Lord Abbett Family of Funds and Lord, Abbett & Co. LLC; Notice of Application, 44395-44400 [2016-16038]

Download as PDF Federal Register / Vol. 81, No. 130 / Thursday, July 7, 2016 / Notices temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B) 13 of the Act to determine whether the proposed rule change should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: srobinson on DSK5SPTVN1PROD with NOTICES Electronic Comments • Use the Commission’s Internet comment form https://www.sec.gov/ rules/sro.shtml); or • Send an Email to rule-comments@ sec.gov. Please include File No. SR–ISE Gemini–2016–06 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–ISE Gemini–2016–06. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission’s Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of ISE Gemini. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All 13 15 submissions should refer to File Number SR–ISE Gemini–2016–06 and should be submitted by July 28, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.14 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–16028 Filed 7–6–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Submission for OMB Review; Comment Request Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE., Washington, DC 20549–2736. Extension: Rule 6a–3, SEC File No. 270–0015, OMB Control No. 3235–0021. Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (‘‘PRA’’) (44 U.S.C. 3501 et seq.), the Securities and Exchange Commission (‘‘Commission’’) has submitted to the Office of Management and Budget (‘‘OMB’’) a request for extension of the previously approved collection of information provided for in Rule 6a–3 (17 CFR 240.6a–3) under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) (‘‘Act’’). Section 6 of the Act sets out a framework for the registration and regulation of national securities exchanges. Under Rule 6a–3, one of the rules that implements Section 6, a national securities exchange (or an exchange exempted from registration based on limited trading volume) must provide certain supplemental information to the Commission, including any material (including notices, circulars, bulletins, lists, and periodicals) issued or made generally available to members of, or participants or subscribers to, the exchange. Rule 6a– 3 also requires the exchanges to file monthly reports that set forth the volume and aggregate dollar amount of certain securities sold on the exchange each month. The information required to be filed with the Commission pursuant to Rule 6a–3 is designed to enable the Commission to carry out its statutorily mandated oversight functions and to ensure that registered and exempt exchanges continue to be in compliance with the Act. The Commission estimates that each respondent makes approximately 12 U.S.C. 78s(b)(2)(B). VerDate Sep<11>2014 17:23 Jul 06, 2016 14 17 Jkt 238001 PO 00000 CFR 200.30–3(a)(12). Frm 00138 Fmt 4703 Sfmt 4703 44395 such filings on an annual basis at an average cost of approximately $20 per response. Currently, 19 respondents (19 national securities exchanges) are subject to the collection of information requirements of Rule 6a–3. The Commission estimates that the total burden for all respondents is 114 hours and $4,560 per year. Compliance with Rule 6a–3 is mandatory for registered and exempt exchanges. Information received in response to Rule 6a–3 shall not be kept confidential; the information collected is public information. As set forth in Rule 17a–1 (17 CFR 240.17a–1) under the Act, a national securities exchange is required to retain records of the collection of information for at least five years. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information under the PRA unless it displays a currently valid OMB control number. The public may view background documentation for this information collection at the following Web site: www.reginfo.gov. Comments should be directed to: (i) Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Office of Management and Budget, Room 10102, New Executive Office Building, Washington, DC 20503, or by sending an email to: Shagufta_ Ahmed@omb.eop.gov; and (ii) Pamela Dyson, Director/Chief Information Officer, Securities and Exchange Commission, c/o Remi Pavlik-Simon, 100 F Street NE., Washington, DC 20549, or by sending an email to: PRA_ Mailbox@sec.gov. Comments must be submitted to OMB within 30 days of this notice. Dated: June 30, 2016. Robert W. Errett, Deputy Secretary. [FR Doc. 2016–16036 Filed 7–6–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 32167; File No. 812–14502] Lord Abbett Family of Funds and Lord, Abbett & Co. LLC; Notice of Application June 29, 2016. Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice of an application for an order pursuant to (a) section 6(c) of the Investment Company Act of 1940 (‘‘Act’’) granting an exemption from AGENCY: E:\FR\FM\07JYN1.SGM 07JYN1 44396 Federal Register / Vol. 81, No. 130 / Thursday, July 7, 2016 / Notices sections 18(f) and 21(b) of the Act; (b) section 12(d)(1)(J) of the Act granting an exemption from section 12(d)(1) of the Act; (c) sections 6(c) and 17(b) of the Act granting an exemption from sections 17(a)(1), 17(a)(2) and 17(a)(3) of the Act; and (d) section 17(d) of the Act and rule 17d–1 under the Act to permit certain joint arrangements. Summary of the Application: Applicants request an order that would permit certain registered open-end management investment companies to participate in a joint lending and borrowing facility. Applicants: Lord Abbett Affiliated Fund, Inc., Lord Abbett Bond-Debenture Fund, Inc., Lord Abbett Developing Growth Fund, Inc., Lord Abbett Equity Trust, Lord Abbett Global Fund, Inc., Lord Abbett Investment Trust, Lord Abbett Mid Cap Stock Fund, Inc., Lord Abbett Municipal Income Fund, Inc., Lord Abbett Research Fund, Inc., Lord Abbett Securities Trust, Lord Abbett Series Fund, Inc., and Lord Abbett U.S. Government & Government Sponsored Enterprises Money Market Fund, Inc. (collectively, the ‘‘Funds’’), and Lord, Abbett & Co. LLC (‘‘Lord Abbett’’). srobinson on DSK5SPTVN1PROD with NOTICES SUMMARY: (Division of Investment Management, Chief Counsel’s Office). SUPPLEMENTARY INFORMATION: The following is a summary of the application. The complete application may be obtained via the Commission’s Web site by searching for the file number, or for an applicant using the Company name box, at https:// www.sec.gov/search/search.htm or by calling (202) 551–8090. Applicants’ Representations 1. Each Fund is organized as a Maryland corporation or Delaware statutory trust. Each Fund is registered under the Act as an open-end management investment company. Certain of the Funds consist of multiple series and all may offer additional series in the future (such series thereof, each also a ‘‘Fund’’). Certain of the Funds either are, or may be, money market funds that comply with Rule 2a–7 under the Act (collectively, ‘‘Money Market Funds’’). Lord Abbett is a Delaware limited liability company and serves as the investment adviser to the Funds.1 Lord Abbett and every investment adviser to the Funds will be registered as an investment adviser under the DATES: Filing Dates: The application was Investment Advisers Act of 1940 filed on June 30, 2015, and amended on (‘‘Advisers Act’’). 2. At any particular time, while some October 9, 2015, June 16, 2016 and June Funds are lending money to banks or 22, 2016. Hearing or Notification of Hearing: An other entities by entering into repurchase agreements, or purchasing order granting the requested relief will be issued unless the Commission orders other short-term instruments, other Funds may need to borrow money from a hearing. Interested persons may the same or similar banks for temporary request a hearing by writing to the purposes to satisfy redemption requests, Commission’s Secretary and serving to cover unanticipated cash shortfalls applicants with a copy of the request, such as a trade ‘‘fail’’ in which cash personally or by mail. Hearing requests payment for a security sold by a Fund should be received by the Commission has been delayed, or for other temporary by 5:30 p.m. on July 25, 2016, and purposes. Certain Funds currently have should be accompanied by proof of service on the applicants, in the form of a $500 million committed line of credit with State Street Bank & Trust Company an affidavit or, for lawyers, a certificate (‘‘Committed Credit Facility’’) for shortof service. Pursuant to rule 0–5 under term temporary or emergency purposes, the Act, hearing requests should state the nature of the writer’s interest, any 1 Applicants request that the relief apply to any facts bearing upon the desirability of a existing and future series of the Funds and any hearing on the matter, the reason for the other registered open-end management investment request, and the issues contested. company or its series that (i) is advised by Lord Abbett, any successor thereto or any investment Persons who wish to be notified of a adviser controlling, controlled by, or under hearing may request notification by common control (within the meaning of Section writing to the Commission’s Secretary. 2(a)(9) of the Act) with Lord Abbett or any successor thereto (such entities included in the ADDRESSES: Secretary, U.S. Securities term ‘‘Lord Abbett’’), and (ii) is part of the same and Exchange Commission, 100 F Street ‘‘group of investment companies,’’ as defined in NE., Washington, DC 20549–1090; Section 12(d)(1)(G)(ii) of the Act, as the Funds (each also included in the term ‘‘Fund’’). The term Applicants, c/o Brooke A. Fapohunda, Esq., Lord, Abbett & Co. LLC, 90 Hudson ‘‘successor’’ is limited to entities that result from a reorganization into another jurisdiction or a change Street, Jersey City, NJ 07302. in the type of business organization. All entities that currently intend to rely on the requested relief FOR FURTHER INFORMATION CONTACT: are named as applicants. Any other entity that Kaitlin C. Bottock, Senior Counsel, at subsequently relies on the order will comply with (202) 551–8658 or Daniele Marchesani, the terms and conditions set forth in the application. Branch Chief, at (202) 551–6821 VerDate Sep<11>2014 17:23 Jul 06, 2016 Jkt 238001 PO 00000 Frm 00139 Fmt 4703 Sfmt 4703 including the funding of shareholder redemptions and trade settlements. 3. When a Fund borrows money under the Committed Credit Facility, it would pay interest on the borrowed cash at a rate that would be higher than the rate that would be earned by other (non-borrowing) Funds on investments in repurchase agreements and other short-term instruments of the same maturity as the bank loan. Applicants assert that this differential represents the profit earned by the lender on loans and is not attributable to any material difference in the credit quality or risk of such transactions. 