Federal Register / Vol. 62, No. 28 / Tuesday, February 11, 1997 / Notices 6283

provisions to other persons or

circumstances will not be affected.

For the U.S. Nuclear Regulatory

Commission.

Dated: December 2, 1996.

James M. Taylor,

Executive Director for Operations.

For the State of Vermont.

Dated: December 10, 1996.

George L. Lowe,

Director, Vermont Emergency Management.

[FR Doc. 97–3320 Filed 2–10–97; 8:45 am]

BILLING CODE 7590–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. IC–22492; 812–10396]

John Nuveen & Co. Incorporated and

Nuveen Tax-Free Unit Trusts; Notice of

Application

February 4, 1997.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of Application for

Exemption under the Investment

Company Act of 1940 (the ‘‘Act’’).

APPLICANTS: John Nuveen & Co.

Incorporated (the ‘‘Sponsor’’), Nuveen

Tax-Free Unit Trusts (the ‘‘Nuveen

Trust’’), and any future trusts sponsored

by the Sponsor (together with the

Nuveen Trust, the ‘‘Trusts’’), and their

respective series (each, a ‘‘Series’’ or a

‘‘Trust Series’’).

RELEVANT ACT SECTIONS: Order requested

under section 6(c) for an exemption

from sections 2(a)(32), 2(a)(35), 12(d)(3),

14(a), 19(b), 22(d), and 26(a)(2) of the

Act, and rules 19b–1 and 22c–1

thereunder; under section 11(a) for an

exemption from section 11(c); and

under sections 6(c) and 17(b) for an

exemption from section 17(a).

SUMMARY OF APPLICATION: Applicants

request an order to permit: (a) the Trust

to impose sales charges on a deferred

basis, and to waive the deferred sales

charge in certain circumstances; (b)

certain offers of exchange involving the

Trusts; (c) units of the Trusts to be

publicly offered without requiring the

Sponsor to take for its own account or

place with others $100,000 worth of

units in those Trusts; (d) certain Trusts

to distribute capital gains resulting from

the sale of portfolio securities within a

reasonable time after receipt; (e) a

terminating Series of a Trust to sell

portfolio securities to a new Series of

the Trust; and (f) certain Trust Series to

invest up to 10.5%, and certain other

Trust Series to invest up to 20.5% of

their assets in the securities of issuers

that derived more than 15% of their

gross revenues in their most recent

fiscal year from securities related

activities.

FILING DATE: The application was filed

on October 15, 1996.

HEARING OR NOTIFICATION OF HEARING: An

order granting the application will be

issued unless the SEC orders a hearing.

Interested persons may request a

hearing by writing to the SEC’s

Secretary and serving applicants with a

copy of the request, personally or by

mail. Hearing requests should be

received by the SEC by 5:30 p.m. on

March 3, 1997, 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 request, the reason for the

request, and the issues contested.

Persons may request notification of a

hearing by writing to the SEC’s

Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

Street N.W., Washington, D.C. 20549.

Applicants: 333 West Wacker Drive,

Chicago, IL 60606.

FOR FURTHER INFORMATION CONTACT:

Christine Y. Greenlees, Senior Counsel,

at (202) 942–0581, or Mary Kay Frech,

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.

Applicants’ Representations

1. Each Trust is or will be a unit

investment trust registered as an

investment company under the Act.

Each of the Trusts is sponsored by the

Sponsor, and is made up of one or more

Series of separate unit investment trusts

issuing securities registered or to be

registered under the Securities Act of

1933. Each Series is created by a Trust

Indenture (the ‘‘Indenture’’) between the

Sponsor and a banking institution or

trust company as trustee (the

‘‘Trustee’’). The Sponsor is a whollyowned subsidiary of The John Nuveen

Company, of which approximately 78%

is owned by The St. Paul Companies,

Inc.

2. The fundamental structures of the

Trusts and the various Series are similar

in most respects, however, the

investment objectives may differ. In all

cases, the Sponsor will acquire a

portfolio of securities which it then

deposits with the Trustee in exchange

for certificates representing units of

fractional undivided interest (‘‘Units’’)

in the deposited portfolio. The Units are

then offered to the public through the

Sponsor and dealers at a public offering

price which, during the initial offering

period, is based upon the aggregate

offering side evaluation of the

underlying securities plus a front-end

sales charge. This sales charge is the

maximum amount applicable to any

particular Series of a Trust and

currently ranges from 4.9% to 2.5% of

the public offering price, depending on

the term of the underlying securities.

The Sponsor may reduce the sales

charge under certain circumstances,

which will be disclosed in the

prospectus. Any such reduction will be

made in accordance with rule 22d–1.

3. The Sponsor maintains a secondary

market for Units of outstanding Series,

and continually offers to purchase these

Units at prices based upon the bid side

evaluation of the underlying securities.

