[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