4. The Funds seek to enter into master interfund lending agreements (‘‘Interfund Lending Agreements’’) with each other that would permit each Fund to lend money directly to and borrow money directly from other Funds through an interfund facility (‘‘Facility’’) for temporary purposes (‘‘Interfund Loan’’). The Money Market Funds typically will not participate as borrowers. It is anticipated that, in order to comply with Rule 2a–7 under the Act, the Money Market Funds will lend through the Facility only if the requisite determinations contemplated by that Rule have been made by Lord Abbett. Applicants state that the Facility would both reduce the Funds’ potential borrowing costs and enhance the ability of the lending Funds to earn higher rates of interest on their short-term loans. Although the Facility would reduce the Funds’ need to borrow from banks, the Funds would be free to establish committed lines of credit or other borrowing arrangements with unaffiliated banks. 5. Applicants anticipate that the Facility would provide a borrowing Fund with significant savings at times when the cash position of the borrowing Fund is insufficient to meet temporary cash requirements. This situation could arise when shareholder redemptions exceed anticipated volumes and certain Funds have insufficient cash on hand to satisfy such redemptions. When the Funds liquidate portfolio securities to meet redemption requests, they often do not receive payment in settlement for up to three days (or longer for certain transactions). However, redemption requests normally are effected immediately. The Facility would provide a source of immediate, shortterm liquidity pending settlement of the sale of portfolio securities. 6. Applicants also anticipate that a Fund could use the Facility when a sale of securities ‘‘fails,’’ for example, due to a delay in the delivery of cash to the Fund’s custodian or improper delivery instructions by the broker effecting the E:\FR\FM\07JYN1.SGM 07JYN1 srobinson on DSK5SPTVN1PROD with NOTICES Federal Register / Vol. 81, No. 130 / Thursday, July 7, 2016 / Notices transaction. ‘‘Sales fails’’ may present a cash shortfall if the Fund has undertaken to purchase a security using the proceeds from securities sold. Alternatively, the Fund could: (i) ‘‘Fail’’ on its intended purchase due to lack of funds from the previous sale, resulting in additional cost to the Fund; or (ii) sell a security on a same-day settlement basis, possibly earning a lower return on the investment. Use of the Facility under these circumstances would enable the Fund to have access to immediate short-term liquidity. 7. While bank borrowings generally could supply needed cash to cover unanticipated redemptions and sales fails, under the Facility, a borrowing Fund would pay lower interest rates than the rate that would be available to the Fund under short-term loans offered by banks. In addition, Funds making short-term cash loans directly to other Funds would earn interest at a rate higher than they otherwise could obtain from investing their cash in repurchase agreements. Thus, applicants assert that the Facility would benefit both borrowing and lending Funds. 8. The interest rate to be charged to the Funds on any Interfund Loan (the ‘‘Interfund Loan Rate’’) would be the average of the ‘‘Repo Rate’’ and the ‘‘Bank Loan Rate,’’ both as defined below. The Repo Rate for any day would be the highest rate available to a lending Fund from investment in overnight repurchase agreements with counterparties approved by the Fund or Lord Abbett. The Bank Loan Rate for any day would be calculated by the Interfund Lending Committee (as defined below) each day an Interfund Loan is made according to a formula established by each Fund’s board of directors or trustees (‘‘Fund Board’’ and each such director or trustee, a ‘‘Director’’) that is intended to approximate the lowest interest rate at which short-term bank loans would be available to the Funds. The formula would be based upon a publicly available rate (e.g., federal funds plus 100 basis points) or another appropriate rate reflective of short-term bank loan rates that could be available to the Funds and would vary with this rate so as to reflect changing bank loan rates. The initial formula and any subsequent modifications to the formula would be subject to the approval of each Fund Board. In addition, each Fund Board periodically would review the continuing appropriateness of using the formula to determine the Bank Loan Rate, as well as the relationship between the Bank Loan Rate and current bank loan rates that would be available to the Funds. VerDate Sep<11>2014 17:23 Jul 06, 2016 Jkt 238001 9. Certain members of Lord Abbett’s Operations, Legal and Compliance Departments would administer the Facility (‘‘Interfund Lending Committee’’). No portfolio manager of any Fund will serve as a member of the Interfund Lending Committee. The Facility would be available to any Fund. On any day on which a Fund intends to borrow money, the Interfund Lending Committee would make an Interfund Loan from a lending Fund to a borrowing Fund only if the Interfund Loan Rate is: (i) More favorable to the lending Fund than the Repo Rate; and (ii) more favorable to the borrowing Fund than the Bank Loan Rate. Under the Facility, the portfolio manager(s) for each participating Fund could provide standing instructions to participate daily as a borrower or lender. The Interfund Lending Committee on each business day would collect data on the uninvested cash and borrowing requirements of all participating Funds from the Funds’ custodian. The Interfund Lending Committee would allocate loans among borrowing Funds without any further communication from a Fund’s portfolio manager(s). Applicants anticipate that there typically will be far more available uninvested cash each day than borrowing demand. Therefore, after the Interfund Lending Committee has allocated cash for Interfund Loans, the Interfund Lending Committee will invest any remaining cash in accordance with the standing instructions of the portfolio manager(s) or such remaining amounts will be invested directly by the Fund’s portfolio manager(s). 10. The Interfund Lending Committee would allocate borrowing demand and cash available for lending among the Funds on what the Interfund Lending Committee believes to be an equitable basis, subject to certain administrative procedures applicable to all Funds, such as the time of filing requests to participate, minimum loan lot sizes, and the need to minimize the number of transactions and associated administrative costs. To reduce transaction costs, each InterFund Loan normally would be allocated in a manner intended to minimize the number of participants necessary to complete the loan transaction. The method of allocation and related administrative procedures would be approved by each Fund Board, including a majority of the Directors who are not ‘‘interested persons’’ of the Fund, as that term is defined in section 2(a)(19) of the Act (‘‘Independent Fund Board Members’’), to ensure that both PO 00000 Frm 00140 Fmt 4703 Sfmt 4703 44397 borrowing and lending Funds participate on an equitable basis. 11. The Interfund Lending Committee would: (i) Monitor the Interfund Loan Rate and the other terms and conditions of the loans; (ii) limit the borrowings and loans entered into by each Fund to ensure that they comply with the Fund’s investment policies and limitations; (iii) ensure equitable treatment of each Fund; and (iv) make quarterly reports to each Fund Board concerning any transactions by the Fund under the Facility and the Interfund Loan Rate charged. 12. Lord Abbett, through the Interfund Lending Committee, would administer the Facility as a disinterested fiduciary as part of its duties under the investment management contract with each Fund and as part of its duties under the administrative services agreement with the Funds, and would receive no additional fee as compensation for its services in connection with the administration of the Facility. No Fund will pay any additional fees in connection with the administration of the Facility (i.e., the Funds will not pay standard pricing, record keeping, bookkeeping or accounting fees in connection with the Facility). 13. No Fund may participate in the Facility unless: (i) The Fund has obtained shareholder approval for its participation, if such approval is required by law; (ii) the Fund has fully disclosed all material information concerning the Facility in its prospectus and/or statement of additional information (‘‘SAI’’); and (iii) the Fund’s participation in the Facility is consistent with its investment objectives, investment limitations and organizational documents. 14. As part of each Fund Board’s review of the continuing appropriateness of a Fund’s participation in the Facility as required by condition 14, the Directors of the Fund, including a majority of the Independent Fund Board Members, also will review the process in place to assess: (i) If the Fund participates as a lender, any effect its participation may have on the Fund’s liquidity; and (ii) if the Fund participates as a borrower, whether the Fund’s portfolio liquidity is sufficient to satisfy its obligations under the Facility along with its other liquidity needs. 15. In connection with the Facility, applicants request an order pursuant to section 6(c) of the Act exempting them from the provisions of sections 18(f) and 21(b) of the Act; pursuant to section 12(d)(1)(J) of the Act exempting them from section 12(d)(1) of the Act; E:\FR\FM\07JYN1.SGM 07JYN1 44398 Federal Register / Vol. 81, No. 130 / Thursday, July 7, 2016 / Notices srobinson on DSK5SPTVN1PROD with NOTICES pursuant to sections 6(c) and 17(b) of the Act exempting them from sections 17(a)(1), 17(a)(2), and 17(a)(3) of the Act; and pursuant to section 17(d) of the Act and rule 17d–1 under the Act to permit certain joint arrangements. Applicants’ Legal Analysis 1. Section 17(a)(3) of the Act generally prohibits any affiliated person of a registered investment company, or any affiliated person of such a person, from borrowing money or other property from the registered investment company. Section 21(b) of the Act generally prohibits any registered management company from lending money or other property to any person, directly or indirectly, if that person controls or is under common control with that company. Section 2(a)(3)(C) of the Act defines an ‘‘affiliated person’’ of another person, in part, to be any person directly or indirectly controlling, controlled by, or under common control with, such other person. Section 2(a)(9) of the Act defines ‘‘control’’ as the ‘‘power to exercise a controlling influence over the management or policies of a company,’’ but excludes circumstances in which ‘‘such power is solely the result of an official position with such company.’’ Applicants state that the Funds may be under common control by virtue of having Lord Abbett as their common investment adviser and/or by having common officers, directors and/or trustees. 2. Section 6(c) of the Act provides that an exemptive order may be granted where an 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. Section 17(b) of the Act authorizes the Commission to grant an order exempting a proposed transaction from section 17(a) provided that: (i) The terms of the transaction, including the consideration to be paid or received, are fair and reasonable and do not involve overreaching on the part of any person concerned; (ii) the transaction is consistent with the policy of the investment company as recited in its registration statement and reports filed under the Act; and (iii) the transaction is consistent with the general purposes of the Act. Applicants believe that the proposed arrangements satisfy these standards for the reasons discussed below. 3. Applicants assert that sections 17(a)(3) and 21(b) of the Act were intended to prevent a party with strong potential adverse interests to, and some influence over the investment decisions of, a registered investment company VerDate Sep<11>2014 17:23 Jul 06, 2016 Jkt 238001 from causing or inducing the investment company to engage in lending transactions that unfairly inure to the benefit of such party and that are detrimental to the best interests of the investment company and its shareholders. Applicants assert that the Facility transactions do not raise these concerns because: (i) Lord Abbett, through the Interfund Lending Committee, would administer the program as a disinterested fiduciary as part of its duties under the investment management contract with each Fund and as part of its duties under the administrative services agreement with the Funds; (ii) all Interfund Loans would consist only of uninvested cash reserves that the lending Fund otherwise would invest in short-term repurchase agreements or other shortterm instruments; (iii) the Interfund Loans would not involve a significantly greater risk than other such investments; (iv) the lending Fund would earn interest at a rate higher than it could otherwise obtain through such other investments; and (v) the borrowing Fund would pay interest at a rate lower than otherwise available to it under its bank loan agreements. Moreover, applicants assert that the other terms and conditions that applicants propose also would effectively preclude the possibility of any Fund obtaining an undue advantage over any other Fund. 4. Section 17(a)(1) of the Act generally prohibits any affiliated person of a registered investment company, or any affiliated person of such a person, from selling securities or other property to the investment company. Section 17(a)(2) of the Act generally prohibits any affiliated person of a registered investment company, or any affiliated person of such a person, from purchasing securities or other property from the investment company. Section 12(d)(1) of the Act generally prohibits any registered investment company from purchasing or otherwise acquiring any security issued by any other investment company except in accordance with the limitations set forth in that section. 5. Applicants state that the obligation of a borrowing Fund to repay an Interfund Loan could be deemed to constitute a security for the purposes of sections 17(a)(1) and 12(d)(1) of the Act. Applicants also state that a pledge of assets in connection with an Interfund Loan could be construed as a purchase of the borrowing Fund’s securities or other property for purposes of section 17(a)(2) of the Act. Section 12(d)(1)(J) of the Act provides that the Commission may exempt persons or transactions from any provision of section 12(d)(1) if PO 00000 Frm 00141 Fmt 4703 Sfmt 4703 and to the extent that such exemption is consistent with the public interest and the protection of investors. Applicants contend that the standards under sections 6(c), 17(b), and 12(d)(1)(J) are satisfied for all the reasons set forth above in support of their request for relief from sections 17(a)(3) and 21(b) and for the reasons discussed below. Applicants also state that the requested relief from section 17(a)(2) of the Act meets the standards of section 6(c) and 17(b) because any collateral pledged to secure an Interfund Loan would be subject to the same conditions imposed by any other lender to a Fund that imposes conditions on the quality of or access to collateral for a borrowing (if the lender is another Fund) or the same or better conditions (in any other circumstance). 6. Applicants state that section 12(d)(1) was intended to prevent the pyramiding of investment companies in order to avoid imposing on investors additional and duplicative costs and fees attendant upon multiple layers of investments. Applicants submit that the Facility does not involve these abuses. Applicants note that there will be no duplicative costs or fees to the Funds or their shareholders, and that Lord Abbett will receive no additional compensation for its services in administering the Facility. Applicants also note that the purpose of the Facility is to provide economic benefits for all the participating Funds and their shareholders. 7. Section 18(f)(1) of the Act prohibits any open-end investment company from issuing any senior security except that any such company is permitted to borrow from any bank, provided, that immediately after the borrowing, there is asset coverage of at least 300 per centum for all borrowings of the company. Under section 18(g) of the Act, the term ‘‘senior security’’ generally includes any bond, debenture, note or similar obligation or instrument constituting a security and evidencing indebtedness. Applicants request exemptive relief under section 6(c) from section 18(f)(1) to the limited extent necessary to permit a Fund to borrow directly from other Funds. 8. Applicants believe that granting relief under section 6(c) is appropriate because the Funds would remain subject to the requirement of section 18(f)(1) that all borrowings of a Fund, including combined interfund and bank borrowings, have at least 300% asset coverage. Based on the conditions and safeguards described in the application, applicants also submit that to allow the Funds to borrow from other Funds pursuant to the Facility is consistent E:\FR\FM\07JYN1.SGM 07JYN1 Federal Register / Vol. 81, No. 130 / Thursday, July 7, 2016 / Notices srobinson on DSK5SPTVN1PROD with NOTICES with the purposes and policies of section 18(f)(1). 9. Section 17(d) of the Act and rule 17d-1 under the Act generally prohibit any affiliated person of a registered investment company, or any affiliated person of such a person, when acting as principal, from effecting any transaction in which the investment company is a joint or joint and several participant, unless, upon application, the transaction has been approved by the Commission. Rule 17d-1(b) under the Act provides that in passing upon an application filed under the rule, the Commission will consider whether the participation of the registered investment company in a joint enterprise, joint arrangement, or profitsharing plan on the basis proposed is consistent with the provisions, policies and purposes of the Act and the extent to which such participation is on a basis different from or less advantageous than that of the other participants. 10. Applicants assert that the purpose of section 17(d) is to avoid overreaching by and unfair advantage to insiders. Applicants assert that the Facility is consistent with the provisions, policies and purposes of the Act in that it offers both reduced borrowing costs and enhanced returns on loaned funds to all participating Funds and their shareholders. Applicants note that each Fund would have an equal opportunity to borrow and lend on equal terms consistent with its investment policies and limitations. Applicants assert that each Fund’s participation in the Facility would be on terms that are no different from or less advantageous than that of other participating Funds. Applicants’ Conditions Applicants agree that any order granting the requested relief will be subject to the following conditions: 1. The Interfund Loan Rate will be the average of the Repo Rate and the Bank Loan Rate. 2. On each business day, the Interfund Lending Committee will compare the Bank Loan Rate with the Repo Rate and will make cash available for Interfund Loans only if the Interfund Loan Rate is: (i) More favorable to the lending Fund than the Repo Rate and (ii) more favorable to the borrowing Fund than the Bank Loan Rate. 3. If a Fund has outstanding bank borrowings, any Interfund Loans to the Fund: (i) Will be at an interest rate equal to or lower than the interest rate of any outstanding bank loan; (ii) will be secured at least on an equal priority basis with at least an equivalent percentage of collateral to loan value as any outstanding bank loan that requires VerDate Sep<11>2014 17:23 Jul 06, 2016 Jkt 238001 collateral; (iii) will have a maturity no longer than any outstanding bank loan (and in any event not over seven days); and (iv) will provide that, if an event of default by the Fund occurs under any agreement evidencing an outstanding bank loan to the Fund, that event of default will automatically (without need for action or notice by the lending Fund) constitute an immediate event of default under the Interfund Lending Agreement entitling the lending Fund to call the Interfund Loan (and exercise all rights with respect to any collateral) and that such call will be made if the lending bank exercises its right to call its loan under its agreement with the borrowing Fund. 4. A Fund may make an unsecured borrowing through the Facility if its outstanding borrowings from all sources immediately after the interfund borrowing total 10% or less of its total assets, provided that if the Fund has a secured loan outstanding from any other lender, including but not limited to another Fund, the Fund’s interfund borrowing will be secured on at least an equal priority basis with at least an equivalent percentage of collateral to loan value as any outstanding loan that requires collateral. If a Fund’s total outstanding borrowings immediately after an interfund borrowing would be greater than 10% of its total assets, the Fund may borrow through the Facility only on a secured basis. A Fund may not borrow through the Facility or from any other source if its total outstanding borrowings immediately after such borrowing would be more than 33 1/3% of its total assets. 