Investors may purchase Units on the

secondary market at the current public

offering price plus a front-end sales

charge. If the Sponsor discontinues

maintaining such a market at any time

for any Series, holders of Units

(‘‘Unitholders’’) of such a Series may

redeem their Units through the Trustee.

A. Deferred Sales Charge

1. The Sponsor proposes to

implement a program for one or more

Trust Series under which part or all of

the sales charge would be deferred.

Under applicants’ deferred sales charge

(‘‘DSC’’) proposal, the Sponsor will

determine both the maximum amount of

the sales charge per Unit, and whether

to defer the collection of all or part of

the sales charge over a period (the

‘‘Collection Period’’) subsequent to the

settlement date for the purchase of

Units. The Sponsor will in no event add

to the deferred amount of the sales

charge any additional amount for

interest or any similar or related charge

to reflect or adjust for such deferral.

2. The Sponsor anticipates collecting

a portion of the total sales charge

immediately upon the purchase of Trust

Units. The balance of the sales charge

will be collected over the Collection

Period for the particular Trust Series. A

ratable portion of the sales charge

remaining to be collected will be

deducted from each Unitholder’s

distributions on the Units (‘‘Distribution

Deductions’’) during the Collection

Period until the total amount of the

sales charge per Unit is collected. If

distribution income is insufficient to

pay a DSC installment, the Trustee,

pursuant to the powers granted in the

Indenture, will have the ability to sell

portfolio securities in an amount
6284 Federal Register / Vol. 62, No. 28 / Tuesday, February 11, 1997 / Notices

1 Investment Company Act Release No. 17096

(Aug. 3, 1989) (proposing amendments to rule

12d3–1). The proposed amendment defined a

‘‘Qualified Foreign Exchange’’ to mean a foreign

necessary to provide the requisite

payments. If a Unitholder redeems his

or her Units before the total sales charge

has been collected from installment

payments, the Sponsor intends to

deduct any amount of unpaid DSC from

sale or redemption proceeds. Applicants

represent that the total of all these

amounts will in no event exceed the

maximum sales charge per Unit.

3. For purposes of determining

whether a DSC applies to a particular

redemption or sale of Units, the Sponsor

will assume that Units on which the

total aggregate of Distribution

Deductions has been collected are

liquidated first. Any Units disposed of

over and above such amounts will be

subject to the DSC, which will be

applied on the assumption that Units

held for the longest time are redeemed

first. Therefore, the DSC will be the

balance of the sales charge per Unit,

determined as of the date of purchase,

which remains owing and uncollected.

The Sponsor may in the future choose

to waive the DSC in connection with

redemption or sales of Units under

certain circumstances. Any such waiver

of the DSC will be disclosed in the

prospectus and will be implemented in

accordance with rule 22d–1.

4. The Sponsor believes that the DSC

program will be adequately disclosed to

potential investors as well as

Unitholders. The prospectus for each

Trust Series will describe the operation

of the DSC, including the amount and

date of each Distribution Deduction, and

the duration of the Collection Period.

The prospectus also will disclose that

the Trustee may sell Trust securities in

the event that income generated by the

Trust portfolio is insufficient to pay for

DSC expenses. Applicants also state that

each annual report will provide

Unitholders with information as to the

aggregate amount of annual DSC

payments made by the Trust during the

previous fiscal year on both a Series and

per Unit basis. Further, the securities

confirmation statement for each

Unitholder’s purchase transaction will

state both the front-end sales charge and

the DSC that will be imposed, and that

the DSC will be withdrawn in regular

installments from distribution payments

made to Unitholders.

B. Exchange Option and Rollover

Option

1. Applicants also seek an exemption

to permit offers of exchange among

Series of the Trusts (the ‘‘Exchange

Option’’), and offers of exchange made

in connection with the termination of

Trust Series (the ‘‘Rollover Option’’).

The Exchange Option will extend to all

exchanges of Units sold either with a

front-end sales charge or with a DSC.

The Rollover Option will give

Unitholders the ability to ‘‘roll over’’

any or all of their Units in a Series of

a Trust (each, a ‘‘Rollover Trust’’) that

is terminating for Units of a new Trust

Series of the same type (a ‘‘New Trust’’)

at a reduced sales charge.

2. An investor who purchases Units

under either the Exchange Option or the

Rollover Option will pay a lower sales

charge than that which would be paid

by a new investor. The reduced sales

charge imposed will be reasonably

related to the expenses incurred in

connection with the administration of

the program, which may include an

amount that will fairly and adequately

compensate the Sponsor and the

participating underwriters and brokers

for their services in providing the

program.

3. The sales charge on Units acquired

pursuant to the Exchange option

generally will be reduced from

maximum sales charges ranging from

4.9% to 2.5% of the public offering

price (5.5% to 0% for sales on the

secondary market) to a flat fee (e.g., $25

per 100 Units for Units of a Series

whose initial cost was approximately

$10 per Unit, or $25 per 1,000 Units for

Units of a Series whose initial cost was

approximately $1.00 per Unit) or a

percentage of the public offering price.

