Federal Register / Vol. 62, No. 239 / Friday, December 12, 1997 / Notices 65453

1 ‘‘Successors in interest’’ is limited to entities

that result from a reorganization into another

jurisdiction or a change in the type of business

organization, e.g., a partnership or a corporation.

2The Trust will make monthly distributions of an

amount representing the dividends accumulated on

portfolio securities during each month, net of fees

and expenses.

Form Nos. Annual responses

Time

(minutes)

Burden

(hours)

Total ............................................................................................................................................... 270,900 .................... 27,921

Additional Information or Comments

To request more information or to

obtain a copy of the information

collection justification, forms, and/or

supporting material, please call the RRB

Clearance Officer at (312) 751–3363.

Comments regarding the information

collection should be addressed to

Ronald J. Hodapp, Railroad Retirement

Board, 844 North Rush Street, Chicago,

Illinois 60611–2092. Written comments

should be received within 60 days of

this notice.

Chuck Mierzwa,

Clearance Officer.

[FR Doc. 97–32490 Filed 12–11–97; 8:45 am]

BILLING CODE 7905–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–22927; 812–10704]

Diamonds Trust, DJIA Trust Receipts

Series, PDR Services Corporation and

ALPS Mutual Funds, Inc.; Notice of

Application

December 5, 1997.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for an

order under section 6(c) of the

Investment Company Act of 1940 (the

‘‘Act’’) for an exemption from sections

4(2), 14(a), 22(d), 24(d), and 26(a)(2)(C)

of the Act and rule 22c–1; under

sections 6(c) and 17(b) of the Act for an

exemption from sections 17(a) (1) and

(2) of the Act; and under rule 17d–1 to

permit certain joint transactions.

APPLICANTS: Diamonds Trust, DJIA Trust

Receipts Series (the ‘‘Trust’’), PDR

Services Corporation (together with its

‘‘successors in interest’’ 1 and with any

person directly or indirectly controlling,

controlled by, or under common control

with, PDR Service Corporation, the

‘‘Sponsor’’) and ALPS Mutual Funds,

Inc. (the ‘‘Distributor’’).

SUMMARY OF APPLICATION: Applicants

request an order that would (i) permit

the Trust, a unit investment trust whose

portfolio will consist of the component

stocks of the Dow Jones Industrial

Average (‘‘DJIA’’), to issue nonredeemable securities (‘‘DJIA Trust

Receipts’’); (ii) permit secondary market

transactions in DJIA Trust Receipts at

negotiated prices; (iii) permit dealers to

sell DJIA Trust Receipts to purchasers in

the secondary market unaccompanied

by a prospectus, when prospectus

delivery is not required by the

Securities Act of 1933 (the ‘‘Securities

Act’’); (iv) permit certain expenses

associated with the creation and

maintenance of the Trust to be borne by

the Trust rather than the Sponsor; (v)

exempt the Sponsor from the Act’s

requirement that it purchase, or place

with others, $100,000 worth of DJIA

Trust Receipts; (vi) permit affiliated

persons of the Trust to deposit securities

into, and receive securities from, the

Trust in connection with the purchase

and redemption of DJIA Trust Receipts;

and (vii) permit the Trust to reimburse

the Sponsor and/or the American Stock

Exchange, Inc. (‘‘AMEX’’) for payment

of an annual licensing fee to Dow Jones

& Company, Inc. (‘‘Dow Jones’’).

FILING DATES: The application was filed

on June 17, 1997, and an amendment to

the application was filed on December

3, 1997.

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

December 29, 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 interest, the reason for the

request, and the issues contested.

Persons may request notification of a

hearing by writing to the SEC’s

Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

Street, NW., Washington, DC 20549.

Applicants, c/o James F. Duffy,

Executive Vice President and General

Counsel, American Stock Exchange,

Inc., 86 Trinity Place, New York, NY

10006.

FOR FURTHER INFORMATION CONTACT:

Brian T. Hourihan, Senior Counsel, at

(202) 942–0526, or Nadya B. Roytblat,

Assistant Director, 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 from the SEC’s

Public Reference Branch, 450 Fifth

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

(tel. (202) 942–8090).