5. Before any Fund that has outstanding interfund borrowings may, through additional borrowings, cause its outstanding borrowings from all sources to exceed 10% of its total assets, the Fund must first secure each outstanding Interfund Loan by the pledge of segregated collateral with a market value at least equal to 102% of the outstanding principal value of the loan. If the total outstanding borrowings of a Fund with outstanding Interfund Loans exceed 10% of its total assets for any other reason (such as a decline in net asset value or because of shareholder redemptions), the Fund will within one business day thereafter: (i) Repay all its outstanding Interfund Loans; (ii) reduce its outstanding indebtedness to 10% or less of its total assets; or (iii) secure each outstanding Interfund Loan by the pledge of segregated collateral with a market value at least equal to 102% of the outstanding principal value of the loan until the Fund’s total outstanding borrowings cease to exceed 10% of its total assets, at which time the collateral PO 00000 Frm 00142 Fmt 4703 Sfmt 4703 44399 called for by this condition (5) shall no longer be required. Until each Interfund Loan that is outstanding at any time that a Fund’s total outstanding borrowings exceed 10% is repaid or the Fund’s total outstanding borrowings cease to exceed 10% of its total assets, the Fund will mark the value of the collateral to market each day and will pledge such additional collateral as is necessary to maintain the market value of the collateral that secures each outstanding Interfund Loan at least equal to 102% of the outstanding principal value of the Interfund Loan. 6. No Fund may lend to another Fund through the Facility if the loan would cause its aggregate outstanding loans through the Facility to exceed 15% of the lending Fund’s current net assets at the time of the loan. 7. A Fund’s Interfund Loans to any one Fund shall not exceed 5% of the lending Fund’s net assets. 8. The duration of Interfund Loans will be limited to the time required to receive payment for securities sold, but in no event more than seven days. Loans effected within seven days of each other will be treated as separate loan transactions for purposes of this condition. 9. A Fund’s borrowings through the Facility, as measured on the day when the most recent loan was made, will not exceed the greater of 125% of the Fund’s total net cash redemptions for the preceding seven calendar days or 102% of the Fund’s sales fails for the preceding seven calendar days. 10. Each Interfund Loan may be called on one business day’s notice by a lending Fund and may be repaid on any day by a borrowing Fund. 11. A Fund’s participation in the Facility must be consistent with its investment objectives, investment limitations, and organizational documents. 12. The Interfund Lending Committee will calculate total Fund borrowing and lending demand through the Facility, and allocate loans on an equitable basis among the Funds, without the intervention of a Fund’s portfolio manager(s). The Interfund Lending Committee will not solicit cash for the Facility from any Fund or prospectively publish or disseminate loan demand data to any portfolio manager. The Interfund Lending Committee will invest any amounts remaining after satisfaction of borrowing demand in accordance with the standing instructions of the portfolio manager(s) or such remaining amounts will be invested directly by the Fund’s portfolio manager(s). E:\FR\FM\07JYN1.SGM 07JYN1 srobinson on DSK5SPTVN1PROD with NOTICES 44400 Federal Register / Vol. 81, No. 130 / Thursday, July 7, 2016 / Notices 13. The Interfund Lending Committee will monitor the Interfund Loan Rates charged and the other terms and conditions of the Interfund Loans and will make a quarterly report to each Fund Board concerning the participation of the Funds in the Facility and the terms and other conditions of any extensions of credit under the Facility. 14. Each Fund Board, including a majority of the Independent Fund Board Members, will: (a) review, no less frequently than quarterly, the relevant Fund’s participation in the Facility during the preceding quarter for compliance with the conditions of any order permitting such transactions; (b) establish the Bank Loan Rate formula used to determine the interest rate on Interfund Loans and review, no less frequently than annually, the continuing appropriateness of the Bank Loan Rate formula; and (c) review, no less frequently than annually, the continuing appropriateness of the relevant Fund’s participation in the Facility. 15. In the event an Interfund Loan is not paid according to its terms and such default is not cured within two business days from its maturity or from the time the lending Fund makes a demand for payment under the provisions of the Interfund Lending Agreement, Lord Abbett promptly will refer such loan for arbitration to an independent arbitrator selected by each Fund Board involved in the loan who will serve as arbitrator of disputes concerning Interfund Loans.2 The arbitrator will resolve any problem promptly, and the arbitrator’s decision will be binding on both Funds. The arbitrator will submit, at least annually, a written report to each Fund Board setting forth a description of the nature of any dispute and the actions taken by the Funds involved to resolve the dispute. 16. Each Fund will maintain and preserve for a period of not less than six years from the end of the fiscal year in which any transaction by it under the Facility occurred, the first two years in an easily accessible place, written records of all such transactions setting forth a description of the terms of the transactions, including the amount, the maturity, and the Interfund Loan Rate, the rate of interest available at the time the Interfund Loan is made on overnight repurchase agreements and bank borrowings, and such other information 2 If the dispute involves Funds with different Fund Boards, the respective Fund Boards will select an independent arbitrator that is satisfactory to each Fund. VerDate Sep<11>2014 17:23 Jul 06, 2016 Jkt 238001 presented to the Fund Board in connection with the review required by conditions (13) and (14). 17. The Interfund Lending Committee will prepare and submit to each Fund Board for review an initial report describing the operations of the Facility and the procedures to be implemented to ensure that all Funds are treated fairly. After the commencement of the Facility, the Interfund Lending Committee will provide quarterly reports on the operations of the Facility to each Fund Board. Each Fund’s chief compliance officer, as defined in Rule 38a-1(a)(4) under the Act (a ‘‘Fund CCO’’), shall prepare an annual report for its Fund Board for each year that the Fund participates in the Facility, which report evaluates the Fund’s compliance with the terms and conditions of the application and the procedures established to achieve such compliance. Additionally, each Fund CCO will also annually file a certification pursuant to Item 77Q3 of Form N–SAR, as such Form may be revised, amended, or superseded from time to time (‘‘N– SAR’’), for each year that the Fund participates in the Facility, that certifies that the Fund and Lord Abbett have established procedures reasonably designed to achieve compliance with the terms and conditions of the order. In particular, the certification will address procedures designed to achieve the following objectives: (a) That the Interfund Loan Rate will be higher than the Repo Rate, but lower than the Bank Loan Rate; (b) compliance with the collateral requirements as set forth in the application; (c) compliance with the percentage limitations on interfund borrowing and lending; (d) allocation of interfund borrowing and lending demand in an equitable manner and in accordance with procedures established by the Fund Board; and (e) that the interest rate on any Interfund Loan does not exceed the interest rate on any third-party borrowings of a borrowing Fund at the time of the Interfund Loan. Additionally, each Fund’s independent registered public accountants, in connection with their audit examination of the Fund, will review the operation of the Facility for compliance with the conditions of the application and their review will form the basis, in part, of the auditor’s report on internal accounting controls in Form N–SAR. 18. No Fund will participate in the Facility upon receipt of the requisite regulatory and shareholder approval PO 00000 Frm 00143 Fmt 4703 Sfmt 4703 unless it has fully disclosed in its prospectus and/or SAI all material facts about its intended participation. For the Commission, by the Division of Investment Management, under delegated authority. Robert W. Errett, Deputy Secretary. [FR Doc. 2016–16038 Filed 7–6–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–78223; File No. SR– NASDAQ–2016–013] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Amendment No. 2 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 2, To Require Listed Companies to Publicly Disclose Compensation or Other Payments by Third Parties to Board of Director’s Members or Nominees July 1, 2016. I. Introduction On March 15, 2016, The Nasdaq Stock Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to require listed companies to publicly disclose compensation or other payments by third parties to board of director’s members or nominees for director. The proposed rule change was published for comment in the Federal Register on April 5, 2016.3 On May 18, 2016, Nasdaq filed Amendment No. 1 to the proposal.4 On May 20, 2016, the Commission extended the time period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to disapprove the proposed rule change.5 On June 30, 2016, Nasdaq withdrew Amendment No. 1 and filed Amendment No. 2 to the proposal, which replaced and superseded the original proposal in its 1 15 U.S.C.78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 77481 (Mar. 30, 2016), 81 FR 19678 (‘‘Notice’’). 4 See Letter to Brent J. Fields, Secretary, Commission, from David Strandberg, Associate Vice President, Nasdaq dated May 18, 2016. 5 See Securities Exchange Act Release No. 77879 (May 20, 2016), 81 FR 33571 (May 26, 2016). 2 17 E:\FR\FM\07JYN1.SGM 07JYN1

