[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