Applicant’s Representations

1. The Trust is a unit investment trust

(‘‘UIT’’) organized under the laws of the

state of New York. The Sponsor is a

wholly-owned subsidiary of AMEX.

State Street Bank and Trust Company

will act as trustee of the Trust

(‘‘Trustee’’). The Distributor, a registered

broker-dealer, will serve as underwriter

of the DJIA Trust Receipts on an agency

basis.

2. The Trust will hold a portfolio of

securities consisting of all of the

component common stocks of the DJIA.

The DJIA is a price-weighted index of

thirty stocks. Issuers of the component

stocks are all leaders in their respective

industries, and the component stocks

represent approximately one-fifth of the

market value of all U.S. stocks.

Applicants represent that the DJIA is the

oldest continuous barometer of the U.S.

stock market, and the most widely

quoted indicator of U.S. stock market

activity. DJIA Trust Receipts, units of

beneficial interest in the Trust, are

designed to provide investors with an

instrument that closely tracks the DJIA,

that trades like a share of common

stock, and pays periodic dividends

proportionate to those paid by the

portfolio of stocks held by the Trust.2

Applicants believe that DJIA Trust

Receipts will afford significant benefits

in the public interest. Applicants expect

the Trust to be able to track the DJIA

more closely than certain other index

products and, unlike open-end index

funds, trade at negotiated prices

throughout the business day. Applicants

also state that DJIA Trust Receipts will

compete with comparable products

available on foreign exchanges and

attract capital to the U.S. equity market.

3. The composition of the Trust’s

portfolio will be adjusted periodically to

conform to changes in the DJIA resulting

from corporate actions such as stock
65454 Federal Register / Vol. 62, No. 239 / Friday, December 12, 1997 / Notices

3Changes in the composition of the DJIA are

made entirely by the editors of the Wall Street

Journal.

4At the close of the market on each business day,

the Trustee will calculate the NAV of the Trust and

then divide the NAV by the number of outstanding

DJIA Trust Receipts in Creation Unit size

aggregations, resulting in an NAV per Creation Unit.

The Trustee will then calculate the required

number of shares of the Index Securities, and the

amount of cash, comprising a Portfolio Deposit for

the following business day. The Sponsor will make

available a list of the names of each of the Index

Securities in the current Portfolio Deposit and the

required number of shares. The cash equivalent of

an Index Security may be included in the cash

component of a Portfolio Deposit in lieu of the

Security if (i) the Trustee determines that an Index

Security is likely to be unavailable or available in

insufficient quantity for inclusion in a Portfolio

Deposit (for example, when the security is subject

to a trading halt or stop order, or the subject of a

tender offer), or (ii) a particular investor is restricted

from investing or engaging in transactions in the

Index Security (for example, when the investor is

a broker-dealer restricted by regulation or internal

policy from investing in securities issued by a

company on whose board of directors one of its

principals serves, or when the investor is a brokerdealer and the security is on its ‘‘restricted list’’).

In the latter situation, the Trustee will use the cash

equivalent payment to purchase the appropriate

number of shares of the Index Security that the

investor was unable to purchase.

5The Transaction Fee will be $1,000 per day

regardless of the number of Creation Units

purchased on that day by the investor. An

additional amount not to exceed three times the

Transaction Fee will be charged to investors who

purchase Creation Units via DTC rather than via the

NSCC, to cover increased expense associated with

settlement outside the CNS system. To the extent

the Transaction Fee exceeds the Trustee’s actual

settlement costs, and subject to certain limitations,

the excess will be subtracted from the Trustee’s Fee.

The Trustee’s Fee also will be reduced by the

amounts earned by the Trustee in respect of cash

held for the benefit of the Trust and not otherwise

expended on behalf of the Trust. The amount of the

Transaction Fee (including any variation in the

amount) will be disclosed in the prospectus for the

Trust.

6The procedures for processing a purchase order

will depend upon whether the transaction is settled

through NSCC or DTC.

