[Federal Register Volume 63, Number 109 (Monday, June 8, 1998)]
[Notices]
[Pages 31243-31245]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-15076]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC--23232; 812-10926]
Janus Investment Fund, et al.; Notice of Application
June 1, 1998.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for an order under the Investment Company
Act of 1940 (the ``Act'') under Section 12(d)(1)(J) of the Act for an
exemption from Sections 12(d)(1)(A) and (B) of the Act, under Sections
6(c) and 17(b) of the Act for an exemption from Sections 17(a) of the
Act, and under Section 17(d) of the Act and Rule 17d-1 under the Act to
permit certain joint transactions.
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SUMMARY OF APPLICATION: The requested order would supersede an existing
order to permit certain registered management investment companies to
invest excess cash in affiliated money market funds in excess of the
limits of sections 12(d)(1)(A) and (B) of the Act.
APPLICANTS: Janus Investment Fund and Janus Aspen Series (each a
``Trust''), Janus Capital Corporation (``Janus Capital''), and any
other registered management investment companies advised by Janus
Capital or an entity controlling, controlled by, or under common
control with Janus Capital (``Future Funds'').\1\
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\1\ All existing investment companies that currently intend to
rely on the order have been named as applicants, and any other
existing or future registered management investment companies that
subsequently rely on the order will comply with the terms and
conditions in the application.
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FILING DATES: The application was filed on July 2, 1997, and amended on
December 31, 1997, and on April 27, 1998.
HEARING OR NOTIFICATION OF HEARING: An order granting the requested
relief 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 June 25,
1998, 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. Applicants, Janus Capital Corporation, 100 Fillmore Street,
Denver, CO 80206-4923.
FOR FURTHER INFORMATION CONTACT:
Lisa McCrea, Attorney Adviser, (202) 942-0562 or Nadya B. Roytblat,
Assistant Director, at (202) 942-0564 (Office of Investment Company
Regulation, Division of Investment Management).
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 5th Street, N.W., Washington, DC,
20549 (tel. 202-942-8090).
Applicants' Representations
1. Janus Investment Fund and Janus Aspen Series are open-end
management investment companies registered under the Act. Janus
Investment Fund and Janus Aspen series currently offer nineteen and
twelve series (together with Future Funds the ``Funds''), respectively,
three and one of which, respectively, are subject to the requirements
of rule 2a-7 under the Act (``Money Market Funds''). Janus Capital
serves as investment adviser to each Fund, and is registered as an
investment adviser under the investment Advisers Act of 1940.
2. The Funds have cash reserves that have not been invested in
portfolio securities (``Uninvested Cash''), including dividend
payments, interest received on portfolio securities, unsettled
securities transactions, strategic reserves, matured investments,
proceeds from liquidation of portfolio securities, or new investor
capital. An existing order permits the Funds (``Investing Funds'') to
invest their Uninvested Cash in the Money Market Funds so long as each
Fund's aggregate
[[Page 31244]]
investment in the Money Market Funds does not exceed the greater of 5%
of the Investing Fund's total net assets or $2.5 million (the ``Cash
Sweep Order'').\2\
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\2\ Janus Investment Fund, et al., Investment Company Act
Release Nos. 21042 (May 4, 1995) (notice) and 21103 (May 31, 1995)
(order).
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3. Applicants request an order that would supersede the Cash Sweep
Order to permit the Investing Funds to use Uninvested Cash to purchase
shares of the Money Market Funds, and the Money Market Funds to sell
shares to and redeem shares from an Investing Fund, so long as an
Investing Fund's aggregate investment in the Money Market Funds does
not exceed 25% of the Investing Fund's total assets at any time. The
Funds, including the Money Market Funds, also may participate in an
interfund lending and borrowing facility.
4. Applicants believe that increasing the Funds' ability to invest
Uninvested Cash in Money Market Funds will maximize the benefits to the
Investing Funds sought under the Cash Sweep Order. These benefits
include reduced transaction costs, increased liquidity, greater returns
on Uninvested Cash, and further diversification. Applicants state that
the proposed transactions would be consistent with the investment
restrictions and policies disclosed in the Funds' registration
statements.
Applicants' Legal Analysis
1. Section 12(d)(1)(A) of the Act provides that no registered
investment company may acquire securities of another investment company
if the securities represent more than 3% of the acquired company's
outstanding voting stock, more than 5% of the acquiring company's total
assets, or if the securities, together with the securities of other
acquired investment companies, represent more than 10% of the acquiring
company's total assets. Section 12(d)(1)(B) of the Act provides that no
registered open-end investment company may sell its securities to
another investment company if the sale will cause the acquiring company
to own more than 3% of the acquired company's voting stock, or if the
sale will cause more than 10% of the acquired company's voting stock to
be owned by investment companies.
2. Section 12(d)(1)(J) of the Act provides that the SEC may exempt
any persons or transactions from any provision of section 12(d)(1) if
the exemption is consistent with the public interest and the protection
of investors.
3. Applicants' request would permit the Investing Funds to use
Uninvested Cash to acquire shares of Money Market Funds in excess of
the percentage limitations in section 12(d)(1)(A), so long as no
Investing Fund will have more than an aggregate of 25% of its total
assets invested in all Money Market Funds at any time. Applicants'
request also would permit Money Market Funds to sell their securities
to Investing Funds in excess of the percentage limitations set out in
section 12(d)(1)(B). Applicants represent that no Money Market Fund
will acquire securities of any other investment company in excess of
the limitations in section 12(d)(1)(A), except as permitted by the SEC
order permitting the Funds to participate in an interfund lending and
borrowing facility (''Interfund Lending Order'').\3\
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\3\ Janus Investment Fund, et al., Investment Company Act
Release Nos. 22922 (Dec. 2, 1997) (notice) and 22983 (Dec. 30, 1997)
(order) (``Interfund Lending Order'').