An adjustment will be made if Units of

any Trust Series are exchanged within

five months of their acquisition for

Units of a Trust Series with a higher

sales charge (the ‘‘Five Months

Adjustment’’). An adjustment also will

be made if Units that impose

Distribution Deductions are exchanged

for Units of a Trust Series that imposes

a front-end sales charge at any time

before the Distribution Deductions (plus

any portion of the sales charge on the

exchanged Units collected up front)

have at least equaled the per Unit sales

charge then applicable on the acquired

Units (the ‘‘DSC Front-end Exchange

Adjustment’’). In cases involving either

the Five Months or the DSC Front-end

Exchange Adjustment, the exchange fee

will be the greater of: (a) the reduced

sales charge, or (b) an amount which,

together with the sales charge already

paid on the Units being exchanged,

equals the normal sales charge on the

Units of the Trust Series being acquired

through such exchange (the ‘‘Exchange

Trust’’), determined as of the date of the

exchange. The Sponsor may waive, with

appropriate disclosures, such exchange

fee, and reserves the right to vary the

sales charge normally applicable to a

Series, to vary the charge applicable to

exchanges, and to modify, suspend, or

terminate the Exchange Option as set

forth in the conditions to the

application.

4. Under the Exchange Option, if DSC

Units are exchanged for DSC Units of

another Series, the reduced sales charge

will be collected in connection with

such an exchange. The Distribution

Deductions will continue to be taken

from the investment income generated

by the newly acquired Units, or

proceeds from the sale of Trust portfolio

securities, as the case may be, until the

original balance of the sales charge

owed on the initial investment has been

collected. The DSC due on the initial

investment will not be collected at the

time of exchange, except in the case of

any exchange to a Series not having a

DSC.

5. Under the Rollover Option,

Unitholders of Rollover Trusts may elect

by a certain date (the ‘‘Rollover

Notification Date’’) to redeem their

Units in a terminating Rollover Trust,

and invest in Units of a New Trust,

which is created on or about the

Rollover Notification Date, at a reduced

sales charge. Unitholders making such

an election will be referred to as

‘‘Rollover Unitholders.’’ The applicable

sales charge upon the initial investment

in a Rollover Trust typically is 2.9% of

the public offering price, while the

reduced sales charge applicable to a

Rollover Unitholder’s investment in a

New Trust usually will be 1.9% of the

public offering price.

C. Purchase and Sale Transactions

Between a Rollover Trust and a New

Trust

1. Applicants also request an

exemption to permit any Rollover Trust

to sell their portfolio securities to a New

Trust, and the New Trust to purchase

these securities. Each Rollover Trust

will contain a portfolio of equity

securities (the ‘‘Equity Securities’’)

representing a portion of a specific

published index (an ‘‘Index’’). The

Equity Securities in each portfolio will

be: (a) Actively traded (i.e., have had an

average daily trading volume in the

preceding six months of a least 500

shares equal in value to at least U.S.

$25,000) on (i) an exchange (an

‘‘Exchange’’) which is either a national

securities exchange that meets the

qualifications of section 6 of the

Securities Exchange Act of 1934, or a

foreign securities exchange (‘‘Foreign

Exchange’’) that meets the qualifications

set forth in a proposed amendment to

rule 12d3–1(d)(6) under the Act,1 and
Federal Register / Vol. 62, No. 28 / Tuesday, February 11, 1997 / Notices 6285

stock exchange meeting certain standards with

respect to trading volume and other matters. As

subsequently amended, however, the rule omitted

that proposed definition.

which releases daily closing prices, or

(ii) the Nasdaq-National Market System

(‘‘Nasdaq-NMS’’); and (b) included in an

Index.

2. The investment objective of each

Rollover Trust is to seek a greater total

return than that achieved by the stocks

comprising the entire Index over the life

of the Rollover Trust. To achieve this

objective, each Rollover Trust will

consist of a specified number of the

highest dividend yielding securities in

such Rollover Trust’s respective Index,

or in a specified number of the lowest

dollar price per share of the highest

dividend yielding securities in such

Rollover Trust’s respective Index. For

example, certain Rollover Trusts (the

‘‘Ten Series’’) will invest for a specified

period in approximately equal values in

the ten common stocks contained in the

Dow Jones Industrial Average (the

‘‘DJIA’’), the Financial Times Industrial

Ordinary Share Index (the ‘‘FT Index’’),

or the Hang Seng Index, having the

highest yields as of no more than three

business days prior to the Ten Series’

initial date of deposit. In addition, other

Rollover Trusts (the ‘‘Five Series’’) will

pursue their objective by investing for a

specified period in approximately equal

values in the common stocks of the five

companies with the lowest dollar price

per share of the ten companies in the

DJIA, the FT Index, or the Han Seng

Index, having the highest dividend

yields as of no more than three business

days prior to the Five Series’ initial date

of deposit.

