Federal Register / Vol. 60, No. 1 / Tuesday, January 3, 1995 / Notices 163

1The S&P MidCap 400 Index is an index that

focuses on middle capitalization stocks not

included in the Standard and Poor’s 500 Composite

Stock Price Index (‘‘S&P 500 Index’’). The issues

included in the S&P MidCap 400 Index were

selected from a population of 1,700 securities, each

with a 1990 year-end capitalization of between $200

million and $5 billion. As of December 31, 1993,

applicants estimate that over $6 billion was

invested in or indexed to the S&P MidCap 400

Index.

Issuer Delisting; Notice of Application

To Withdraw From Listing and

Registration (Benson Eyecare

Corporation, Common Stock, $.01 Par

Value); File No. 1–9435

December 27, 1994.

Benson Eyecare Corporation

(‘‘Company’’) has filed an application

with the Securities and Exchange

Commission (‘‘Commission’’), pursuant

to section 12(d) of the Securities

Exchange Act of 1934 (‘‘Act’’) and Rule

12d2–2(d) promulgated thereunder, to

withdraw the above specified security

(‘‘Security’’) from listing and

registration on the American Stock

Exchange, Inc. (‘‘Amex’’).

The reasons alleged in the application

for withdrawing the Security from

listing and registration include the

following:

According to the Company, in

addition to being listed on the Amex,

the Security is listed on the New York

Stock Exchange, Inc. (‘‘NYSE’’). The

Security commenced trading on the

NYSE at the opening of business on

December 7, 1994 and concurrently

therewith the Security was suspended

from trading on the Amex.

In making the decision to withdraw

the Security from listing on the Amex,

the Company considered the direct and

indirect costs and expenses attendant on

maintaining the dual listing of its

securities on the NYSE and on the

Amex. The Company does not see any

particular advantage in the dual trading

of the Security and believes that dual

listing would fragment the market for

the Security.

Any interested person may, on or

before January 18, 1995, submit by letter

to the Secretary of the Securities and

Exchange Commission, 450 Fifth Street

NW., Washington, DC 20549, facts

bearing upon whether the application

has been made in accordance with the

rules of the Exchange 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. 94–32306 Filed 12–30–94; 8:45 am]

BILLING CODE 8010–01–M

[Rel. No. IC–20797; 812–8422]

MID CAP SPDR Trust, Series 1, et al.;

Notice of Application

December 23, 1994.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of Application for Order

under the Investment Company Act of

1940 (‘‘Act’’).

APPLICANTS: MID CAP SPDR Trust,

Series 1 (‘‘Trust’’) and PDR Services

Corporation (together with any person

directly or indirectly controlling,

controlled by, or under common control

with, PDR Services, the ‘‘Sponsor’’).

RELEVANT ACT SECTIONS: Order requested

under section 6(c) granting an

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

17(a) (1), 17(a) (2), 22(d), 22(e), 24(d),

26(a) (C) and rule 22c–1; under section

17(b) granting an exemption from

sections 17(a)(1) and 17(a)(2); and under

rule 17d–1 to permit certain joint

transactions with affiliates.

SUMMARY OF APPLICATION: Applicants

request an order permitting:

(1) the Trust to issue non-redeemable

securities (‘‘MID CAP SPDRs’’);

(2) secondary market transactions in

MID CAP SPDRs at negotiated prices,

rather than at a current public offering

price described in the prospectus;

(3) dealers to sell MID CAP SPDRs to

purchasers in the secondary market

unaccompanied by a prospectus, when

prospectus delivery is not required by

the Securities Act of 1933;

(4) certain expenses associated with

the creation and maintenance of the

Trust to be borne by the Trust, rather

than by the Sponsor;

(5) affiliated persons of the Trust to

deposit securities into, and receive

securities from, the Trust in connection

with the purchase and redemption of

MID CAP SPDRs; and

(6) the Trust to reimburse the Sponsor

for payment of an annual licensing fee

to Standard & Poor’s. The order would

also temporarily permit the Trust to

satisfy redemption requests within five

business days rather than seven

calendar days and exempt the Sponsor

from the Act’s requirement that it

purchase, or place with others, $100,000

worth of MID CAP SPDRs;

FILING DATE: The application was filed

on May 28, 1993; and amended on July

13, 1994. By letter dated December 23,

1994, counsel, on behalf of applicants,

agreed to file a further amendment

during the notice period to make certain

technical changes. This notice reflects

the changes to be made to the

application by such further amendment.

