[Federal Register Volume 59, Number 153 (Wednesday, August 10, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-19522]
[[Page Unknown]]
[Federal Register: August 10, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 20442; 812-8908]
Lord, Abbett & Co., et al.; Notice of Application
August 4, 1994.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of Application for Exemption under the Investment
Company Act of 1940 (the ``Act'').
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APPLICANTS: Lord, Abbett & Co. (``Lord Abbett'') Affiliated Fund, Inc.,
Lord Abbett Developing Growth Fund, Inc., Lord Abbett Value
Appreciation Fund, Inc., Lord Abbett Fundamental Value Fund, Inc., Lord
Abbett Global Fund, Inc., Lord Abbett Bond-Debenture Fund, Inc., Lord
Abbett U.S. Government Securities Fund, Inc., Lord Abbett Tax-Free
Income Fund, Inc., Lord Abbett California Tax-Free Income Fund, Inc.,
Lord Abbett Tax-Free Income Trust, Lord Abbett Investment Trust
(``Investment Trust''), Lord Abbett U.S. Government Securities Money
Market Fund, Inc. (``Money Market Fund''), Lord Abbett Securities Trust
(``Securities Trust''), and other existing or future registered open-
end management investment companies for whom Lord Abbett or an entity
controlling, controlled by, or under common control with Lord Abbett
serves as principal underwriter.\1\.
\1\Certain existing investment companies which currently do not
intend to rely on the requested relief are not named as parties to
the application, but may in the future rely on any exemption granted
pursuant to the application if they determine to impose a contingent
deferred sales charge in accordance with the representations and
condition in the application.
RELEVANT ACT SECTIONS: Conditional order requested under section 6(c)
for exemption from the provisions of sections 2(a)(32), 2(a)(35),
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22(c), and 22(d), and rule 22c-1.
SUMMARY OF APPLICATION: Applicants seek an order to permit the Funds,
as defined below, to assess a contingent deferred sales charge
(``CDSC'') on certain redemptions of shares.
FILING DATE: The application was filed on March 21, 1994, and amended
on May 17, 1994, July 29, 1994, and August 3, 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 August 29, 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 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, D.C.
20549. Applicants, 767 Fifth Avenue, New York, New York 10153.
FOR FURTHER INFORMATION CONTACT:James J. Dwyer, Staff Attorney at (202)
942-0581, or C. David Messman, Branch Chief, at (202) 942-0564
(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.
Applicant's Representations
1. All of the applicants other than Lord Abbett are registered
open-end management investment companies that offer shares in one or
more series. The term ``Fund'' refers to any series of such an
applicant that offers shares in multiple series, or to such an
applicant that offers shares only in one series. Lord Abbett serves as
investment adviser to each Fund, and acts as principal underwriter of
the shares of each Fund.
2. Shares of Money Market Fund and the Funds comprising Securities
Trust are offered at net asset value. Shares of the other Funds (each
an ``FESC Fund'') are offered to investors at their net asset value
plus a front-end sales charge. However, there is no front-end sales
charge on reinvestment of dividends and distributions, and sales that
involve an investment above $1 million.\2\ Also, shares of the FESC
Funds and Money Market Fund may be exchanged freely, one for the other,
without a sales charge, except on exchanges from Money Market Fund into
an FESC Fund when Money Market Fund shares were originally purchased
without a sales charge. In addition, shares of the Securities Trust
Funds are freely exchangeable with shares of other Securities Trust
Funds but are not currently exchangeable for shares of any other Fund.
\2\To reach the $1 million breakpoint, investments in all Funds
except Money Market Fund (unless such investment has been exchanged
into Money Market Fund from an FESC Fund) are taken into account, as
are amounts covered by statements of intention with any FESC Funds.
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3. Each applicant has adopted a rule 12b-1 plan (the ``Plan'').
Although shareholders have approved each Plan, some of the Plans are
not yet effective. The Plans of the FESC Funds except Investment Trust
provide that, when shares are sold above $1 million, the applicable
Fund will pay at the time of sale to Lord Abbett in its capacity as
principal underwriter a one-time distribution fee equal to 1% of the
net asset value of the shares sold. The Plan of Investment Trust
provides that Investment Trust will pay, with respect to sales above $1
million, a one-time distribution fee of 1% of the first $3 million,
plus .50% of the next $7 million, plus .25% of the remainder, of the
net asset value of shares sold. The Plans of all FESC Funds also
provide for annual service fees payable by the FESC Fund to Lord Abbett
in its capacity as principal underwriter of up to .25% of the average
daily net asset value of shares held in broker-dealer accounts.