3. The securities deposited in each

Rollover Trust are chosen solely

according to the formulas described

above and set forth in the prospectus for

the Rollover Trust. The Sponsor will not

have any discretion as to which

securities are purchased, because

securities are initially purchased in

accordance with the formulas described

above. The Rollover Trust’s portfolios

will not be actively managed and will

not be altered to reflect changes to those

stocks comprising the top dividend

yielding stocks (or lowest priced stocks

of the top dividend yielding stocks) in

an Index on a date after the Rollover

Trust’s initial date of deposit. The

Sponsor does not have discretion as to

when securities will be sold, except that

the Sponsor is authorized to sell

securities in extremely limited

circumstances, such as a default by the

issuer on the payment on any of its

outstanding obligations, a decline in the

price of an Equity Security, or other

credit factors that, in the opinion of the

Sponsor, would cause the retention of

the securities to be detrimental to the

Rollover Trust.

4. Each Rollover Trust will hold its

securities for a specified period,

generally one year. As the Rollover

Trust terminates, the Sponsor intends to

create a New Trust for the next period.

With respect to the Rollover Trusts, the

New Trust will be based on the same

Index, using the same number of current

top dividend yielding securities (or of

the lowest price per share securities of

the highest dividend yielding securities,

whichever is applicable) in the Index.

5. There normally is some overlap

from year to year of the highest

dividend yielding securities (or the

lowest dollar price per share stocks of

the highest dividend yielding securities)

in an Index and, therefore, between the

portfolios of each terminating Rollover

Trust and the related New Trust. For

example, of the ten highest dividend

yielding securities on the DJIA as of

May 1995, eight were among the top ten

dividend yielding securities at

approximately the same time the

following year.

6. In connection with its termination,

each Rollover Trust will sell all of its

portfolio securities on an Exchange or

Nasdaq-NMS as quickly as practicable,

but over a period of time so as to

minimize any adverse impact on the

market price. Similarly, a New Trust

will acquire its portfolio securities in

purchase transactions on an exchange or

non Nasdaq-NMS. This procedure will

result in substantial brokerage

commissions on portfolio securities of

the same issue that are borne by the

Unitholders of both the Rollover Trust

and the New Trust.

7. In light of these costs, applicants

request exemptive relief to permit any

Rollover Trust having the characteristics

described above to sell Equity Securities

to a New Trust, and to permit the New

Trust to purchase Equity Securities at

the closing sales price of such securities

on the applicable Exchange or on

Nasdaq-NMS on the sale date, provided

that applicants comply with rule 17a–7

under the Act, except for paragraph (e)

thereof, as discussed below.

8. In order to minimize overreaching,

the Sponsor will certify to the Trustee,

within five days of each sale from a

Rollover Trust to a New Trust: (a) That

the transaction is consistent with the

policy of both the Rollover Trust and

the New Trust, as recited in their

respective registration statements and

reports filed under the Act; (b) the date

of such transaction; and (c) the closing

sales price on the Exchange or on

Nasdaq-NMS for the sale date of the

securities subject to such sale. The

Trustee will then countersign the

certificate, unless the Trustee disagrees

with the price listed on the certificate,

in which event the Trustee will

immediately inform the Sponsor orally

of any such disagreement and returns

the certificate within five days to the

Sponsor with corrections duly noted.

Upon the Sponsors receipt of a

corrected certificate, if the Sponsor can

verify the corrected price by reference to

an independently published list of

closing sales prices for the date of the

transactions, the Sponsor will ensure

that the price of Units of the New Trust,

and distributions to Unitholders of the

Rollover Trust with regard to

redemption of their Units or termination

of the Rollover Trust, accurately reflect

the corrected price. If the Sponsor

disagrees with the Trustee’s corrected

price, the Sponsor and the Trustee will

jointly determine the correct sales price

by reference to a mutually agreeable,

independently published list of closing

sales prices for the date of the

transaction.

D. Investments in Securities Related

Issuers on Certain Indexes

1. Applicants also request an

exemption to permit the Ten Series to

acquire securities of an issuer that

derives more than 15% of its gross

revenues from ‘‘securities related

activities’’ (as defined in rule 12d3–

1(d)(1)), provided that: (a) Those

securities are included in the DJIA, the

FT Index, or the Hang Seng Index; (b)

they have one of the ten highest yields

of stocks comprising the DJIA, the FT

Index, or the Hang Seng Index no more

than three business days prior to the

initial date of deposit; and (c) the value

of the securities deposited of each

securities related issuer represents no

more than approximately 10%, but in

no event more than 10.5%, of the value

of that Ten Series’ total assets as of its

initial date of deposit. In addition,

Applicants request an exemption to

permit the Five Series to acquire

securities of an issuer that derives more

than 15% of its gross revenues from

‘‘securities related activities’’ (as

defined in rule 12d3–1(d)(1)), provided

that: (a) those securities are included in

the DJIA, the FT Index, or the Hang

Seng Index; (b) they are securities of one

of the five companies with the lowest

dollar price per share of the ten stocks

in the DJIA, the FT Index, or the Hang

Seng Index having the highest dividend

yield as of no more than three business

days prior to the initial date of deposit;

and (c) the value of the securities

deposited of each securities related

issuer represents no more than
6286 Federal Register / Vol. 62, No. 28 / Tuesday, February 11, 1997 / Notices