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

January 17, 1995, and should be

accompanied by proof of service on the

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, N.W., Washington, DC 20549.

Applicants, c/o American Stock

Exchange, Inc., 86 Trinity Place, New

York, New York 10006.

FOR FURTHER INFORMATION CONTACT:

Felice R. Foundos, Staff Attorney, at

(202) 942–0571, or Robert A. Robertson,

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. The Trust is a unit investment trust

(‘‘UIT’’) that will be organized under the

laws of the State of New York. The Trust

is designed to provide investors with a

low-cost instrument that closely tracks

the Standard & Poor’s MidCap 400

Index (‘‘S&P MidCap 400 Index’’), that

trades like a share of common stock, and

that pays quarterly dividends

proportionate to those paid by the

portfolio of stocks that constitutes the

S&P MidCap 400 Index.1 The Sponsor is

a wholly-owned subsidiary of the

American Stock Exchange (‘‘AMEX’’).

The Bank of New York (‘‘Trustee’’) will

act as trustee of the Trust. PDR

Distributors, Inc. (‘‘Distributor’’), a

registered broker-dealer and whollyowned subsidiary of Signature Financial

Group, Inc., will serve as the distributor
164 Federal Register / Vol. 60, No. 1 / Tuesday, January 3, 1995 / Notices

of the Trust’s securities, known as MID

CAP SPDRs (for Standard & Poor’s

MidCap 400 Portfolio Depositary

Receipts).

2. Units of beneficial interest in the

Trust will be issued in aggregates of

25,000 MID CAP SPDRs known as

‘‘Creation Units.’’ Each MID CAP SPDR

will be worth one-fifth the value of the

S&P MidCap Index, or approximately

$34 at the time of filing the application.

Each Creation Unit, therefore, would

cost about $850,000.

3. All orders to purchase Creation

Units from the Trust must be placed

with the Distributor, who shall be

responsible for transmitting such orders

to the Trustee. The Distributor will

furnish to purchasers confirmation that

the orders have been accepted, but shall

reject any order that is not in proper

form. Upon acceptance of an order, the

Distributor will instruct the Trustee to

initiate the appropriate procedures. The

Distributor will maintain records of the

orders placed with it, the confirmations

of acceptances it issues, and the

instructions to implement delivery. The

Distributor will be responsible for

distributing prospectuses and may

provide certain other administrative

services, such as those related to state

securities compliance. The Sponsor will

pay the Distributor a fee for its services.

The Sponsor will not seek

reimbursement from the Trust for the

payment of such fee without obtaining

exemptive relief from the SEC.

4. Investors wishing to purchase a

Creation Unit must transfer to the Trust

a ‘‘Portfolio Deposit,’’ which consists of:

(a) a portfolio of securities that is

substantially similar, in composition, to

the component securities (‘‘Index

Securities’’) of the S&P MidCap 400

Index; (b) 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, on a Creation

Unit basis; and (c) a cash payment or

credit (‘‘Balancing Amount’’) designed

to equalize the net asset value of the

S&P MidCap 400 Index and the net asset

value of a Portfolio Deposit. The

Balancing Amount is required because,

among other things, a Portfolio Deposit,

unlike the S&P MidCap 400 Index,

cannot contain fractional shares. An

investor making a Portfolio Deposit also

will be charged a nominal service fee

(‘‘Transaction Fee’’) to defray securities

settlement costs, as discussed below.

5. MID CAP SPDRs will not be

individually redeemable, except upon

termination of the Trust. To redeem, an

investor must accumulate enough MID

CAP SPDRs to reconstitute a Creation

Unit. An investor redeeming a Creation

Unit will receive Index Securities and

cash identical to the Portfolio Deposit

required of an investor wishing to

purchase a Creation Unit on that date.