Agencies

[Federal Register Volume 81, Number 130 (Thursday, July 7, 2016)]
[Notices]
[Pages 44395-44400]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-16038]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 32167; File No. 812-14502]


Lord Abbett Family of Funds and Lord, Abbett & Co. LLC; Notice of 
Application

June 29, 2016.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order pursuant to (a) section 
6(c) of the Investment Company Act of 1940 (``Act'') granting an 
exemption from

[[Page 44396]]

sections 18(f) and 21(b) of the Act; (b) section 12(d)(1)(J) of the Act 
granting an exemption from section 12(d)(1) of the Act; (c) sections 
6(c) and 17(b) of the Act granting an exemption from sections 17(a)(1), 
17(a)(2) and 17(a)(3) of the Act; and (d) section 17(d) of the Act and 
rule 17d-1 under the Act to permit certain joint arrangements.

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SUMMARY: Summary of the Application: Applicants request an order that 
would permit certain registered open-end management investment 
companies to participate in a joint lending and borrowing facility.
    Applicants: Lord Abbett Affiliated Fund, Inc., Lord Abbett Bond-
Debenture Fund, Inc., Lord Abbett Developing Growth Fund, Inc., Lord 
Abbett Equity Trust, Lord Abbett Global Fund, Inc., Lord Abbett 
Investment Trust, Lord Abbett Mid Cap Stock Fund, Inc., Lord Abbett 
Municipal Income Fund, Inc., Lord Abbett Research Fund, Inc., Lord 
Abbett Securities Trust, Lord Abbett Series Fund, Inc., and Lord Abbett 
U.S. Government & Government Sponsored Enterprises Money Market Fund, 
Inc. (collectively, the ``Funds''), and Lord, Abbett & Co. LLC (``Lord 
Abbett'').

DATES: Filing Dates: The application was filed on June 30, 2015, and 
amended on October 9, 2015, June 16, 2016 and June 22, 2016.
    Hearing or Notification of Hearing: An order granting the requested 
relief 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 July 25, 2016, and should be accompanied by proof of 
service on the applicants, in the form of an affidavit or, for lawyers, 
a certificate of service. Pursuant to rule 0-5 under the Act, hearing 
requests should state the nature of the writer's interest, any facts 
bearing upon the desirability of a hearing on the matter, 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 and Exchange Commission, 100 F 
Street NE., Washington, DC 20549-1090; Applicants, c/o Brooke A. 
Fapohunda, Esq., Lord, Abbett & Co. LLC, 90 Hudson Street, Jersey City, 
NJ 07302.

FOR FURTHER INFORMATION CONTACT: Kaitlin C. Bottock, Senior Counsel, at 
(202) 551-8658 or Daniele Marchesani, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number, or for an 
applicant using the Company name box, at https://www.sec.gov/search/search.htm or by calling (202) 551-8090.

Applicants' Representations

    1. Each Fund is organized as a Maryland corporation or Delaware 
statutory trust. Each Fund is registered under the Act as an open-end 
management investment company. Certain of the Funds consist of multiple 
series and all may offer additional series in the future (such series 
thereof, each also a ``Fund''). Certain of the Funds either are, or may 
be, money market funds that comply with Rule 2a-7 under the Act 
(collectively, ``Money Market Funds''). Lord Abbett is a Delaware 
limited liability company and serves as the investment adviser to the 
Funds.\1\ Lord Abbett and every investment adviser to the Funds will be 
registered as an investment adviser under the Investment Advisers Act 
of 1940 (``Advisers Act'').
---------------------------------------------------------------------------

    \1\ Applicants request that the relief apply to any existing and 
future series of the Funds and any other registered open-end 
management investment company or its series that (i) is advised by 
Lord Abbett, any successor thereto or any investment adviser 
controlling, controlled by, or under common control (within the 
meaning of Section 2(a)(9) of the Act) with Lord Abbett or any 
successor thereto (such entities included in the term ``Lord 
Abbett''), and (ii) is part of the same ``group of investment 
companies,'' as defined in Section 12(d)(1)(G)(ii) of the Act, as 
the Funds (each also included in the term ``Fund''). The term 
``successor'' is limited to entities that result from a 
reorganization into another jurisdiction or a change in the type of 
business organization. All entities that currently intend to rely on 
the requested relief are named as applicants. Any other entity that 
subsequently relies on the order will comply with the terms and 
conditions set forth in the application.
---------------------------------------------------------------------------

