[Federal Register Volume 70, Number 169 (Thursday, September 1, 2005)]
[Notices]
[Pages 52143-52146]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-4788]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 27049; 812-13140]


Harris Insight Funds Trust, et al., Notice of Application

August 25, 2005.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order under section 12(d)(1)(J) of 
the Investment Company Act of 1940 (``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 section 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 applicants request an order that would 
permit certain registered management investment companies to invest 
uninvested cash and cash collateral in affiliated money market funds.
    Applicants: Harris Insight Funds Trust (the ``Trust'') and Harris 
Investment Management, Inc. (the ``Adviser'').
    Filing Dates: The application was filed on December 3, 2004, and

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amended on June 27, 2005, and August 16, 2005.
    Hearing or Notification of Hearing: An order granting the 
application will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving applicants with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on September 19, 2005, and should be accompanied by proof of 
service on the 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 Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities & Exchange Commission, 100 F 
Street NE., Washington, DC 20549-9303; Applicants, c/o Timothy R. Kain, 
Vice President and Counsel, Harris Trust and Savings Bank, 111 W. 
Monroe Street, Chicago, IL 60603.

FOR FURTHER INFORMATION CONTACT: Bruce R. MacNeil, Senior Counsel, at 
(202) 551-6817 or Nadya B. Roytblat, Assistant Director, at (202) 551-
6821 (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 
Commission's Public Reference Branch, 100 F Street NE., Washington, DC 
20549-0102 (telephone (202) 551-5850).

Applicants' Representations

    1. The Trust, a Massachusetts business trust, is registered under 
the Act as an open-end management investment company and consists of 
multiple series (each, a ``Fund''). The Adviser, a Delaware 
corporation, is an investment adviser registered under the Investment 
Advisers Act of 1940 and serves as investment adviser to each of the 
Funds.\1\
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    \1\ Applicants request that any relief granted also apply to any 
existing or future registered open-end management investment company 
or series thereof that is currently or in the future advised by the 
Adviser, or any person controlling, controlled by, or under common 
control with the Adviser (included in the term ``Funds''). All 
registered investment companies that currently intend to rely on the 
requested order are named as applicants. Any existing or future 
registered investment company or series thereof that relies on the 
requested order in the future will do so only in accordance with the 
terms and conditions of the application.
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    2. Certain Funds, including money market Funds that comply with 
rule 2a-7 under the Act (each, an ``Investing Fund''), have, or may be 
expected to have, cash that has not been invested in portfolio 
securities (``Uninvested Cash''). Uninvested Cash may result from a 
variety of sources, including dividends or interest received on 
portfolio securities, unsettled securities transactions, strategic 
reserves, matured investments, proceeds from liquidation of investment 
securities, dividend payments or money from investors. Certain 
Investing Funds also may participate in a securities lending program 
(``Securities Lending Program'') under which a Fund may lend its 
portfolio securities to registered broker-dealers or other 
institutional investors. The loans are secured by collateral, including 
cash collateral (``Cash Collateral'' and together with Uninvested Cash, 
``Cash Balances''), equal at all times to at least the market value of 
the securities loaned. The Securities Lending Program, including the 
investment of any Cash Collateral, will comply with all present and 
future applicable Commission and staff positions regarding securities 
lending arrangements.
    3. Applicants request an order to permit: (a) The Investing Funds 
to use their Cash Balances to purchase shares of one or more of the 
Funds that are in the same group of investment companies (as defined in 
section 12(d)(1)(G) of the Act) as the Investing Fund and comply with 
rule 2a-7 under the Act (``Money Market Funds''); (b) the Money Market 
Funds to sell their shares to and redeem such shares from the Investing 
Funds; and (c) the Adviser to effect the above transactions.
    4. The investment by each Investing Fund in shares of the Money 
Market Funds will be in accordance with that Investing Fund's 
investment policies and restrictions as set forth in its prospectus and 
statement of additional information. Applicants believe that the 
proposed transactions may reduce transaction costs, create more 
liquidity, increase returns and diversify holdings.