6. Because a redeeming shareholder

will receive a Portfolio Deposit in

exchange for its Creation Unit, and only

a minute portion of a Portfolio Deposit

consists of cash, the Trustee will not be

forced to maintain large cash reserves

for redemptions. This should allow the

Trust’s resources to be committed as

fully as possible to tracking the S&P

MidCap 400 Index, enabling the Trust to

track the Index more closely than other

basket products that must allocate a

much greater portion of their assets for

cash redemptions.

7. Persons obtaining MID CAP SPDRs

from the Trust in Creation Unit size

aggregations may hold those MID CAP

SPDRs or sell some or all of them into

the secondary market. MID CAP SPDRs

will be listed on the AMEX and traded

in the secondary market in the same

manner as other equity securities. The

price of MID CAP SPDRs on the AMEX

will be based on a current bid/offer

market. Transactions involving the sale

of MID CAP SPDRs will be subject to

customary brokerage commissions and

charges.

8. Applicants expect that the price at

which MID CAP SPDRs trade will be

disciplined by arbitrage opportunities

created by the ability to purchase or

redeem Creation Unit-size aggregations

at net asset value, which should ensure

that MID CAP SPDRs will not trade at

a material discount or premium in

relation to net asset value.

9. To be eligible to purchase a

Creation Unit, an organization must be

a participant in the continuous net

settlement system of the National

Securities Clearing Corporation

(‘‘NSCC’’) or a Depository Trust

Company (‘‘DTC’’) participant, but is

not required to be an AMEX member.

The procedures employed to process a

purchase order will depend upon

whether the transaction is settled

through NSCC or DTC. Procedures for

redeeming a Creation Unit are analogous

to those for purchasing one, although

redemption requests are placed with the

Trustee, rather than the Distributor.

10. MID CAP SPDRs will be registered

in book-entry form only; certificates will

not be issued. The DTC or its nominee

will be the registered owner of all

outstanding MID CAP SPDRs. Records

reflecting the beneficial owners of MID

CAP SPDRs will be maintained by the

DTC or the DTC participants.

11. 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. For example, a brokerdealer firm may be deemed a statutory

underwriter if it purchases Creation

Units from the Trust, breaks them down

into the constituent MID CAP SPDRs,

and sells the MID CAP SPDRs directly

to its customers; or if it chooses to

couple the creation of a supply of new

MID CAP SPDRs with an active selling

effort involving solicitation of a

secondary market demand for MID CAP

SPDRs. 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 will

explain that (a) a statutory underwriter

will be subject to certain liability

provisions of the Securities Act, and (b)

dealers who are statutory underwriters,

and dealers effecting transactions in

MID CAP SPDRs that are part of an

‘‘unsold allotment’’ within the meaning

of section 4(3)(C) of the Securities Act,

will be unable to take advantage of the

prospectus delivery exemption provided

to dealers by section 4(3) of the

Securities Act.

12. As provided in the rules of the

AMEX, applicants will make available a

‘‘Product Description’’ of MID CAP

SPDRs to members and member

organizations for distributions by them

to customers purchasing MID CAP

SPDRs. In addition, members are

required to include the Product

Description with sales materials relating

to MID CAP SPDRs that is provided to

the public. The Product Description is

designed to provide a brief and readily

understandable description of the

salient aspects of MID CAP SPDRs. The

Product Description will advise

investors that a prospectus is available

without charge upon request. Although

the AMEX rule cannot ensure delivery

of a Product Description to investors

purchasing MID CAP SPDRs through a

non-member broker-dealer in a

transaction away from the AMEX floor,

applicants expect that such transactions

should be extremely rare. In addition,

applicants note that transactions

effected on regional exchanges pursuant

to unlisted trading privileges can be

covered by conditioning the grant of

such privileges upon imposition of an

exchange requirement that Product

Descriptions be delivered. Purchases

effected over the counter may be

somewhat more difficult to address,

although applicants note that the

National Association of Securities

Dealers, Inc. may wish to promulgate an

advice to members regarding the need to

distribute a Product Description to every
Federal Register / Vol. 60, No. 1 / Tuesday, January 3, 1995 / Notices 165

2See SPDR Trust, Series 1, Investment Company

Act Release Nos. 18959 (Sept. 17, 1992) (notice) and

19055 (October 26, 1992) (order) (‘‘SPDR Order’’).

MID CAP SPDR purchaser on the same

terms as required by the AMEX rule.