2Without an exemption, a Trust selling Units

subject to a DSC could not meet the definition of

a unit investment trust under section 4(2) of the

Act. As here relevant, section 4(2) defines a unit

investment trust as an investment company that

issues only ‘‘redeemable securities.’’

approximately 20%, but in no event

more than 20.5%, of the value of that

Five Series’ total assets as of its initial

date of deposit.

2. As noted above, the Ten Series and

the Five Series will contain a portfolio

of Equity Securities which represents a

portion of the DJIA, the FT Index, or the

Hang Seng Index. The DJIA comprises

30 widely-held common stocks listed on

the New York Stock Exchange that are

chosen by the editors of The Wall Street

Journal. The FT Index comprises

widely-held common stocks listed on

the London Stock Exchange that are

chosen by the editors of the The

Financial Times (London). The FT

Index is an unweighted average of 30

companies representative of British

industry and commerce. The Hang Seng

Index is a weighted average of 33

companies representative of Hong Kong

industry. The publishers of the Dow

Jones & Company, Inc. (owner of the

DJIA), the FT Index, and the Hang Seng

Index are unaffiliated with any Series or

the Sponsor and do not participate in

any way in the creation of any Series or

the selection of its stocks.

3. Certain of the stocks currently

comprising the DJIA, the FT Index, and

the Hang Seng Index are issued by

companies with subsidiaries engaged in

‘‘securities related activities’’ (as

defined in rule 12d3–1(d)(1)), revenues

of which may from time to time

represent more than 15% of the issuer’s

gross revenues. It also is possible that

additional companies in the DJIA, the

FT Index, and the Hang Seng Index may

acquire companies engaged in or enter

into those business in the future.

Applicants’ Legal Analysis

1. Applicants request an exemption

under section 6(c) granting relief from

sections 2(a)(32), 2(a)(35), 22(d),

26(a)(2), and rule 22c–1 to permit them

to assess a DSC, and to waive the DSC

under certain circumstances. Applicants

also request an exemption under section

11(a) granting relief from section 11(c)

to enable them to implement the

Exchange and Rollover Options. In

addition, applicants request an

exemption under sections 6(c) and 17(b)

granting relief from section 17(a) to

permit a terminating Series of a Trust to

sell portfolio securities to a new Series

of the Trust. Finally, applicants seek an

exemption under section 6(c) granting

relief from sections 12(d)(3), 14(a),

19(b), and rule 19b–1 to the extent

described below.

2. Section 2(a)(32) of the Act defines

a ‘‘redeemable security’’ as a security

that, upon its presentation to the issuer,

entities the holder to receive

approximately his or her proportionate

share of the issuer’s current net assets.

or the cash equivalent of those assets.

Because the imposition of a DSC may

cause a redeeming Unitholder to receive

an amount less than the net asset value

of the redeemed Units, applicants

request an exemption from section

2(a)(32) so that Units subject to a DSC

are considered redeemable securities for

purposes of the Act.2

3. Section 2(a)(35) of the Act, in

relevant part, defines the term ‘‘sales

load’’ to be the difference between the

public selling price of a security and

that portion of the sale proceeds

invested or held for investment by the

depositor or trustee. Because a DSC is

not charged at the time of purchase,

applicants request an exemption from

section 2(a)(35).

4. Rule 22c–1, in relevant part,

prohibits a registered investment

company issuing a redeemable security

from selling, redeeming, or repurchasing

any such security, except at a price

based on the current net asset value of

such security. Because the imposition of

a DSC may cause a redeeming

Unitholder to receive an amount less

than the net asset value of the redeemed

Units, applicants request an exemption

from rule 22c–1.

5. Section 22(d) of the Act requires an

investment company and its principal

underwriter and dealers to sell

securities issued by such investment

company only at the current public

offering price as described in the

investment company’s prospectus.

Because sales charges traditionally have

been a component of the public offering

price, section 22(d) historically required

that all investors be charged the same

load. Rule 22d–1 was adopted to permit

the sale of redeemable securities with

scheduled variations in the sales load.

Applicants submit that waivers,

deferrals or other scheduled variations,

if disclosed in the relevant prospectus,

would be consistent with section 22(d),

and that rule 22d–1 contemplates and

permits such waivers, deferrals or other

scheduled variations if disclosed in the

relevant prospectus. In the interest of

clarity, however, applicants seek relief

from section 22(d) to permit scheduled

variations or waivers of the DSC under

certain circumstances.