7 DJIA Trust Receipts will be registered in bookentry form only. DTC or its nominee will be the

registered owner of all outstanding DJIA Trust

Receipts. Records reflecting the beneficial owners of

DJIA Trust Receipts will be maintained by DTC or

its participants.

splits or changes in the identity of the

DJIA component stocks.3 All

adjustments to the Trust’s portfolio will

be made by the Trustee as set forth in

the trust agreement and will be

nondiscretionary.

4. The Trustee will be paid a

‘‘Trustee’s Fee’’ ranging between 11/100

of 1% to 15/100 of 1% of the Trust’s net

asset value (‘‘NAV’’) on an annualized

basis. The Trustee’s Fee will be adjusted

to reflect the costs that the Trustee

incurs in connection with the issuance

and redemption of DJIA Trust Receipts

(as discussed below). The Sponsor and

the AMEX are paying the Trust’s

organizational expenses. The Trust will

reimbuse the Sponsor and the AMEX for

these expenses ratably over a five-year

period. Should the Trust terminate prior

to its fifth anniversary, the remaining

unamortized organizational expenses

will continue to be borne by the

Sponsor and the AMEX, and will not be

charged against the Trust. The Trust

also will reimburse the Sponsor and/or

the AMEX up to a maximum of 20 basis

points of the Trust’s NAV on an

annualized basis, for the following

expenses: (i) annual licensing fees for

the use of the ‘‘DJIA’’ trademark; (ii)

federal and state annual registration fees

for the issuance of DJIA Trust Receipts;

and (iii) expenses of the Sponsor

relating to the marketing of DJIA Trust

Receipts and the Trust (including, but

not limited to, related legal, consulting,

and advertising expenses). The Sponsor

will pay the Distributor a flat annual fee.

The Sponsor will not seek

reimbursement for payment of this

annual fee from the Trust without

obtaining prior exemptive relief from

the Commission.

5. DJIA Trust Receipts will be issued

in aggregations of 50,000 (‘‘Creation

Units’’). The price of each Creation Unit

will be approximately $4,007,000 (based

on the value of the DJIA on November

28, 1997). To be eligible to purchase a

Creation Unit, an investor must either

be a participant in the Continuous Net

Settlement (‘‘CNS’’) System of the

National Securities Clearing Corporation

(‘‘NSCC’’), or a Depository Trust

Company (‘‘DTC’’) participant, but is

not required to be an AMEX member.

An investor wishing to purchase a

Creation Unit from the Trust will have

to transfer to the Trust a ‘‘Portfolio

Deposit’’ consisting of: (i) a portfolio of

securities that is substantially similar in

composition and weighting to the DJIA

component securities (‘‘Index

Securities’’); (ii) a cash payment equal to

the dividends accrued on the Trust’s

portfolio securities since the last

dividend payment by the Trust, net of

expenses and liabilities; and (iii) a cash

payment or credit to equalize any

differences between the Portfolio

Deposit Amount and the NAV per

Creation Unit (which may be required,

for example, if a portion of the Trust’s

assets is held in cash).4 An investor

making a Portfolio Deposit will be

charged a service fee (‘‘Transaction

Fee’’), paid to the Trustee, to defray the

Trustee’s costs in processing securities

deposited into the Trust.5

6. Orders to purchase Creation Units

will be placed with the Distributor, who

will be responsible for transmitting the

orders to the Trustee.6 The Distributor

will maintain records of these orders,

issue confirmations of acceptance, and

issue delivery instructions to the

Trustee to implement the delivery of

DJIA Trust Receipts. The Distributor

will be responsible for delivering

prospectuses to purchasers of the

Creation Units and may provide certain

other administrative services, such as

those related to state securities law

compliance.

7. Person purchasing DJIA Trust

Receipts from the Trust in Creation Unit

aggregations may hold those Receipts or

sell some or all of them in the secondary

market. DJIA Trust Receipts will be

listed on the AMEX and traded in the

secondary market as individual units

(i.e., in less than Creation Unit size

aggregations) in the same manner as

other equity securities. An AMEX

specialist will be assigned to make a

market in DJIA Trust Receipts. The price

of DJIA Trust Receipts on the AMEX

will be based on a current bid/offer

market and will be in the range of $80

per Receipt (based on the value of the

DJIA on November 28, 1997).