13. During the first two years of

operation, the Trustee will be paid a

‘‘Trustee’s Fee’’ of 12/100 of 1% of the

Trust’s net asset value annually.

Thereafter, the Trustee’s Fee will vary

from 10/100 to 14/100 of 1% per

annum, depending on the net asset

value of the Trust. The Trustee may

waive all or a portion of the Trustee’s

fee. The Trustee also will receive a

Transaction Fee directly from investors

in connection with certain creations and

redemptions of Creation Units to defray

securities settlement costs. The

Transaction Fee will vary from $250 to

$1500 per Creation Unit depending

upon the number of Creation Units the

investor creates or redeems. An

additional amount not to exceed three

times the Transaction Fee will be

charged to investors who purchase and

redeem via the DTC rather than the

continuous net settlement system of

NSCC, to cover the increased expense

associated with settlement outside the

NSCC clearing process. The Sponsor

may modify or waive the Transaction

Fee for certain lot-size creations or

redemptions. Any increase of the

Transaction Fee will be subject to a

maximum of 20/100 of 1% of the value

of a Creation Unit at the time of creation

or redemption, as the case may be. All

variations in the Transaction Fee will be

imposed in compliance with rule 22d–

1, as if it were a sales load. The Trustee

also will receive as compensation any

benefit derived from holding funds of

the Trust in non-interest bearing

accounts.

14. The Trust will make quarterly

distributions of an amount representing

the dividends accumulated on portfolio

securities during such quarter, net of

fees and expenses. Additional

distributions will be made to the

minimum extent necessary to comply

with certain provisions of the Internal

Revenue Code and to avoid the

imposition of excise taxes imposed by

section 4982 of the Code. The Trust also

intends to make available the DTC book

entry Dividend Reinvestment Service

through which investors may have their

dividend distributions reinvested in

MID CAP SPDRs. The Trust’s

prospectus will disclose that brokerage

commissions, if any, incurred in

obtaining the Index Securities necessary

to create additional MID CAP SPDRs

with the cash from these distributions

will be an expense of the Trust.

15. Beneficial owners of MID CAP

SPDRs will have no voting rights with

respect to the securities held by the

Trust. The Trustee will have the right to

vote all of the voting stocks in the Trust.

The Trustee will vote the Trust’s shares

in the same proportion as all other

shares of the security are voted. If this

arrangement is not permitted, the

Trustee shall abstain from voting.

16. Applicants assert that MID CAP

SPDRs afford significant benefits in the

public interest. MID CAP SPDRs, which

track non-S&P 500 securities, will

broaden the trading, investing, and

hedging opportunities available to

investors by tracking an alternative

segment of the domestic equity

securities market, stocks with mid-range

capitalizations. Applicants believe that

MID CAP SPDRs enhance the choices

available to investors and provide a

cost-effective mechanism for investing

in the targeted market segment. Further,

the Trust should be able to track the

S&P MidCap 400 Index more closely

than other basket products that must

allocate a portion of their assets for cash

redemptions. In addition, MID CAP

SPDRs will provide a low-cost marketbasket security that, unlike open-end

index funds, can be traded at negotiated

prices throughout the business day.

Applicants’ Legal Analysis

1. Applicants request an order

granting an exemption from sections

4(2), 14(a), 17(a)(1), 17(a)(2), 22(d),

22(e), 24(d), and 26(a)(2)(C) and rule

22c–1 and permitting them to engage in

affiliated transactions otherwise

prohibited by section 17(d) and rule

17d–1. Applicants represent that the

relief requested herein is substantially

similar to that granted in the application

concerning the Standard and Poor’s

Depositary Receipts (‘‘SPDRs’’), a

similar instrument that tracks the S&P

500 Index.2

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

UIT as an investment company that,

among other things, issues only

redeemable securities. Because MID

CAP SPDRs are not individually

redeemable, applicants request an order

that would permit the Trust to register

and operate as a UIT. Applicants note

that beneficial owners of MID CAP

SPDRs wishing to redeem may purchase

additional MID CAP SPDRs and tender

the resulting Creation Unit for

redemption. Moreover, because the

market price of MID CAP SPDRs will be

disciplined by arbitrage opportunities,

beneficial owners should be able to sell

MID CAP SPDRs at approximately net

asset value.