6. Section 26(a)(2) of the Act, in

relevant part, prohibits a trustee or

custodian of a unit investment trust

from collecting from the trust as an

expense any payment to a depositor or

principal underwriter thereof. Because

of this prohibition, applicants request

an exemption to permit the trustee to

collect the charge from income

distributions on the Units and disburse

them to the Sponsor as contemplate by

the DSC program.

7. Section 6(c) of the Act provides, in

relevant part, that the SEC, by order

upon application may exempt any

person or transaction, or any class or

classes of persons or transactions, from

any provision of the Act or any rule

thereunder if such exemption is

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. Applicants believe that granting

the requested relief from sections

2(a)(32), 2(a)(35), 22(d), 26(a)(2), and

rule 22c–1 would meet the requirements

for an exemption established by section

6(c).

8. Section 11(c) of the Act prohibits

any offer of exchange of the securities of

a registered unit investment trust for the

securities of any other investment

company, unless the terms of the offer

have been approved by the SEC.

Applicants request an exemption under

section 11(a) from the provisions of

section 11(c) to permit exchanges of

Units of Trust Series sold with front-end

or deferred sales charges at reduced

sales charges, and to permit exchange

transactions made in connection with

the termination of a Series at a reduced

sales charge. Applicants believe that the

reduced sales charge imposed at the

time of exchange is a reasonable and

justifiable expense to be allocated for

the professional assistance and

operational expenses which are

contemplated in connection with the

Exchange and the Rollover Option.

Applicants further believe that the

requirement that a person who has

acquired Units at a lower sales charge

pay the difference, if greater than the

reduced fixed charge, upon exercising

the Exchange Option when the Five

Months Adjustment or the DSC Frontend Exchange Adjustment applies is

appropriate in order to maintain the

equitable treatment of various investors

in each Trust Series.

9. Section 14(a) of the Act requires in

substance that investment companies

have $100,000 of net worth prior to

making a public offering. Applicants

believe that each Series will comply

with this requirement because the

Sponsor will deposit substantially more

than $100,000 of debt or equity

securities or a combination thereof,

depending on the objective of the

particular Series. Applicants assert,

however, that the SEC has interpreted
Federal Register / Vol. 62, No. 28 / Tuesday, February 11, 1997 / Notices 6287

section 14(a) as requiring that the initial

capital investment in an investment

company be made without any intention

to dispose of the investment. Applicants

state that, under this interpretation, a

Trust Series would not satisfy section

14(a) because of the Sponsor’s intention

to sell all the Units thereof. Rule 14a–

3 exempts unit investment trusts from

this provision if certain conditions are

complied with, one of which is that the

trust invest only in ‘‘eligible trust

securities,’’ as defined in the rule.

Applicants intend that certain future

Series of the Trusts (collectively, the

‘‘Equity Trusts’’) will invest all or a

portion of their assets in Equity

Securities, and therefore may not rely

on this rule because Equity Securities

are not eligible trust securities.

Applicants, therefore, request an

exemption under section 6(c) from the

net worth requirement of section 14(a).

Applicants will comply in all respects

with rule 14a–3, except that the Equity

Trusts will not restrict their portfolio

investments to ‘‘eligible trust

securities.’’

10. Section 19(b) of the Act and rule

19b–1 provide that, except under

limited circumstances, no registered

investment company may distribute

long-term gains more than once every

twelve months. Rule 19b–1(c), under

certain circumstances, excepts a unit

investment trust investing in ‘‘eligible

trust securities’’ (as defined in rule 14a–

3) from the requirements of rule 19b–1.

Because the Equity Trusts do not limit

their investments to ‘‘eligible trust

securities,’’ such Trusts will not qualify

for the exemption in paragraph (c) of

rule 19b–1. Therefore, applicants

request an exemption under section 6(c)

from section 19(b) and rule 19b–1 to the

extent necessary to permit capital gains

earned in connection with the sale of

portfolios securities to be distributed to

Unitholders along with the Equity

Trust’s regular distributions. In all other

respects, applicants will comply with

section 19(b) and rule 19b–1.

11. Applicants believe that the

dangers which section 19(b) and rule

19b–1 are designed to prevent do not

exist in the Equity Trusts. Any gains

from the sale of portfolio securities

would be triggered by the need to meet

Trust expenses, DSC installments, or by

requests to redeem Units, events over

which the Sponsor and the Equity

Trusts have no control. Applicants

acknowledge that the Sponsor has

control over the actual redemption of

Units to the extent it makes a market in

Units. Applicants assert, however, that

the Sponsor has no incentive to redeem

or permit the redemption of Units in

order to generate capital gains for the

purpose against which section 19(b) and

rule 19b–1 were designed to protect.

Moreover, since principal distributions

must be clearly indicated in

accompanying reports to Unitholders as

a return of principal and will be

relatively small in comparison to

normal dividend distributions, there is

little danger of confusion from failure to

differentiate among distributions.