    2. At any particular time, while some Funds are lending money to 
banks or other entities by entering into repurchase agreements, or 
purchasing other short-term instruments, other Funds may need to borrow 
money from the same or similar banks for temporary purposes to satisfy 
redemption requests, to cover unanticipated cash shortfalls such as a 
trade ``fail'' in which cash payment for a security sold by a Fund has 
been delayed, or for other temporary purposes. Certain Funds currently 
have a $500 million committed line of credit with State Street Bank & 
Trust Company (``Committed Credit Facility'') for short-term temporary 
or emergency purposes, including the funding of shareholder redemptions 
and trade settlements.
    3. When a Fund borrows money under the Committed Credit Facility, 
it would pay interest on the borrowed cash at a rate that would be 
higher than the rate that would be earned by other (non-borrowing) 
Funds on investments in repurchase agreements and other short-term 
instruments of the same maturity as the bank loan. Applicants assert 
that this differential represents the profit earned by the lender on 
loans and is not attributable to any material difference in the credit 
quality or risk of such transactions.
    4. The Funds seek to enter into master interfund lending agreements 
(``Interfund Lending Agreements'') with each other that would permit 
each Fund to lend money directly to and borrow money directly from 
other Funds through an interfund facility (``Facility'') for temporary 
purposes (``Interfund Loan''). The Money Market Funds typically will 
not participate as borrowers. It is anticipated that, in order to 
comply with Rule 2a-7 under the Act, the Money Market Funds will lend 
through the Facility only if the requisite determinations contemplated 
by that Rule have been made by Lord Abbett. Applicants state that the 
Facility would both reduce the Funds' potential borrowing costs and 
enhance the ability of the lending Funds to earn higher rates of 
interest on their short-term loans. Although the Facility would reduce 
the Funds' need to borrow from banks, the Funds would be free to 
establish committed lines of credit or other borrowing arrangements 
with unaffiliated banks.
    5. Applicants anticipate that the Facility would provide a 
borrowing Fund with significant savings at times when the cash position 
of the borrowing Fund is insufficient to meet temporary cash 
requirements. This situation could arise when shareholder redemptions 
exceed anticipated volumes and certain Funds have insufficient cash on 
hand to satisfy such redemptions. When the Funds liquidate portfolio 
securities to meet redemption requests, they often do not receive 
payment in settlement for up to three days (or longer for certain 
transactions). However, redemption requests normally are effected 
immediately. The Facility would provide a source of immediate, short-
term liquidity pending settlement of the sale of portfolio securities.
    6. Applicants also anticipate that a Fund could use the Facility 
when a sale of securities ``fails,'' for example, due to a delay in the 
delivery of cash to the Fund's custodian or improper delivery 
instructions by the broker effecting the

[[Page 44397]]

transaction. ``Sales fails'' may present a cash shortfall if the Fund 
has undertaken to purchase a security using the proceeds from 
securities sold. Alternatively, the Fund could: (i) ``Fail'' on its 
intended purchase due to lack of funds from the previous sale, 
resulting in additional cost to the Fund; or (ii) sell a security on a 
same-day settlement basis, possibly earning a lower return on the 
investment. Use of the Facility under these circumstances would enable 
the Fund to have access to immediate short-term liquidity.
    7. While bank borrowings generally could supply needed cash to 
cover unanticipated redemptions and sales fails, under the Facility, a 
borrowing Fund would pay lower interest rates than the rate that would 
be available to the Fund under short-term loans offered by banks. In 
addition, Funds making short-term cash loans directly to other Funds 
would earn interest at a rate higher than they otherwise could obtain 
from investing their cash in repurchase agreements. Thus, applicants 
assert that the Facility would benefit both borrowing and lending 
Funds.
    8. The interest rate to be charged to the Funds on any Interfund 
Loan (the ``Interfund Loan Rate'') would be the average of the ``Repo 
Rate'' and the ``Bank Loan Rate,'' both as defined below. The Repo Rate 
for any day would be the highest rate available to a lending Fund from 
investment in overnight repurchase agreements with counterparties 
approved by the Fund or Lord Abbett. The Bank Loan Rate for any day 
would be calculated by the Interfund Lending Committee (as defined 
below) each day an Interfund Loan is made according to a formula 
established by each Fund's board of directors or trustees (``Fund 
Board'' and each such director or trustee, a ``Director'') that is 
intended to approximate the lowest interest rate at which short-term 
bank loans would be available to the Funds. The formula would be based 
upon a publicly available rate (e.g., federal funds plus 100 basis 
points) or another appropriate rate reflective of short-term bank loan 
rates that could be available to the Funds and would vary with this 
rate so as to reflect changing bank loan rates. The initial formula and 
any subsequent modifications to the formula would be subject to the 
approval of each Fund Board. In addition, each Fund Board periodically 
would review the continuing appropriateness of using the formula to 
determine the Bank Loan Rate, as well as the relationship between the 
Bank Loan Rate and current bank loan rates that would be available to 
the Funds.
    9. Certain members of Lord Abbett's Operations, Legal and 
Compliance Departments would administer the Facility (``Interfund 
Lending Committee''). No portfolio manager of any Fund will serve as a 
member of the Interfund Lending Committee. The Facility would be 
available to any Fund. On any day on which a Fund intends to borrow 
money, the Interfund Lending Committee would make an Interfund Loan 
from a lending Fund to a borrowing Fund only if the Interfund Loan Rate 
is: (i) More favorable to the lending Fund than the Repo Rate; and (ii) 
more favorable to the borrowing Fund than the Bank Loan Rate. Under the 
Facility, the portfolio manager(s) for each participating Fund could 
provide standing instructions to participate daily as a borrower or 
lender. The Interfund Lending Committee on each business day would 
collect data on the uninvested cash and borrowing requirements of all 
participating Funds from the Funds' custodian. The Interfund Lending 
Committee would allocate loans among borrowing Funds without any 
further communication from a Fund's portfolio manager(s). Applicants 
anticipate that there typically will be far more available uninvested 
cash each day than borrowing demand. Therefore, after the Interfund 
Lending Committee has allocated cash for Interfund Loans, the Interfund 
Lending Committee will invest any remaining cash in accordance with the 
standing instructions of the portfolio manager(s) or such remaining 
amounts will be invested directly by the Fund's portfolio manager(s).
    10. The Interfund Lending Committee would allocate borrowing demand 
and cash available for lending among the Funds on what the Interfund 
Lending Committee believes to be an equitable basis, subject to certain 
administrative procedures applicable to all Funds, such as the time of 
filing requests to participate, minimum loan lot sizes, and the need to 
minimize the number of transactions and associated administrative 
costs. To reduce transaction costs, each InterFund Loan normally would 
be allocated in a manner intended to minimize the number of 
participants necessary to complete the loan transaction. The method of 
allocation and related administrative procedures would be approved by 
each Fund Board, including a majority of the Directors who are not 
``interested persons'' of the Fund, as that term is defined in section 
2(a)(19) of the Act (``Independent Fund Board Members''), to ensure 
that both borrowing and lending Funds participate on an equitable 
basis.
    11. The Interfund Lending Committee would: (i) Monitor the 
Interfund Loan Rate and the other terms and conditions of the loans; 
(ii) limit the borrowings and loans entered into by each Fund to ensure 
that they comply with the Fund's investment policies and limitations; 
(iii) ensure equitable treatment of each Fund; and (iv) make quarterly 
reports to each Fund Board concerning any transactions by the Fund 
under the Facility and the Interfund Loan Rate charged.
    12. Lord Abbett, through the Interfund Lending Committee, would 
administer the Facility as a disinterested fiduciary as part of its 
duties under the investment management contract with each Fund and as 
part of its duties under the administrative services agreement with the 
Funds, and would receive no additional fee as compensation for its 
services in connection with the administration of the Facility. No Fund 
will pay any additional fees in connection with the administration of 
the Facility (i.e., the Funds will not pay standard pricing, record 
keeping, bookkeeping or accounting fees in connection with the 
Facility).
    13. No Fund may participate in the Facility unless: (i) The Fund 
has obtained shareholder approval for its participation, if such 
approval is required by law; (ii) the Fund has fully disclosed all 
material information concerning the Facility in its prospectus and/or 
statement of additional information (``SAI''); and (iii) the Fund's 
participation in the Facility is consistent with its investment 
objectives, investment limitations and organizational documents.
    14. As part of each Fund Board's review of the continuing 
appropriateness of a Fund's participation in the Facility as required 
by condition 14, the Directors of the Fund, including a majority of the 
Independent Fund Board Members, also will review the process in place 
to assess: (i) If the Fund participates as a lender, any effect its 
participation may have on the Fund's liquidity; and (ii) if the Fund 
participates as a borrower, whether the Fund's portfolio liquidity is 
sufficient to satisfy its obligations under the Facility along with its 
other liquidity needs.
    15. In connection with the Facility, applicants request an order 
pursuant to section 6(c) of the Act exempting them from the provisions 
of sections 18(f) and 21(b) of the Act; pursuant to section 12(d)(1)(J) 
of the Act exempting them from section 12(d)(1) of the Act;

[[Page 44398]]

pursuant to sections 6(c) and 17(b) of the Act exempting them from 
sections 17(a)(1), 17(a)(2), and 17(a)(3) of the Act; and pursuant to 
section 17(d) of the Act and rule 17d-1 under the Act to permit certain 
joint arrangements.