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4. Applicants submit that the proposed transactions do not involve
the perceived abuses that section 12(d)(1) was intended to prevent.
Applicants submit that the proposed transactions will not result in
inappropriate layering of fees because no sales charge, contingent
deferred sales charge, distribution fee under rule 12b-1 under the Act,
or service fee will be charged in connection with the purchase of Money
Market Fund shares with Uninvested Cash. Applicants state that Janus
Capital currently intends to credit to the Investing Fund, or waive,
the investment advisory fees that it earns as a result of the Investing
Fund's investment in the Money Market Funds.
5. Section 17(a) of the Act makes it unlawful for any affiliated
person of a registered investment company, acting as principal, to sell
or purchase any security to or from the company. Section 2(a)(3) of the
Act defines an affiliated person of an investment company to include
any investment adviser of the investment company and any person
controlling, controlled by, or under common control with, the
investment adviser. Applicants state that under section 2(a)(3) of the
Act, the Funds may be deemed to be under common control, and thus
affiliated persons of one another. As a result, section 17(a) would
prohibit the sale of shares of a Money Market Fund to an Investing Fund
and the redemption of the shares from the Investing Fund.
6. Section 17(b) of the Act authorizes the SEC to exempt a
transaction from section 17(a) if the terms of the proposed
transaction, including the consideration to be paid or received, are
reasonable and fair and do not involve overreaching on the part of any
person concerned, and the proposed transaction is consistent with the
policy of each investment company concerned and the general purposes of
the Act.
7. Section 6(c) of the Act permits the SEC to 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.
8. Applicants submit that the request for relief satisfies the
standards of section 17(b) and 6(c). Applicants state that the proposed
transactions are reasonable and fair and would not involve overreaching
because the Investing Funds would retain their ability to invest their
Uninvested cash directly in money market instruments in accordance with
their investment objectives and policies, if a higher return can be
obtained or for any other reason. Applicants also assert that each
Money Market Fund may discontinue selling its shares to any of the
Investing Funds if the board of trustees of the Money Market Fund
determines that the sale would adversely affect the Money Market Fund's
portfolio management and operations. Applicants also note that shares
of the Money Market Funds will be purchased and redeemed by the
Investing Funds at net asset value, which is the same consideration
paid and received for these shares by any other shareholder.
9. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
an affiliated person of a registered investment company, acting as
principal, from participating in any joint arrangement with the
investment company unless the SEC has issued an order authorizing the
arrangement. Applicants state that each Investing Fund, by purchasing
shares of the Money Market Funds, Janus Capital, by managing the assets
of the Investing Fund invested in the Money Market Funds, and each
Money Market Fund, by selling shares to each Investing Fund, could be
deemed to be participants in a joint arrangement.
10. In determining whether to grant an exemption under rule 17d-1,
the SEC considers whether the investment company's participation in the
joint enterprise is consistent with the provisions, policies, and
purposes of the Act, and the extent to which that participation is on a
basis different from, or less advantageous than, that of other
participants. Applicants assert that the investment by the Investing
Funds in shares of the Money Market
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Funds would be on the same basis and consistent with the purposes of
the Act.
Applicants' Conditions
Applicants agree that the order granting the requested relief will
be subject to the following conditions:
1. Shares of the Money Market Funds sold to and redeemed from the
Investing Funds will not be subject to a sales load, redemption fee,
distribution fee under a plan adopted in accordance with rule 12b-1, or
service fee (as defined in section 2830(b)(9) of the NASD Rules of
Conduct).
2. If Janus Capital collects from the Money Market Funds a fee for
acting as investment adviser with respect to assets invested by the
Investing Funds, before the next meeting of the board of trustees of an
Investing Fund (``Board'') that invests in the Money Market Funds is
held for the purpose of voting upon an investment advisory contract of
the Investing Fund under section 15 of the Act, Janus Capital will
provide the Board with specific information regarding the approximate
cost to Janus Capital for, or the portion of the investment advisory
fee under, the existing investment advisory agreement attributable to
managing the assets of the Investing Fund that can be invested in such
Money Market Funds. Before approving any investment advisory contract
under section 15 of the Act, the Board of the Investing Fund, including
a majority of the trustees who are not ``interested persons'' as
defined in section 2(a)(19) of the Act, shall consider to what extent,
if any, the investment advisory fees charged to the Investing Fund by
Janus Capital should be reduced to account for the investment advisory
fees indirectly paid by the Investing Fund because of the investment
advisory fee paid by the Money Market Fund to Janus Capital. The minute
books of the Investing Fund will record fully the Board's consideration
in approving the investment advisory contract, including the
consideration relating to fees referred to above.
3. Each of the Investing Funds will invest Uninvested Cash in, and
hold shares of, the Money Market Funds only to the extent that the
Investing Fund's aggregate investment in the Money Market Funds does
not exceed 25% of the Investing Fund's total assets. For purposes of
this limitation, each Investing Fund will be treated as a separate
investment company.
4. Investment in shares of the Money Market Funds will be in
accordance with each Investing Fund's investment restrictions and
policies as set forth in its prospectus and statement of additional
information.
5. No Money Market Fund shall acquire securities of any other
investment company in excess of the limits contained in section
12(d)(1)(A) of the Act, except as permitted by the Interfund Lending
Order.
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-15076 Filed 6-5-98; 8:45 am]
BILLING CODE 8010-01-M