Applicants' Legal Analysis

A. Section 12(d)(1)

    1. Section 12(d)(1)(A) of the Act provides that no investment 
company may acquire securities of a registered investment company if 
such 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 such 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, its principal underwriter, or 
any broker or dealer, may sell securities of the investment company 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 Commission may 
exempt any person, security, or transaction from any provision of 
section 12(d)(1) if and to the extent that such exemption is consistent 
with the public interest and the protection of investors. Applicants 
request relief under section 12(d)(1)(J) to permit the Investing Funds 
to use their Cash Balances to acquire shares of a Money Market Fund in 
excess of the percentage limitations in section 12(d)(1)(A), provided 
however, that in all cases an Investing Fund's aggregate investment of 
Uninvested Cash in shares of the Money Market Funds will not exceed 25% 
of the Investing Fund's total assets. Applicants also request relief to 
permit the Money Market Funds, their principal underwriter and any 
broker or dealer to sell securities of the Money Market Funds to the 
Investing Funds in excess of the percentage limitations in section 
12(d)(1)(B).
    3. Applicants state that the proposed arrangement will not result 
in the abuses that sections 12(d)(1)(A) and (B) were intended to 
prevent. Applicants state that because each Money Market Fund will 
maintain a highly liquid portfolio, an Investing Fund will not be in a 
position to gain undue influence over a Money Market Fund. Applicants 
represent that the proposed arrangement will not result in an 
inappropriate layering of fees because shares of the Money Market Funds 
sold to the Investing Funds will not be subject to a sales load, 
redemption fee, asset-based distribution fee adopted in accordance with 
rule 12b-1 under the Act or service fee (as defined in rule 2830(b)(9) 
of the NASD Conduct Rules) or, if such shares are subject to any such 
fee, the Adviser will waive its advisory fee for each Investing Fund in 
an amount that offsets the amount of such fees incurred by the 
Investing Fund. Applicants state that if a Money Market Fund offers 
more than one class of shares, an Investing Fund will invest its Cash 
Balances only in the class with the lowest expense ratio (taking into 
account the expected impact of the Investing Fund's

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investment) at the time of the investment. In connection with approving 
any advisory contract, the board of trustees of an Investing Fund 
(``Board''), including a majority of the trustees who are not 
``interested persons,'' as defined in section 2(a)(19) of the Act 
(``Independent Trustees''), will consider to what extent, if any, the 
advisory fees charged to the Investing Fund by the Adviser should be 
reduced to account for reduced services provided to the Investing Fund 
by the Adviser as a result of Uninvested Cash being invested in the 
Money Market Funds. Applicants represent that no Money Market Fund will 
acquire securities of any other investment company or company relying 
on section 3(c)(1) or 3(c)(7) of the Act in excess of the limits 
contained in section 12(d)(1)(A) of the Act.

B. Section 17(a) of the Act

    1. 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 investment company. Section 
2(a)(3) of the Act defines an affiliated person of an investment 
company to include any person directly or indirectly owning, 
controlling, or holding with power to vote 5% or more of the 
outstanding voting securities of the other person, any person 5% or 
more of whose outstanding securities are directly or indirectly owned, 
controlled, or held with power to vote by the other person, any person 
directly or indirectly controlling, controlled by, or under common 
control with the other person, and any investment adviser to the 
investment company. Applicants state that the Investing Funds and the 
Money Market Funds may be deemed to be under common control and 
affiliated persons of each other because each Fund is advised by the 
Adviser. In addition, if an Investing Fund acquires more than 5% of the 
voting securities of a Money Market Fund, the Investing Fund may be an 
affiliated person of the Money Market Fund. As a result, section 17(a) 
would prohibit the sale of the shares of the Money Market Funds to the 
Investing Funds, and the redemption of the shares by the Investing 
Funds.
    2. Section 17(b) of the Act authorizes the Commission to exempt a 
transaction from section 17(a) of the Act 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 registered investment company concerned and with the 
general purposes of the Act. Section 6(c) of the Act permits the 
Commission to exempt any person, security or transaction, or any class 
or classes or persons, securities or transactions from any provision of 
the Act, if 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.
    3. Applicants submit that their request for relief satisfies the 
standards in sections 6(c) and 17(b) of the Act. Applicants state that 
the Investing Funds will purchase and sell shares on the same terms and 
on the same basis as shares are purchased and sold by all other 
shareholders of the Money Market Funds. In addition, under the proposed 
transactions, the Investing Funds will retain their ability to invest 
their Cash Balances directly in money market instruments as permitted 
by each Investing Fund's investment objectives and policies. Applicants 
state that each Money Market Fund reserves the right to discontinue 
selling shares to any of the Investing Funds if the Money Market Fund's 
Board determines that such sales would adversely affect its portfolio 
management and operations.