Applicants' Legal Analysis

    1. Section 17(a)(3) of the Act generally prohibits any affiliated 
person of a registered investment company, or any affiliated person of 
such a person, from borrowing money or other property from the 
registered investment company. Section 21(b) of the Act generally 
prohibits any registered management company from lending money or other 
property to any person, directly or indirectly, if that person controls 
or is under common control with that company. Section 2(a)(3)(C) of the 
Act defines an ``affiliated person'' of another person, in part, to be 
any person directly or indirectly controlling, controlled by, or under 
common control with, such other person. Section 2(a)(9) of the Act 
defines ``control'' as the ``power to exercise a controlling influence 
over the management or policies of a company,'' but excludes 
circumstances in which ``such power is solely the result of an official 
position with such company.'' Applicants state that the Funds may be 
under common control by virtue of having Lord Abbett as their common 
investment adviser and/or by having common officers, directors and/or 
trustees.
    2. Section 6(c) of the Act provides that an exemptive order may be 
granted where an 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. 
Section 17(b) of the Act authorizes the Commission to grant an order 
exempting a proposed transaction from section 17(a) provided that: (i) 
The terms of the transaction, including the consideration to be paid or 
received, are fair and reasonable and do not involve overreaching on 
the part of any person concerned; (ii) the transaction is consistent 
with the policy of the investment company as recited in its 
registration statement and reports filed under the Act; and (iii) the 
transaction is consistent with the general purposes of the Act. 
Applicants believe that the proposed arrangements satisfy these 
standards for the reasons discussed below.
    3. Applicants assert that sections 17(a)(3) and 21(b) of the Act 
were intended to prevent a party with strong potential adverse 
interests to, and some influence over the investment decisions of, a 
registered investment company from causing or inducing the investment 
company to engage in lending transactions that unfairly inure to the 
benefit of such party and that are detrimental to the best interests of 
the investment company and its shareholders. Applicants assert that the 
Facility transactions do not raise these concerns because: (i) Lord 
Abbett, through the Interfund Lending Committee, would administer the 
program as a disinterested fiduciary as part of its duties under the 
investment management contract with each Fund and as part of its duties 
under the administrative services agreement with the Funds; (ii) all 
Interfund Loans would consist only of uninvested cash reserves that the 
lending Fund otherwise would invest in short-term repurchase agreements 
or other short-term instruments; (iii) the Interfund Loans would not 
involve a significantly greater risk than other such investments; (iv) 
the lending Fund would earn interest at a rate higher than it could 
otherwise obtain through such other investments; and (v) the borrowing 
Fund would pay interest at a rate lower than otherwise available to it 
under its bank loan agreements. Moreover, applicants assert that the 
other terms and conditions that applicants propose also would 
effectively preclude the possibility of any Fund obtaining an undue 
advantage over any other Fund.
    4. Section 17(a)(1) of the Act generally prohibits any affiliated 
person of a registered investment company, or any affiliated person of 
such a person, from selling securities or other property to the 
investment company. Section 17(a)(2) of the Act generally prohibits any 
affiliated person of a registered investment company, or any affiliated 
person of such a person, from purchasing securities or other property 
from the investment company. Section 12(d)(1) of the Act generally 
prohibits any registered investment company from purchasing or 
otherwise acquiring any security issued by any other investment company 
except in accordance with the limitations set forth in that section.
    5. Applicants state that the obligation of a borrowing Fund to 
repay an Interfund Loan could be deemed to constitute a security for 
the purposes of sections 17(a)(1) and 12(d)(1) of the Act. Applicants 
also state that a pledge of assets in connection with an Interfund Loan 
could be construed as a purchase of the borrowing Fund's securities or 
other property for purposes of section 17(a)(2) of the Act. Section 
12(d)(1)(J) of the Act provides that the Commission may exempt persons 
or transactions 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 contend that the standards 
under sections 6(c), 17(b), and 12(d)(1)(J) are satisfied for all the 
reasons set forth above in support of their request for relief from 
sections 17(a)(3) and 21(b) and for the reasons discussed below. 
Applicants also state that the requested relief from section 17(a)(2) 
of the Act meets the standards of section 6(c) and 17(b) because any 
collateral pledged to secure an Interfund Loan would be subject to the 
same conditions imposed by any other lender to a Fund that imposes 
conditions on the quality of or access to collateral for a borrowing 
(if the lender is another Fund) or the same or better conditions (in 
any other circumstance).
    6. Applicants state that section 12(d)(1) was intended to prevent 
the pyramiding of investment companies in order to avoid imposing on 
investors additional and duplicative costs and fees attendant upon 
multiple layers of investments. Applicants submit that the Facility 
does not involve these abuses. Applicants note that there will be no 
duplicative costs or fees to the Funds or their shareholders, and that 
Lord Abbett will receive no additional compensation for its services in 
administering the Facility. Applicants also note that the purpose of 
the Facility is to provide economic benefits for all the participating 
Funds and their shareholders.
    7. Section 18(f)(1) of the Act prohibits any open-end investment 
company from issuing any senior security except that any such company 
is permitted to borrow from any bank, provided, that immediately after 
the borrowing, there is asset coverage of at least 300 per centum for 
all borrowings of the company. Under section 18(g) of the Act, the term 
``senior security'' generally includes any bond, debenture, note or 
similar obligation or instrument constituting a security and evidencing 
indebtedness. Applicants request exemptive relief under section 6(c) 
from section 18(f)(1) to the limited extent necessary to permit a Fund 
to borrow directly from other Funds.
    8. Applicants believe that granting relief under section 6(c) is 
appropriate because the Funds would remain subject to the requirement 
of section 18(f)(1) that all borrowings of a Fund, including combined 
interfund and bank borrowings, have at least 300% asset coverage. Based 
on the conditions and safeguards described in the application, 
applicants also submit that to allow the Funds to borrow from other 
Funds pursuant to the Facility is consistent

[[Page 44399]]