Transactions involving the sale of DJIA

Trust Receipts will be subject to

customary brokerage commissions and

charges. Applicants expect that the

price at which DJIA Trust Receipts trade

will be disciplined by arbitrage

opportunities created by the ability to

continually purchase or redeem

Creation Unit-size aggregations at NAV,

which should ensure that DJIA Trust

Receipts will not trade at a material

discount or premium in relation to

NAV.

8. Applicants expect that purchasers

of Creation Units will include

institutional investors and arbitrageurs

(which could include institutional

investors). The AMEX specialist, in

providing for a fair and orderly

secondary market for DJIA Trust

Receipts, also may purchase Receipts for

use in its market-making activities on

the AMEX. Applicants expect that

secondary market purchasers of DJIA

Trust Receipts will include both

institutional and retail investors.7

9. Applicants will make available a

standard DJIA Trust Receipt product

description (‘‘Product Description’’) to

AMEX members and member

organizations for distribution to

investors purchasing DJIA Trust

Receipts in accordance with AMEX Rule

1000. The purpose of the Product

Description is to provide a brief and

readily understandable description of

the salient aspects of DJIA Trust

Receipts. The Product Description will

advise investors that a prospectus for

DJIA Trust Receipts is available without

charge upon request from the investor’s

account executive. Applicants expect
Federal Register / Vol. 62, No. 239 / Friday, December 12, 1997 / Notices 65455

8See note 5, supra.

that customer purchases of DJIA Trust

Receipts through a non-member brokerdealer in a transaction away from the

AMEX floor will be rare.

10. DJIA Trust Receipts will not be

individually redeemable, except upon

termination of the Trust. DJIA Trust

Receipts will only be redeemable in

Creation Unit-size aggregations through

the Trust. To redeem, an investor will

have to accumulate enough DJIA Trust

Receipts to constitute a Creation Unit.

An investor redeeming a Creation Unit

amount of DJIA Trust Receipts will

receive a portfolio of securities identical

in weighting and composition to the

securities portion of a Portfolio Deposit

as of the date the redemption request

was made. An investor may receive the

cash equivalent of a portfolio security (i)

when the Trustee determines that an

Index Security is likely to be

unavailable or available in insufficient

quantity, (ii) upon the request of the

redeeming investor, or (iii) upon notice

of the termination of the Trust. A

redeeming investor will also receive an

amount of cash equal to the dividends

accrued on the portfolio securities since

the last dividend payment by the Trust,

net of expenses and liabilities, and may

also receive an amount of cash to

equalize any differences between the

Portfolio Deposit Amount and the NAV

per Creation Unit. A redeeming investor

will pay a Transition Fee calculated in

the same manner as a Transaction Fee

payable in connection with the

purchase of a Creation Unit.8 The

Trustee will transfer the cash and

securities to the redeeming investor on

the third business day after the

redemption request date.

11. Because a redeeming Creation

Unit holder will ordinarily receive a

Portfolio Deposit in exchange for its

Unit, the Trustee will not have to

maintain large cash reserves for

redemptions. This will allow the Trust’s

assets to be committed as fully as

possible to tracking the DJIA, enabling

the Trust to track the index more closely

than certain other investment products

that must allocate a greater portion of

their assets for cash redemptions.

12. The Trust will terminate on the

earlier of (i) January 30, 2122, or (ii) the

date 20 years after the death of the last

survivor of eleven persons named in the

trust agreement. The Trust also will

terminate: (i) if DJIA Trust Receipts are

de-listed from the AMEX; (ii) by

agreement of the holders of 662⁄3% of

outstanding DJIA Trust Receipts; (iii) if

the DTC is unable or unwilling to

continue to perform its functions and a

comparable replacement is unavailable;

and (iv) if NSCC no longer provides

clearance services with respect to DJIA

Trust Receipts, or if the Trustee is no

longer a participants in NSCC. In

addition, the Sponsor will have the

discretionary right to terminate the

Trust if (i) at any time after six months

following and prior to three years

following the initial receipt of Portfolio

Deposits by the Trust the NAV of the

Trust falls below $150,000,000, and (ii)

after three years the NAV is less than

$350,000,000. The Sponsor also may

direct the Trustee to terminate the Trust

if within 90 days from the initial receipt

of Portfolio Deposits the NAV of the

Trust is less than $100,000.