12. Section 17(a) of the Act makes it

unlawful for an affiliated person of a

registered investment company to

purchase securities from, or sell

securities to such registered investment

company. Investment companies under

common control may be considered

affiliated persons of one another. Each

Series will have an identical or common

Sponsor, John Nuveen & Co.

Incorporated. As the Sponsor of each

Series might be considered to control

each Series, it is likely that each Series

would be considered an affiliated

person of the others.

13. Section 17(b) of the Act provides

that the SEC may exempt a proposed

transaction from section 17(a) if

evidence establishes that: (a) the terms

of the proposed transaction are

reasonable and fair and do not involve

overreaching; (b) the proposed

transaction is consistent with the

policies of each registered investment

company involved; and (c) the proposed

transaction is consistent with the

general purposes of the Act. As noted

above, under section 6(c), the SEC may

exempt classes of transactions if, and to

the extent that, such 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. Because section

17(b) applies to a specific proposed

transaction and not to ongoing series of

future transactions, applicants also

request relief from section 17(a) under

section 6(c). Applicants believe that the

proposed transactions satisfy the

requirements of sections 6(c) and 17(b).

14. Rule 17a–7 under the Act permits

registered investment companies that

might be deemed affiliates solely by

reason of common investment advisers,

directors, and/or officers, to purchase

securities from, or sell securities to, one

another at an independently determined

price, provided certain conditions are

met. Paragraph (e) of the rule requires

an investment company’s board of

directors to adopt and monitor the

procedures for these transactions to

assure compliance with the rule. A unit

investment trust does not have a board

of directors and, therefore, may not rely

on the rule. Applicants represent that

they will comply with all of the

provisions of rule 17a–7, other than

paragraph (e).

15. Applicants submit that the

proposed transactions will be consistent

with the policy of the Trust, as only

securities that otherwise would be

bought and sold on the open market

pursuant to the policy of each Trust

Series will be involved in the proposed

transactions. In addition, applicants

state that such purchases from and/or

sales to such affiliated investment

companies will take place only upon the

occurrence of a redemption of Units or

the termination of a Rollover Trust and

the creation of a New Trust. Applicants

further believe that the current practice

of buying and selling on the open

market leads to unnecessary brokerage

fees, and is therefore contrary to the

general purposes of the Act.

16. Section 12(d)(3) of the Act

prohibits an investment company from

acquiring any security issued by any

person who is a broker, dealer,

underwriter, or investment adviser. Rule

12d3–1, in relevant part, exempts from

section 12(d)(3) purchases by an

investment company of securities of an

issuer that derived more than 15% of its

gross revenues in its most recent fiscal

year from securities related activities,

provided that, among other things,

immediately after such acquisition, the

acquiring company has invested not

more than 5% of the value of its total

assets in securities of the issuer.

17. Applicants seek an exemption

under section 6(c) from the provisions

of section 12(d)(3) to permit each Ten

Series to invest up to approximately

10%, but in no event more than 10.5%,

of the value of any Ten Series’ assets in

the securities of an issuer of any of the

ten highest dividend yielding stocks in

the DJIA, the FT Index, or the Hang

Seng Index that derives more than 15%

of its gross revenues from securities

related activities. Similarly, applicants

seek an exemption to permit each Five

Series to invest up to approximately

20%, but in no event more than 20.5%,

of the value of any Five Series’ assets in

the securities of an issuer of any of the

five stocks having the lowest dollar

price per share of the ten highest

yielding stocks in the DJIA, the FT

Index, or the Hang Seng Index, that

derives more than 15% of its gross

revenues from securities related

activities. Applicants represent that

each Ten Series and Five Series will

comply with all of the conditions of rule

12d3–1, except the condition

prohibiting an investment company

from investing more than 5% of the

value of its total assets in securities of

a securities related issuer.
6288 Federal Register / Vol. 62, No. 28 / Tuesday, February 11, 1997 / Notices

18. Applicants submit that the

purpose of section 12(d)(3) was to: (a)

prevent investment companies from

exposing their assets to the

entrepreneurial risks of securities

related businesses; (b) prevent potential

conflicts of interest; (c) eliminate certain

reciprocal practices between investment

companies and securities related

businesses; and (d) ensure that

investment companies maintain

adequate liquidity in their portfolios.

Applicants assert that the proposed

transaction does not give rise to the type

of abuses section 12(d)(3) was designed

to address. Applicants also believe that

the requested relief meets the standards

for an exemption set forth in section

6(c).