with the purposes and policies of section 18(f)(1).
    9. Section 17(d) of the Act and rule 17d-1 under the Act generally 
prohibit any affiliated person of a registered investment company, or 
any affiliated person of such a person, when acting as principal, from 
effecting any transaction in which the investment company is a joint or 
joint and several participant, unless, upon application, the 
transaction has been approved by the Commission. Rule 17d-1(b) under 
the Act provides that in passing upon an application filed under the 
rule, the Commission will consider whether the participation of the 
registered investment company in a joint enterprise, joint arrangement, 
or profit-sharing plan on the basis proposed is consistent with the 
provisions, policies and purposes of the Act and the extent to which 
such participation is on a basis different from or less advantageous 
than that of the other participants.
    10. Applicants assert that the purpose of section 17(d) is to avoid 
overreaching by and unfair advantage to insiders. Applicants assert 
that the Facility is consistent with the provisions, policies and 
purposes of the Act in that it offers both reduced borrowing costs and 
enhanced returns on loaned funds to all participating Funds and their 
shareholders. Applicants note that each Fund would have an equal 
opportunity to borrow and lend on equal terms consistent with its 
investment policies and limitations. Applicants assert that each Fund's 
participation in the Facility would be on terms that are no different 
from or less advantageous than that of other participating Funds.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. The Interfund Loan Rate will be the average of the Repo Rate and 
the Bank Loan Rate.
    2. On each business day, the Interfund Lending Committee will 
compare the Bank Loan Rate with the Repo Rate and will make cash 
available for Interfund Loans only if the Interfund Loan Rate is: (i) 
More favorable to the lending Fund than the Repo Rate and (ii) more 
favorable to the borrowing Fund than the Bank Loan Rate.
    3. If a Fund has outstanding bank borrowings, any Interfund Loans 
to the Fund: (i) Will be at an interest rate equal to or lower than the 
interest rate of any outstanding bank loan; (ii) will be secured at 
least on an equal priority basis with at least an equivalent percentage 
of collateral to loan value as any outstanding bank loan that requires 
collateral; (iii) will have a maturity no longer than any outstanding 
bank loan (and in any event not over seven days); and (iv) will provide 
that, if an event of default by the Fund occurs under any agreement 
evidencing an outstanding bank loan to the Fund, that event of default 
will automatically (without need for action or notice by the lending 
Fund) constitute an immediate event of default under the Interfund 
Lending Agreement entitling the lending Fund to call the Interfund Loan 
(and exercise all rights with respect to any collateral) and that such 
call will be made if the lending bank exercises its right to call its 
loan under its agreement with the borrowing Fund.
    4. A Fund may make an unsecured borrowing through the Facility if 
its outstanding borrowings from all sources immediately after the 
interfund borrowing total 10% or less of its total assets, provided 
that if the Fund has a secured loan outstanding from any other lender, 
including but not limited to another Fund, the Fund's interfund 
borrowing will be secured on at least an equal priority basis with at 
least an equivalent percentage of collateral to loan value as any 
outstanding loan that requires collateral. If a Fund's total 
outstanding borrowings immediately after an interfund borrowing would 
be greater than 10% of its total assets, the Fund may borrow through 
the Facility only on a secured basis. A Fund may not borrow through the 
Facility or from any other source if its total outstanding borrowings 
immediately after such borrowing would be more than 33 1/3% of its 
total assets.
    5. Before any Fund that has outstanding interfund borrowings may, 
through additional borrowings, cause its outstanding borrowings from 
all sources to exceed 10% of its total assets, the Fund must first 
secure each outstanding Interfund Loan by the pledge of segregated 
collateral with a market value at least equal to 102% of the 
outstanding principal value of the loan. If the total outstanding 
borrowings of a Fund with outstanding Interfund Loans exceed 10% of its 
total assets for any other reason (such as a decline in net asset value 
or because of shareholder redemptions), the Fund will within one 
business day thereafter: (i) Repay all its outstanding Interfund Loans; 
(ii) reduce its outstanding indebtedness to 10% or less of its total 
assets; or (iii) secure each outstanding Interfund Loan by the pledge 
of segregated collateral with a market value at least equal to 102% of 
the outstanding principal value of the loan until the Fund's total 
outstanding borrowings cease to exceed 10% of its total assets, at 
which time the collateral called for by this condition (5) shall no 
longer be required. Until each Interfund Loan that is outstanding at 
any time that a Fund's total outstanding borrowings exceed 10% is 
repaid or the Fund's total outstanding borrowings cease to exceed 10% 
of its total assets, the Fund will mark the value of the collateral to 
market each day and will pledge such additional collateral as is 
necessary to maintain the market value of the collateral that secures 
each outstanding Interfund Loan at least equal to 102% of the 
outstanding principal value of the Interfund Loan.
    6. No Fund may lend to another Fund through the Facility if the 
loan would cause its aggregate outstanding loans through the Facility 
to exceed 15% of the lending Fund's current net assets at the time of 
the loan.
    7. A Fund's Interfund Loans to any one Fund shall not exceed 5% of 
the lending Fund's net assets.
    8. The duration of Interfund Loans will be limited to the time 
required to receive payment for securities sold, but in no event more 
than seven days. Loans effected within seven days of each other will be 
treated as separate loan transactions for purposes of this condition.
    9. A Fund's borrowings through the Facility, as measured on the day 
when the most recent loan was made, will not exceed the greater of 125% 
of the Fund's total net cash redemptions for the preceding seven 
calendar days or 102% of the Fund's sales fails for the preceding seven 
calendar days.
    10. Each Interfund Loan may be called on one business day's notice 
by a lending Fund and may be repaid on any day by a borrowing Fund.
    11. A Fund's participation in the Facility must be consistent with 
its investment objectives, investment limitations, and organizational 
documents.
    12. The Interfund Lending Committee will calculate total Fund 
borrowing and lending demand through the Facility, and allocate loans 
on an equitable basis among the Funds, without the intervention of a 
Fund's portfolio manager(s). The Interfund Lending Committee will not 
solicit cash for the Facility from any Fund or prospectively publish or 
disseminate loan demand data to any portfolio manager. The Interfund 
Lending Committee will invest any amounts remaining after satisfaction 
of borrowing demand in accordance with the standing instructions of the 
portfolio manager(s) or such remaining amounts will be invested 
directly by the Fund's portfolio manager(s).

[[Page 44400]]

    13. The Interfund Lending Committee will monitor the Interfund Loan 
Rates charged and the other terms and conditions of the Interfund Loans 
and will make a quarterly report to each Fund Board concerning the 
participation of the Funds in the Facility and the terms and other 
conditions of any extensions of credit under the Facility.
    14. Each Fund Board, including a majority of the Independent Fund 
Board Members, will:
    (a) review, no less frequently than quarterly, the relevant Fund's 
participation in the Facility during the preceding quarter for 
compliance with the conditions of any order permitting such 
transactions;
    (b) establish the Bank Loan Rate formula used to determine the 
interest rate on Interfund Loans and review, no less frequently than 
annually, the continuing appropriateness of the Bank Loan Rate formula; 
and
    (c) review, no less frequently than annually, the continuing 
appropriateness of the relevant Fund's participation in the Facility.
    15. In the event an Interfund Loan is not paid according to its 
terms and such default is not cured within two business days from its 
maturity or from the time the lending Fund makes a demand for payment 
under the provisions of the Interfund Lending Agreement, Lord Abbett 
promptly will refer such loan for arbitration to an independent 
arbitrator selected by each Fund Board involved in the loan who will 
serve as arbitrator of disputes concerning Interfund Loans.\2\ The 
arbitrator will resolve any problem promptly, and the arbitrator's 
decision will be binding on both Funds. The arbitrator will submit, at 
least annually, a written report to each Fund Board setting forth a 
description of the nature of any dispute and the actions taken by the 
Funds involved to resolve the dispute.
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    \2\ If the dispute involves Funds with different Fund Boards, 
the respective Fund Boards will select an independent arbitrator 
that is satisfactory to each Fund.
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    16. Each Fund will maintain and preserve for a period of not less 
than six years from the end of the fiscal year in which any transaction 
by it under the Facility occurred, the first two years in an easily 
accessible place, written records of all such transactions setting 
forth a description of the terms of the transactions, including the 
amount, the maturity, and the Interfund Loan Rate, the rate of interest 
available at the time the Interfund Loan is made on overnight 
repurchase agreements and bank borrowings, and such other information 
presented to the Fund Board in connection with the review required by 
conditions (13) and (14).
    17. The Interfund Lending Committee will prepare and submit to each 
Fund Board for review an initial report describing the operations of 
the Facility and the procedures to be implemented to ensure that all 
Funds are treated fairly. After the commencement of the Facility, the 
Interfund Lending Committee will provide quarterly reports on the 
operations of the Facility to each Fund Board. Each Fund's chief 
compliance officer, as defined in Rule 38a-1(a)(4) under the Act (a 
``Fund CCO''), shall prepare an annual report for its Fund Board for 
each year that the Fund participates in the Facility, which report 
evaluates the Fund's compliance with the terms and conditions of the 
application and the procedures established to achieve such compliance.
    Additionally, each Fund CCO will also annually file a certification 
pursuant to Item 77Q3 of Form N-SAR, as such Form may be revised, 
amended, or superseded from time to time (``N-SAR''), for each year 
that the Fund participates in the Facility, that certifies that the 
Fund and Lord Abbett have established procedures reasonably designed to 
achieve compliance with the terms and conditions of the order. In 
particular, the certification will address procedures designed to 
achieve the following objectives:
    (a) That the Interfund Loan Rate will be higher than the Repo Rate, 
but lower than the Bank Loan Rate;
    (b) compliance with the collateral requirements as set forth in the 
application;
    (c) compliance with the percentage limitations on interfund 
borrowing and lending;
    (d) allocation of interfund borrowing and lending demand in an 
equitable manner and in accordance with procedures established by the 
Fund Board; and
    (e) that the interest rate on any Interfund Loan does not exceed 
the interest rate on any third-party borrowings of a borrowing Fund at 
the time of the Interfund Loan.
    Additionally, each Fund's independent registered public 
accountants, in connection with their audit examination of the Fund, 
will review the operation of the Facility for compliance with the 
conditions of the application and their review will form the basis, in 
part, of the auditor's report on internal accounting controls in Form 
N-SAR.
    18. No Fund will participate in the Facility upon receipt of the 
requisite regulatory and shareholder approval unless it has fully 
disclosed in its prospectus and/or SAI all material facts about its 
intended participation.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-16038 Filed 7-6-16; 8:45 am]
 BILLING CODE 8011-01-P
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