13. Within a reasonable period after

the Trust’s termination, the Trustee will

use its best efforts to sell all portfolio

securities not previously distributed to

investors redeeming Creation Units.

DJIA Trust Receipts not redeemed prior

to termination will be redeemed in cash

at NAV based on the proceeds from the

sale of portfolio securities.

Applicants’ Legal Analysis

1. Applicants request an order under

section 6(c) of the Act granting an

exemption from sections 4(2), 14(a),

22(d), 24(d), and 26(a)(2)(C) of the Act

and rule 22c-1; under sections 6(c) and

17(b) of the Act granting an exemption

from sections 17(a)(1) and (2) of the Act;

and under rule 17d-1 to permit certain

joint transactions.

2. Section 6(c) of the Act provides that

the Commission may exempt any

person, security, or transaction, or any

class of persons, securities, or

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.

Section 4(2) of the Act

1. Section 4(2) of the Act defines a

UIT as an investment company that,

among other things, issues only

redeemable securities. Because DJIA

Trust Receipts will not be individually

redeemable, applicants request an order

that would permit the Trust to register

and operate as a UIT. Applicants state

that investors may purchase DJIA Trust

Receipts in Creation Units from the

Trust and redeem Creation Units.

Applicants further state that, because

the market price of DJIA Trust Receipts

will be disciplined by arbitrage

opportunities, investors should be able

to sell DJIA Trust Receipts in the

secondary market at approximately their

NAV.

Section 14(a) of the Act

1. Section 14(a) provides, in pertinent

part, that no registered investment

company may make an initial public

offering of its securities unless it has a

net worth of at least $100,000, or

provision is made in connection with

the registration of its securities that (i)

firm agreements to purchase $100,000

worth of its securities will have been

made by not more than 25 persons, and

(ii) all proceeds, including sales loads,

will be refunded to investors if the

investment company’s net worth is less

than $100,000 within 90 days after the

effective date of the registration

statement. Applicants state that section

14(a) was designed to address the

formation of undercapitalized

investment companies.

2. Rule 14a-3 under the Act exempts

from section 14(a) UIT’s that invest only

in ‘‘eligible trust securities,’’ which do

not include equity securities, subject to

certain safeguards, including the refund

of any sales load collected from

investors. Applicants will comply in all

respects with rule 14a-3, except that the

Trust will not restrict its investments to

eligible trust securities and the Trustee

will not refund the Transaction Fee.

Applicants contend that the Trust’s

investment in equity securities does not

negate the effectiveness of the rule’s

safeguards nor subject investors to any

greater risk of loss due to investment in

an undercapitalized investment

company. With respect to the

Transaction Fee, applicants assert that it

is not a sales load, and therefore is not

covered by the rule’s refund provision.

Applicants not that the Transaction Fee

will be paid note by retail investors, but

by institutional and other sophisticated,

well-capitalized investors who can

afford the approximately $4,007,000

purchase price of a Creation Unit and

who do not require the protections of

section 14(a).

Section 22(d) of the Act

1. Section 22(d) of the Act, among

other things, prohibits a dealer from

selling a redeemable security that is

being currently offered to the public by

or through an underwriter, except at a

current public offering price described

in the prospectus. Rule 22c-1 under the

Act generally requires that a dealer

selling, redeeming, or repurchasing a

redeemable security do so only at a

price based on its NAV. Applicants state

that secondary market trading in DJIA

Trust Receipts will take place at

negotiated prices, not a current offering

price described in the prospectus, and

not at a price based on NAV. Thus,

purchases and sales of DJIA Trust
65456 Federal Register / Vol. 62, No. 239 / Friday, December 12, 1997 / Notices

