODE 8010-01-M