3. Section 22(d), 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 generally

requires that a dealer selling, redeeming,

or repurchasing a redeemable security

do so only at a price based on its net

asset value. Secondary market

transactions in MID CAP SPDRs will

take place at negotiated prices (generally

the current bid/offer price quoted on the

AMEX), not at a current offering price

described in the prospectus, and not at

a price based on net asset value. Thus,

purchases and sales of MID CAP SPDRs

by dealers in the secondary market will

not comply with section 22(d) and rule

22c–1. Accordingly, applicants have

requested an exemption from these two

provisions.

4. 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 MID CAP SPDRs.

While there is little legislative history

regarding section 22(d), its provisions,

as well as those of rule 22c–1, appear to

have been enacted (a) to prevent

dilution caused by certain risklesstrading schemes by principal

underwriters and contract dealers, (b) to

prevent unjust discrimination or

preferential treatment among buyers

resulting from sales at different prices,

and (c) to assure an orderly distribution

of 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. Applicants believe

that none of these purposes will be

thwarted by permitting MID CAP SPDRs

to trade in the secondary market at

negotiated prices. First, secondary

market trading in MID CAP SPDRs,

because it does not involve the Trust as

a party, cannot result in dilution of a

beneficial owner’s investment. Second,

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 and interest rates,

not as a result of unjust or

discriminatory manipulation. Therefore,

secondary market trading in MID CAP

SPDRs 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 MID CAP SPDRs and

their net asset value remains narrow.

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

in relevant part, that the prospectus

delivery exemption provided to dealer
166 Federal Register / Vol. 60, No. 1 / Tuesday, January 3, 1995 / Notices

transactions by section 4(3) of the

Securities Act does not apply to any

transaction in a redeemable security

issued by a UIT. If MID CAP SPDRs are

viewed as redeemable because Creation

Units are redeemable and MID CAP

SPDRs are deemed to be securities of the

same class, section 24 would apply.

Because the applicability of section

24(d) is not free from doubt, applicants

have requested an exemption from that

section to permit dealers trading in MID

CAP SPDRs to rely on the prospectus

delivery exemption provided by section

4(3) of the Securities Act. Assuming

section 24(d) applies, the exemption is

necessary because, according to

applicants, the imposition of prospectus

delivery requirements on transactions

by dealers in the secondary market will

materially and adversely impede the

success of the MID CAP SPDRs product.

6. Applicants note that the secondary

market for MID CAP SPDRs is

significantly different from the typical

secondary market for UIT securities,

which usually is maintained by the

sponsor. MID CAP SPDRs 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 funds in the secondary

market generally are not required to

deliver a prospectus to the purchaser.

Applicants contend that the MID CAP

SPDRs should be subject to the same

regulatory scheme as securities issued

by operating companies and closed-end

funds.

7. Because MID CAP SPDRs will be

exchange-listed, prospective investors

will have access to several types of

information about the product.

Information regarding sales price and

volume will be continually available on

a real time basis throughout the day on

brokers’ computer screens and other

electronic services, such as Quotron.

The previous day’s price and volume

information will be published daily in

the financial section of newspapers.

Applicants also will publish daily, on a

per MID CAP SPDR basis, the amount of

accumulated dividends, net of accrued

expenses. In addition, applicants expect

that MID CAP SPDRs, like SPDRs, will

be viewed as a novel, cost-effective,

index security and will generate

significant interest in the financial

community. Applicants expect that

broker-dealers and market analysts will

familiarize themselves with the product,

follow its performance, and share their

opinions of the product with clients and

other investors, resulting in even greater

amounts of available information for

investors.

8. In addition to all the information

set forth above, investors will receive

the Product Description. While not

intended to substitute for a full

prospectus, the Product Description will

contain useful information about MID

CAP SPDRs.