9Applicants state that persons purchasing

Creation Units will be cautioned in the prospectus

that some activities on their part may, depending

on the circumstances, result in their being deemed

statutory underwriters and subject them to the

prospectus delivery and liability provisions of the

Securities Act. For example, a broker-dealer firm or

its client may be deemed a statutory underwriter if

it takes Creation Units after placing a creation order

with the Distributor, breaks them down to the

constituents DJIA Trust Receipts, and sells DJIA

Trust Receipts directly to its customers; or if it

chooses to couple the creation of a supply of new

DJIA Trust Receipts with an active selling effort

involving solicitation of secondary market demand

for DJIA Trust Receipts. The prospectus will state

that whether a person is an underwriter depends

upon all the facts and circumstances pertaining to

that person’s activities. The prospectus also will

state that broker-dealer firms should also note that

dealers who are not ‘‘underwriters’’ but are

participating in a distribution (as contrasted to

ordinary secondary trading transactions), and thus

dealing with DJIA Trust Receipts that are part of an

‘‘unsold allotment’’ within the meaning of section

4(3)(C) of the Securities Act, would be unable to

make advantage of the prospectus delivery

exemption provided by section 4(3) of the

Securities Act.

Receipts in the secondary market will

not comply with section 22(d) and rule

22c-1. Applicants request an exemption

from these provisions.

2. Applicants assert that the concerns

sought to be addressed by section 22(d)

and rule 22c-1 with respect to pricing

are equally satisfied by the proposed

method of pricing DJIA Trust Receipts.

Applicants maintain that while there is

little legislative history regarding

section 22(d), its provisions, as well as

those of rule 22c-1, appear to have been

designed to (i) prevent dilution caused

by certain riskless-trading schemes by

principal underwriters and contract

dealers, (ii) prevent unjust

discrimination or preferential treatment

among buyers resulting from sales at

different prices, and (iii) assure an

orderly distribution investment

company shares by eliminating price

competition from dealers offering shares

at less than the published sales price

and repurchasing shares at more than

the published redemption price.

3. Applicants believe that none of

these purposes will be thwarted by

permitting DJIA Trust Receipts to trade

in the secondary market at negotiated

prices. Applicants state (i) that

secondary market trading in DJIA Trust

Receipts does not involve the Trust as

a party and cannot result in dilution of

an investment in DJIA Trust Receipts;

and (ii) to the extent different prices

exist during a given trading day, or from

day to day, such variances occur as a

result of third-party market forces, such

as supply and demand, not as a result

of unjust or discriminary manipulation.

Therefore, applicants assert that

secondary market transactions in DJIA

Trust Receipts will not lead to

discrimination or preferential treatment

among purchasers. Finally, applicants

contend that the proposed distribution

system will be orderly because arbitrage

activity will ensure that the difference

between the market price of DJIA Trust

Receipts and their NAV remains narrow.

Section 24(d) of the Act

1. Section 24(d) of the Act provides,

in relevant part, that the prospectus

delivery exemption provided to dealer

transactions by section 4(3) of the

Securities Act does not apply to any

transaction in a redeemable security

issued by a UIT. Applicants request an

exemption from section 24(d) to permit

dealers in DJIA Trust Receipts to rely on

the prospectus delivery exemption

provided by section 4(3) of the

Securities Act.9 Applicants state that the

imposition of prospectus delivery

requirements on dealers in the

secondary market will materially

impede the success of DJIA Trust

Receipts.

2. Applicants state that the secondary

market for DJIA Trust Receipts is

significantly different from the typical

secondary market for UIT securities,

which is usually maintained by the

sponsor. DJIA Trust Receipts will be

listed on a national securities exchange

and will be traded in a manner similar

to the shares of common stock issued by

operating companies and closed-end

investment companies. Dealers selling

shares of operating companies and

closed-end investment companies in the

secondary market generally are not

required to deliver a prospectus to the

purchaser.

3. Applicants contend that DJIA Trust

Receipts, as a listed security, merit a

reduction in the compliance costs and

regulatory burdens resulting from the

imposition of prospectus delivery

obligations in the secondary market.

Because DJIA Trust Receipts will be

exchange-listed, prospective investors

will have access to several types of

market information about the product.

Applicants state that quotations, last

sale price and volume information will

be continually available on a real time

basis through the consolidated tape and

will be available throughout the day on

brokers’ computer screens and other

electronic services, such as Quotron.

The previous day’s price and volume

information also will be published daily

in the financial section of newspapers.

