[Federal Register Volume 59, Number 30 (Monday, February 14, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-3317]
[[Page Unknown]]
[Federal Register: February 14, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-20058; 812-8600]
Smith Barney Shearson Income Trust, et al.; Application for
Exemption
February 7, 1994.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').
ACTION: Notice of application for exemption under the Investment
Company Act of 1940 (the ``Act'').
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APPLICANTS: Smith Barney Shearson Income Trust (formerly Shearson
Lehman Brothers Income Trust) (the ``Trust''), and Smith Barney
Shearson Inc. (``Smith Barney Shearson'').
RELEVANT ACT SECTIONS: Exemption requested under section 6(c) from
sections 2(a)(32), 2(a)(35), 22(c), and 22(d) of the Act and rule 22c-1
thereunder.
SUMMARY OF APPLICATION: Applicants request an order that would amend a
prior order that permitted the Trust to impose a contingent deferred
sales charge (``CDSC'') on certain redemptions of Trust shares. The
prior order was granted to the Trust and Shearson Lehman Brothers Inc.
(``Shearson''), the Trust's former sponsor and distributor. Since the
order was granted, Shearson's assets were sold to Primerica Corporation
and its subsidiary Smith Barney Shearson, and Smith Barney Shearson
became the sponsor and underwriter of the Trust. Applicants request to
continue the relief granted in the prior order and to extend the relief
to Smith Barney Shearson and certain investment companies for which
Smith Barney Shearson serves as investment adviser or principal
underwriter.
FILING DATE: The application was filed on October 4, 1993, and amended
on January 14, 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
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 March 4, 1994,
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 may request
notification of a hearing by writing to the SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 5th Street NW., Washington, DC. 20549.
Applicants, Two World Trade Center, New York, New York 10048.
FOR FURTHER INFORMATION CONTACT:
Felice R. Foundos, Senior Attorney, at (202) 272-2190, or Robert A.
Robertson, Branch Chief, at (202) 272-3018 (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.
Applicants' Representations
1. The Trust is an open-end management investment company that was
organized as a business trust under the laws of the Commonwealth of
Massachusetts on October 17, 1991. To date, the Trust consists of four
series: Smith Barney Shearson Limited Maturity Treasury Fund, Smith
Barney Shearson Limited Maturity Municipals Fund, Smith Barney Shearson
Intermediate Maturity California Municipals Fund, and Smith Barney
Shearson Intermediate Maturity New York Municipals Fund (the
``Funds'').
2. On March 12, 1993, American Express Company and its indirect
wholly-owned subsidiary, Shearson, entered into an asset purchase
agreement with Primerica Corporation and its indirect wholly-owned
subsidiary Smith Barney, Harris Upham & Co. Inc. (as renamed, Smith
Barney Shearson). Under the agreement, American Express sold
substantially all of the assets of Shearson and the Asset Management
Divisions of Shearson to Smith Barney Shearson and its designated
affiliates. Upon the closing of the sale on July 31, 1993, Smith Barney
Shearson became the sponsor and distributor of the Trust and Greenwich
Street Advisers Division of Mutual Management Corporation, an affiliate
of Smith Barney Shearson, replaced Shearson Lehman Advisors as the
Trust's investment adviser.
3. Prior to the sale transaction, investment companies sponsored by
Shearson, including the Trust, received orders of exemption from
various provisions of the Act. At the request of Shearson and Smith
Barney, the Commission's Division of Investment Management informed
Shearson and Smith Barney that the Division would not recommend that
the Commission take any enforcement action against them if the Funds
operate under the terms of a prior order until the earlier of (a) the
date the prior order is renewed by the Commission pursuant to a renewal
order specifying Smith Barney and its subsidiaries or affiliates as
applicants or (b) June 8, 1994.\1\ This application is being filed
pursuant to that no-action letter to continue and renew an order that
permitted the Trust to assess a CDSC on redemptions of the Trust's
shares (the ``Income Trust Order'').\2\
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\1\See Shearson Lehman Brothers Inc. (pub. avail. June 8, 1993).
\2\Investment Company Act Rel. Nos. 18565 (Feb. 24, 1992)
(notice) and 18623 (Mar. 23, 1992) (order).
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4. Applicants further request that any relief granted extend to
Smith Barney Shearson and any future series of the Trust or any other
open-end investment company for which Smith Barney Shearson, or any
entity controlled by, or under common control with Smith Barney
Shearson, serves as investment adviser or principal underwriter that
issues shares that are identical in all material respects to those
described in the application.
5. Under the Income Trust Order, the Trust (a) offers shares
subject to a maximum sales charge upon purchase of 1.25% (the ``Upfront
Charge'') that is reduced on purchases of $50,000 or more; (b) has
instituted a shareholder servicing plan in accordance with rule 12b-1
under the Act; and (c) assesses a 1% CDSC on certain redemptions of
shares made within one year of their purchase. Under the amended order,
the CDSC would continue to be imposed on that portion of a redemption
that causes the current value of Fund shares to fall below the total
dollar amount of payments for the purchase of those shares (less any
applicable Upfront Charge) made by the shareholder during the preceding
year.