4. The Plan of Money Market Fund does not impose a rule 12b-1 fee
at the time of sale, but provides for payment of an annual rule 12b-1
service fee equal to .15% of the average daily net asset value of
shares held in broker-dealer accounts; however, this fee has been
suspended. The Plans of the Securities Trust Funds provide that such
Funds pay Lord Abbett a distribution fee and service fee of .75% and
.25%, respectively, of the net asset value of all shares sold other
than in connection with the reinvestment of dividends or other
distributions, or the exchange of shares from another Securities Trust
Fund. The Plans also provide for annual distribution and service fees,
beginning one year after shares are sold, equal to .75% and .25%,
respectively, of the average daily net asset value of shares held in
broker-dealer accounts.
5. Applicants had been imposing a CDSC in reliance on the no-action
position taken by the Division of Investment Management in Flag
Investors Fund, Inc. (``Flag'').\3\ By letter dated September 22,
1993,\4\ the Division withdrew the Flag letter, effective March 22,
1994. By letter dated March 31, 1994,\5\ the Division advised
applicants that it would not recommend enforcement action against the
Funds if they temporarily continued to impose a CDSC in reliance of the
withdrawn Flag position, pending receipt of exemptive relief.
Applicants currently are imposing a CDSC in reliance on the letter of
March 31, 1994.
\3\Flag Investors Fund, Inc. (pub. avail. Oct. 1, 1984) (stating
that the Division would not recommend enforcement action if
requestors imposed a 1% ``redemption fee'' similar in nature to a
CDSC).
\4\Flag Investors Fund, Inc. (pub. avail. Sept. 22, 1993).
\5\Lord Abbett Funds (pub. avail. Mar. 31, 1994).
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6. Under the requested order, a Fund will impose a CDSC of 1% upon
the redemptions of shares (a) of an FESC Fund when shares were
purchased at or above $1 million and redeemed within 24 months
following the month the shares were purchased, or (b) of a Securities
Trust Fund when shares are redeemed within 12 months following the
month of their purchase. The CDSC is received and retained by the Fund
that paid the initial rule 12b-1 fee.
7. In no event does the CDSC exceed 1% of the lesser of the net
asset value of the shares redeemed or the original cost of the shares.
No CDSC is imposed when the investor redeems shares (a) derived from
increases in net asset value per share, (b) where no rule 12b-1 fee was
paid on issuance (including shares acquired through reinvestment of
dividends and capital gains distributions), or (c) which, together with
exchanged shares, have been held continuously for a certain number of
months following the month of purchase (24 months with respect to
shares of an FESC Fund, and 12 months with respect to shares of a
Securities Trust Fund).
8. In determining whether a CDSC is payable, it is assumed that a
redemption is made first of shares originally not subject to a CDSC and
then of shares subject to a CDSC. With respect to shares subject to a
CDSC, it is assumed that the shares held the longest are the first to
be redeemed. No CDSC is charged upon exchanges of shares between (a)
FESC Funds, (b) an FESC Fund and Money Market Fund, or (c) Securities
Trust Funds. If the shares being exchanged are subject to a CDSC, the
CDSC and the original acquisition dates carry over to the shares being
acquired in the exchange. Applicants will comply with rule 11a-3 under
the Act with regard to all exchanges.
9. The Funds may waive the CDSC upon redemptions by tax-qualified
plans under section 401 of the Internal Revenue Code due to plan loans,
hardship withdrawals, death, retirement, or separation from service
with respect to plan participants.
10. Upon their redemption, shares will be subject to the CDSC
schedule in effect at the time of their purchase, except that
applicants may apply a CDSC schedule that has been changed subject to
the purchase of shares if such changes confer a benefit to the
shareholder (e.g., lower fees).
Applicants' Legal Analysis
1. Applicants submit that the requested exemption to permit the
Funds to implement the proposed CDSC is appropriate, in the public
interest, and is consistent with the protection of investors and the
purposes fairly intended by the policy and provisions of the Act. The
proposed CDSC arrangements will provide shareholders the option of
having greater investment dollars working for them from the time of
their purchase than if a sales load had been imposed at such time.
2. Applicants believe that the purposed CDSC waiver is fair,
equitable, and in the public interest and the interest of shareholders
because the redeeming shareholders are members of a class favored under
federal tax and securities laws.
Applicants' Condition
If the requested order is granted, applicants expressly agree to
the following condition: Applicants will comply with proposed rule 6c-
10 under the Act, Investment Company Act Release No. 16619 (Nov. 2,
1988), as such rule is currently proposed and as it may be reproposed,
adopted, or amended.
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-19522 Filed 8-9-94; 8:45 am]
BILLING CODE 8010-01-M