The Sponsor also will publish daily, on

a per DJIA Trust Receipt basis, the

amount of accumulated dividends, net

of accrued expenses.

4. Investors also will receive the

Product Description. Applicants state

that, while not intended as a substitute

for a prospectus, the Product

Description will contain pertinent

information about DJIA Trust Receipts.

Applicants also note that DJIA Trust

Receipts will be readily understandable

to retail investors as a product that

tracks the DJIA, which is well known to

most investors and widely recognized.

Section 26(a)(2)(C) of the Act

1. Section 26(a)(2)(C) requires, among

other things, that a UIT’s trust indenture

prohibit payments to the trust’s

depositor (in the case of the Trust, the

Sponsor), and any affiliated person of

the depositor, except payments for

performing certain administrative

services. Applicants request an

exemption from section 26(a)(2)(C) to

permit the Trust to reimburse the

Sponsor and/or the AMEX for certain

licensing, registration, marketing, and

organizational expenses.

2. Applicants state that, ordinarily, a

sponsor of a UIT has several sources of

income in connection with the creation

of the trust. Applicants assert, however,

that under the proposed structure of the

Trust, the usual sources of income are

not available because the Sponsor will

not impose a sales load, maintain a

secondary market, or deposit Index

Securities into the Trust. Although the

Sponsor’s parent company, the AMEX,

will earn some income on the trading

fees imposed on transactions occurring

on the AMEX, applicants expect that the

fees will generate substantially less

revenue than what would have been

generated by a normal sales charge on

secondary market trades of DJIA Trust

Receipts. Applicants contend that the

abuse sought to be remedied by section

26(a)(2)(C)—‘‘double dipping’’ by UIT

sponsors collecting money from their

captive trusts as well as the profits

already generated by sales charges and

other sources—will not be present if the

requested exemption is granted.

3. Applicants contend that permitting

the Trust to reimburse the Sponsor for

the Trust’s expenses (discussed above)

would be no more disadvantageous to

the holders of DJIA Trust Receipts than

allowing the expenses to be imposed

indirectly as offsets to sales loads and

other charges, as is done by typical

UITs. Applicants also state that the

Trust will pay the Sponsor only its

actual out-of-pocket expenses and no

component of profit will be included.

Finally, applicants state that the

payment is capped at 20 basis points of

the Trust’s NAV on an annualized basis,

with any expenses in excess of that

amount absorbed by the Sponsor.
Federal Register / Vol. 62, No. 239 / Friday, December 12, 1997 / Notices 65457

1 Investment Company Act Release Nos. 15824

(notice) (June 24, 1987) and (July 21, 1987) (order).

Section 17(a) of the Act

1. Section 17(a) of the Act generally

prohibits an affiliated person of a

registered investment company, or an

affiliated person of such person, from

selling any security to or purchasing any

security from the company. Because

purchases and redemptions of Creation

Units will be ‘‘in-kind’’ rather than cash

transactions, section 17(a) may prohibit

affiliated persons of the Trust from

purchasing or redeeming Creation Units.

Because the definition of ‘‘affiliated

person’’ of another person in section

2(a)(3) of the Act includes any person

owning five percent or more of an

issuer’s outstanding voting securities,

every purchaser of a Creation Unit will

be affiliated with the Trust so long as

fewer than twenty Creation Units are

extant. Applicants request an exemption

from section 17(a) under sections 6(c)

and 17(b), to permit affiliated persons of

the Trust to purchase and redeem

Creation Units.

2. Section 17(b) authorizes the

Commission to exempt a proposed

transaction from section 17(a) if

evidence establishes that the terms of

the transaction, including the

consideration to be paid or received, are

reasonable and fair and do not involve

overreaching, and the proposed

transaction is consistent with the

policies of the registered investment

company and the general provisions of

the Act. Applicants contend that no

useful purpose would be served by

prohibiting affiliated persons of the

Trust from purchasing or redeeming

Creation Units. The composition of a

Portfolio Deposit made by a purchaser

or given to a redeeming unitholder will

be the same regardless of the investor’s

identity, and will be valued under the

same objective standards applied to

valuing the Trust’s portfolio securities.