Applicants’ Conditions

Applicants agree that any order

granting the requested relief shall be

subject to the following conditions:

A. Conditions With Request to DSC

Relief and Exchange and Rollover

Options

1. Whenever the Exchange Option or

Rollover Option is to be terminated or

its terms are to be amended materially,

any holder of a security subject to that

privilege will be given prominent notice

of the impending termination or

amendment at least 60 days prior to the

date of termination or the effective date

of the amendment, provided that: (a) no

such notice need be given if the only

material effect of an amendment is to

reduce or eliminate the sales charge

payable at the time of an exchange, to

add one or more new Series eligible for

the Exchange Option or the Rollover

Option, or to delete a Series which has

terminated; and (b) no notice need be

given if, under extraordinary

circumstances, either: (i) there is a

suspension of the redemption of Units

of the Trust under section 22(e) of the

Act and the rules and regulations

promulgated thereunder, or (ii) a Trust

temporarily delays or ceases the sale of

its Units because it is unable to invest

amounts effectively in accordance with

applicable investment objectives,

policies, and restrictions.

2. An investor who purchases Units

under the Exchange Option or the

Rollover Option will pay a lower sales

charge than that which would be paid

for the Units by a new investor.

3. The prospectus of each Trust

offering exchanges or rollovers and any

sales literature or advertising that

mentions the existence of the Exchange

Option or the Rollover Option will

disclose that such Exchange Option or

Rollover Option is subject to

modification, termination, or

suspension, without notice except in

certain limited cases.

4. Each Series offering Units subject to

a DSC will include in its prospectus the

table required by item 2 of Form N–1A

(modified as appropriate to reflect the

differences between unit investment

trusts and open-end management

investment companies), and a schedule

setting forth the number and date of

each installment payment.

B. Condition for Exemption From

Section 12(d)(3)

No company held in the Ten Series’

portfolio or the Five Series’ portfolio,

nor any affiliate thereof, will act as

broker for any Ten Series or Five Series

in the purchase or sale of any security

for such Series’ portfolio.

C. Condition for Exemption From

Section 14(a)

Applicants will comply in all respects

with the requirements of rule 14a–3,

except that the Equity Trusts will not

restrict their portfolio investments to

‘‘eligible trust securities.’’

D. Conditions for Exemption From

Section 17(a)

1. Each sale of Equity Securities by a

Rollover Trust to a New Trust will be

effected at the closing price of the

securities sold on the applicable

Exchange or the Nasdaq-NMS on the

sale date, without any brokerage charges

or other remuneration except customary

transfer fees, if any.

2. The nature and conditions of such

transactions will be fully disclosed to

investors in the appropriate prospectus

of each future Rollover Trust and New

Trust.

3. The Trustee of each Rollover Trust

and New Trust will: (a) review the

procedures discussed in the application

relating to the sale of securities from a

Rollover Trust and the purchase of those

securities for deposit in a New Trust,

and (b) make such changes to the

procedures as the Trustee deems

necessary that are reasonably designed

to comply with paragraphs (a) through

(d) of rule 17a–7.

4. A written copy of these procedures

and a written record of each transaction

pursuant to any order granting the

application will be maintained as

provided in rule 17a–7(f).

For the SEC, by the Division of Investment

Management, under delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–3266 Filed 2–10–97; 8:45 am]

BILLING CODE 8010–01–M

Issuer Delisting; Notice of Application

To Withdraw From Listing and

Registration; (Mitcham Industries, Inc.,

Common Stock, $0.01 Par Value) File

No. 1–13490

February 5, 1997.

Mitcham Industries, Inc.

(‘‘Company’’) has filed an application

with the Securities and Exchange

Commission (‘‘Commission’’), pursuant

to Section 12(d) of the Securities

Exchange 1934 (‘‘Act’’) and Rule 12d2–

2(d) promulgated thereunder, to

withdraw the above specified security

(‘‘Security’’) from listing and

registration on the Pacific Stock

Exchange, Inc. (‘‘PSE’’).

The reasons alleged in the application

for withdrawing the Security from

listing and registration include the

following:

The Company originally listed on the

PSE when its Security was listed on the

Nasdaq SmallCap Market in order to

obtain the blue sky secondary market

trading exemptions afforded by the PSE

listing. Since April 26, 1996, the

Company’s Security has been listed on

the Nasdaq National Market System,

which provides secondary market

trading exemptions for all states. In

addition, the Company believes that

there is insignificant trading of its

Security on the PSE.

Any interested person may, on or

before February 27, 1997, submit by

letter to the Security of the Securities

and Exchange Commission, 450 Fifth

Street, N.W., Washington, D.C. 20549,

facts bearing upon whether the

application has been made in

accordance with the rules of the

exchanges and what terms, if any,

should be imposed by the Commission

for the protection of investors. The

Commission, based on the information

submitted to it, will issue an order

granting the application after the date

mentioned above, unless the

Commission determines to order a

hearing on the matter.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.

Jonathan G. Katz,

Secretary.

[FR Doc. 97–3265 Filed 2–10–97; 8:45 am]

BILLING CODE 8010–01–M

Sunshine Act Meeting

Notice is hereby given, pursuant to

the provisions of the Government in the

Sunshine Act, Pub. L. 94–409, that the

Securities and Exchange Commission

will hold the following meeting during

the week of February 10, 1997.