Federal Register, Volume 59 Issue 77 (Thursday, April 21, 1994)

[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]


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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'').

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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