6. No CDSC would be imposed to the extent that the net asset value
of the shares redeemed does not exceed (a) the current net asset value
of shares purchased more than one year prior to the redemption (``Old
Shares Value''), plus (b) the current net asset value of shares
purchased through reinvestment of dividends or capital gains
distribution (``Reinvestment Shares Value''), plus (c) increases in the
net asset value of the shares above purchase payments (less any
applicable Upfront Charge) made during the preceding year
(``Appreciation Value'').
7. In effecting a particular redemption request of shares made by a
shareholder, the Trust would continue first to redeem an amount that
represents Appreciation Value. The Trust next would redeem an amount
that represents Reinvestment Shares Value, and then an amount that
represents Old Shares Value. The amount by which a redemption exceeds
the total of Appreciation Value, Reinvestment Shares Value, and Old
Shares Value would be subject to the CDSC.
8. In no event would the maximum amount of the CDSC assessed upon
the redemption of shares plus the amount of any Upfront Charge paid
with respect to the shares exceed the maximum sales charge that could
have been imposed at the time the shares were purchased under Article
III, section 26(d) of the Rules of Fair Practice adopted by the
National Association of Securities Dealers, of which Smith Barney
Shearson is a member.
9. Under the amended order, the CDSC would be waived with respect
to: (a) Automatic cash withdrawals by a shareholder in amounts equal to
or less than 2% per month of the value of the shareholder's shares at
the time that the shareholder's participation in the withdrawal plan
commences; (b) redemptions in connection with: (i) lump-sum or other
distributions from a qualified corporate or self-employed retirement
plan following retirement, termination of employment, death, disability
or following attainment of age 59\1/2\ of a plan participant, (ii) the
hardship of a plan participant to the extent permitted under the
Internal Revenue Code of 1986 (the ``Code''), (iii) a loan made by a
qualified corporate or self-employed retirement plan to a participating
employee, (iv) distributions and withdrawals from retirement plans or
individual retirement accounts (``IRAs'') or custodial accounts under
section 403(b)(7) of the Code following attainment of age 59\1/2\; and
(v) a tax-free return of an excess contribution to an IRA; (c)
redemptions of shares that are acquired as a result of an exchange into
any Fund from any fund in the same ``group of investment companies'' as
defined in rule 11a-3 under the Act as the Trust and that are sold
subject to a sales charge upon purchase (the ``Exchange Group of
Funds''); (d) involuntary redemptions; and (e) redemptions by (i)
employees of Travelers Inc. (formerly known as Primerica Corporation)
and its subsidiaries (including Smith Barney Shearson), American
Express and its subsidiaries, and The Boston Company, Inc. and its
subsidiaries, IRAs for those employees, employee benefit plans for
those employees, and the spouses and minor children of those employees,
(ii) accounts managed by investment advisory subsidiaries of Travelers
registered under the Investment Advisers Act of 1940, and (iii)
directors, trustees or general partners of any investment company for
which Smith Barney Shearson serves as distributor. In accordance with
rule 11a-3 under the Act, a CDSC will not be imposed on exchanges
between a Fund and any fund in the Exchange Group of Funds.
10. Under the amended order, a shareholder who has redeemed shares
of a Fund and who reinvests all or part of the redemption proceeds in
shares of any other Fund within 180 days of the redemption will
continue to receive a proportionate credit (in the form of additional
shares of the Fund into which the reinvestment is being made) for the
CDSC imposed on the prior redemption. Also, a shareholder who has
redeemed shares of a Fund and who reinvests all or part of the
redemption proceeds within 30 days of the redemption in shares of any
fund in the Exchange Group of Funds will continue to receive a
proportionate credit (in the form of additional shares of the fund into
which the reinvestment is being made) for any CDSC imposed on the prior
redemption. In each case, the amount of the credit would be funded by
Smith Barney Shearson out of a ``house'' account into which Smith
Barney Shearson would maintain, on an ongoing basis, a portion of the
proceeds from CDSCs assessed to shareholders. The account will at all
times be maintained in an amount sufficient to provide all credits to
which shareholders are entitled.
Applicant's Legal Analysis
1. Applicants request an exemption under section 6(c) of the Act
from sections 2(a)(32), 2(a)(35), 22(c), and 22(d) of the Act and rule
22c-1 thereunder to permit the Funds to continue to assess a CDSC on
certain redemptions of the shares as described above and to permit the
Funds to waive the CDSC with respect to certain types of redemptions.
Applicants believe that the contingent nature of the proposed charge
places the purchaser in a better position than if a sales load were
imposed at the time of sale, since in the case of the CDSC the
shareholder enjoys the possibility that he or she will have to pay only
a reduced sales charge, or no sales charge at all. Applicants further
believe that the imposition of the CDSC permits the Funds' shareholders
to have the advantage of greater investment dollars working for them
from the time of their purchase of shares of the Funds than if a sales
load were imposed at the time of purchase.
Applicant's Condition
As a condition of the requested relief, applicants will comply with
the provisions of proposed rule 6c-10 under the Act, as currently
proposed and as it may be reproposed, adopted or amended.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-3317 Filed 2-11-94; 8:45 am]
BILLING CODE 8010-01-M