Therefore, applicants state that ‘‘in

kind’’ purchases and redemptions will

afford no opportunity for an affiliated

person of the Trust to effect a

transaction detrimental to the other

holders of DJIA Trust Receipts.

Applicants also believe that ‘‘in kind’’

purchases and redemptions will not

result in abusive self-dealing or

overreaching by affiliated persons of the

Trust.

Rule 17d–1

1. Applicants request an order under

rule 17d–1 that would permit the Trust

to reimburse the Sponsor and/or the

AMEX for the payment by either party

to Dow Jones of the annual fee required

under a license agreement. The license

agreement allows applicants to use the

DJIA as a basis for DJIA Trust Receipts

and to use certain of Dow Jones’

trademark rights. Applicants believe

that relief is necessary because the

Trust’s undertaking to reimburse the

Sponsor and/or the AMEX (each an

affiliated person of the Trust) might be

deemed a joint enterprise or joint

arrangement in which the Trust is a

participant, in contravention of section

17(d) of the Act and rule 17d–1.

2. Applicants assert that the terms and

provisions of the license agreement

were negotiated at arm’s length and that

the annual license fee is for fair value,

bargained for in good faith, and, to the

best of their knowledge, is an amount

comparable to that charged for similar

arrangements. Applicants submit that

the proposed transaction will result in

an arrangement in which the

participants deal with each other in a

manner similar to, and no less

advantageous than, others who might be

similarly situated.

Applicants’ Conditions

Applicants agree that the order

granting the requested relief will be

subject to the following conditions:

1. Applicants will not register a new

series of the Trust, whether identical or

similar to the DJIA Trust Receipts

Series, by means of filing a posteffective amendment to the Trust’s

registration statement or by any other

means, unless applicants have requested

and received with respect to such new

series, either exemptive relief from the

Commission or a no-action position

from the Division of Investment

Management of the Commission.

2. The Trust’s prospectus and the

Product Description will clearly

disclose that, for purposes of the Act,

DJIA Trust Receipts are issued by the

Trust and that the acquisition of DJIA

Trust Receipts by investment companies

is subject to the restrictions of section

12(d)(1) of the Act.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Jonathan G. Katz,

Secretary.

[FR Doc. 97–32487 Filed 12–11–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Investment Company Act Release No.

22928; 811–5280]

Partner Wealth Fund I, L.P.; Notice of

Application

December 5, 1997.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for order

under section 8(f) of the Investment

Company Act of 1940 (the ‘‘Act’’)

declaring that applicant has ceased to be

an investment company.

SUMMARY OF APPLICATION: Applicant,

Partner Wealth Fund I, L.P., is an

employees’ securities company under

section 2(a)(13) of the Act. Applicant

requests an order declaring that it has

ceased to be an investment company.

FILING DATES: The application was filed

on November 19, 1997. Applicant has

agreed to file an amendment, the

substance of which is incorporated in

this notice, during the notice period.

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 applicant with a

copy of the request, personally or by

mail. Hearing requests should be

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

December 30, 1997, and should be

accompanied by proof of service on the

applicant, in the form of an affidavit or,

for lawyers, a certificate of service.

Hearing requests should state the nature

of the writer’s interest, the reason for the

request, and the issues contested.

Persons may request notification of a

hearing by writing to the SEC’s

Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

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

Applicant, 333 Clay Street, Suite 2300,

Houston, TX 77002.

FOR FURTHER INFORMATION CONTACT:

Kathleen L. Knisely, Staff Attorney, at

(202) 942–0517 (Division of Investment

Management, Office of Investment

Company Regulation).

SUPPLEMENTARY INFORMATION: This is a

summary of the application. The

complete application may be obtained

for a fee from the SEC’s Public

Reference Branch, 450 Fifth Street,

N.W., Washington, D.C. 20549 (tel. 202–

942–8090).

Applicant’s Representations

1. Applicant is a Delaware limited

partnership and an employees’

securities company under section

2(a)(13) of the Act. On July 21, 1987,

applicant received an order from the

SEC exempting applicant from various

provisions of the Act.1 On August 13,

1987, applicant filed a notification of

registration on Form N–8A.

2. Under applicant’s limited partners

have received distributions at least