C. Section 17(d) of the Act and Rule 17d-1 Under the Act

    1. 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 or effecting any transaction in 
connection with any joint enterprise or joint arrangement in which the 
investment company participates, unless the Commission has issued an 
order authorizing the arrangement. Applicants state that the Investing 
Funds (by purchasing shares of the Money Market Funds), the Money 
Market Funds (by selling shares to and redeeming them from the 
Investing Funds), and the Adviser (by managing the assets of the 
Investing Funds invested in the Money Market Funds) could be deemed to 
be participants in a joint enterprise or other joint arrangement within 
the meaning of section 17(d) of the Act and rule 17d-1 thereunder.
    2. In considering whether to approve a joint transaction under rule 
17d-1, the Commission considers whether the registered investment 
company's participation in the joint transaction 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. Applicants submit that the proposed 
transactions meet these standards because the investments by the 
Investing Funds in shares of the Money Market Funds would be 
indistinguishable from any other shareholder account maintained by the 
Money Market Funds and the transactions will be consistent with the 
Act.

Applicants' Conditions

    Applicants agree that the order granting the requested relief shall 
be subject to the following conditions:
    1. Shares of the Money Market Funds sold to and redeemed by 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 
under the Act, or service fee (as defined in rule 2830(b)(9) of the 
Rules of Conduct of the NASD), or if such shares are subject to any 
such fee, the Adviser will waive its advisory fee for the Investing 
Fund in an amount that offsets the amount of such fees incurred by the 
Investing Fund.
    2. Before the next meeting of the Board of an Investing Fund is 
held for the purpose of voting on an advisory contract under section 15 
of the Act, the Adviser to the Investing Fund will provide the Board 
with specific information regarding the approximate cost to the Adviser 
of, or portion of the advisory fee under the existing advisory contract 
attributable to, managing the Uninvested Cash of the Investing Fund 
that can be expected to be invested in the Money Market Funds. Before 
approving any advisory contract for the Investing Fund, the Board of 
the Investing Fund, including a majority of the Independent Trustees, 
shall consider to what extent, if any, the advisory fee charged to the 
Investing Fund by the Adviser should be reduced to account for reduced 
services provided to the Investing Fund by the Adviser as a result of 
Uninvested Cash being invested in the Money Market Funds. The minute 
books of the Investing Fund will record fully the Board's consideration 
in approving the advisory contact, including the considerations 
relating to fees referred to above.
    3. The Investing Funds will invest Uninvested Cash in, and hold 
shares of, the Money Market Funds only to the extent that each 
Investing Fund's aggregate investment of Uninvested Cash in the Money 
Market Funds does not exceed 25% of the Investing Fund's total assets.
    4. Investment of an Investing Fund's Cash Balances in shares of the 
Money Market Funds will be in accordance

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with the Investing Fund's investment restrictions and will be 
consistent with the Investing Fund's investment objectives and policies 
as set forth in its prospectus and statement of additional information.
    5. So long as its shares are held by an Investing Fund, a Money 
Market Fund will not acquire securities of any other investment company 
or company relying on section 3(c)(1) or 3(c)(7) of the Act in excess 
of the limits contained in section 12(d)(1)(A) of the Act.
    6. Each Investing Fund and each Money Market Fund that may rely on 
the order shall be advised by an Adviser. Each Investing Fund and Money 
Market Fund will be in the same group of investment companies as 
defined in section 12(d)(1)(G) of the Act.
    7. Before the Investing Funds may participate in a Securities 
Lending Program, a majority of the Board, including a majority of the 
Independent Trustees, will have approved the Investing Fund's 
participation in the Securities Lending Program. The Board also will 
evaluate the securities lending arrangement and its results no less 
frequently than annually and determine that any investment of Cash 
Collateral in the Money Market Funds is in the best interests of the 
Investing Fund.
    8. The Board of each Investing Fund will satisfy the fund 
governance standards as defined in rule 0-1(a)(7) under the Act by the 
compliance date for the rule.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-4788 Filed 8-31-05; 8:45 am]
BILLING CODE 8010-01-P