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

other things, that the trust indenture

prohibit payments to the trust’s

depositor (i.e., the Sponsor), and any

affiliated person of the depositor, except

payments for performing certain

administrative services not relevant

hereto. Applicants request an exemption

from section 26(a)(2)(C) to permit the

Trust to reimburse the Sponsor or

AMEX, up to a maximum of 30 basis

points of the Trust’s net asset value on

an annualized basis, for the following

expenses: (a) annual licensing fees for

use of the ‘‘S&P MidCap 400’’

trademark; (b) federal and state annual

registration fees for the issuance of MID

CAP SPDRs; (c) expenses of the Sponsor

relating to the printing and distribution

of marketing materials describing MID

CAP SPDRs and the Trust; and (d) the

initial fees and expenses incurred in

connection with the organization of the

Trust, which will be capitalized and

amortized over five years on a straightline basis.

10. Ordinarily, the sponsor of a UIT

has several sources of income, and

expenses normally incurred by the

sponsor in connection with the creation

and maintenance of a UIT can be offset

against the income from such sources.

As the proposed Trust is structured,

however, 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 exchange, applicants expect that

such fees will generate substantially less

revenue than what would have been

generated by a normal sales load or sales

charges on secondary market trades of

MID CAP SPDRs. In light of the above,

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 on top of the profits

already generated by sales charges and

other sources of income—will not be

present if the requested exemption is

granted. In any event, the payment is

capped at 30 basis points of the Trust’s

net asset value on an annualized basis.

Expenses in excess of that figure will be

absorbed by the Sponsor or the AMEX.

11. Section 14(a) provides, in part,

that no registered investment company

may make an initial public offering of

its securities unless it has a net worth

of $100,000, or provision is made in

connection with the registration of such

securities that (i) firm agreements to

purchase $100,000 worth of such

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 has a net worth of less than

$100,000 within 90 days after the

effective date of the registration

statement.

12. Rule 14a–3 under the Act provides

an exemption from section 14(a) for

UITs that invest only in ‘‘eligible trust

securities’’ and agree to certain investor

safeguards, including the refund of any

sales loads 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, which do not

include equity securities, and the

Trustee will not refund the Transaction

Fee discussed above. The fact that the

Trust’s portfolio is invested in equity

rather than debt securities, applicants

contend, does not negate the

effectiveness of the safeguards nor

subject investors to greater risk of loss

due to investment in an

undercapitalized investment company.

With respect to the Transaction Fee,

applicants believe that it is not a sales

load, and therefore is not covered by the

refund provision. In addition, the

Transaction Fee will be paid not by

small retail investors, but by

institutional and other sophisticated,

well-capitalized investors who can

afford the $850,000 purchase price of a

Creation Unit. Such investors are able to

assume the risk, which will be disclosed

in the prospectus, of forfeiting the

relatively small additional amount

represented by the Transaction Fee.

13. Section 17(a) generally prohibits

an affiliated person of a registered

investment company from purchasing

from or selling to such company any

security or other property. Because

purchases and redemptions will be ‘‘inkind’’ rather than cash transactions,

section 17(a) may prohibit affiliated

persons of the Trust from purchasing or

redeeming Creation Units. Moreover,

because the definition of affiliated

person includes anyone owning 5% or

more of an issuer’s outstanding voting

stock, every purchaser of a Creation

Unit will be affiliated with the Trust so

long as there are twenty or fewer

holders of Creation Units. Applicants

request an exemption from section 17(a)

pursuant to sections 6(c) and 17(b), to
Federal Register / Vol. 60, No. 1 / Tuesday, January 3, 1995 / Notices 167

permit affiliated persons of the Trust to

purchase and redeem Creation Units.

14. Applicants contend that no useful

purpose would be served by prohibiting

affiliated persons from making ‘‘in

kind’’ purchases or ‘‘in kind’’

redemptions of Creation Units. The

composition of the Portfolio Deposit

deposited by a purchaser or given to a

redeemer will be the same regardless of

the investor’s identity, and will be

valued pursuant to the same objective

standards applied to valuing the Trust’s

portfolio securities. Thus, ‘‘in kind’’

purchases and redemptions will afford

no opportunity for affiliated persons to

effect a transaction detrimental to the

other holders of MID CAP SPDRs.

Applicants believe that ‘‘in kind’’

purchases and redemptions will not

result in abusive self-dealing or

overreaching by affiliated persons of the

Trust.

15. Applicants request an order

pursuant to rule 17d–1 that would

permit the Trust to reimburse the

Sponsor or the AMEX for the payment

by either such party to Standard &

Poor’s of the annual fee required under

a license agreement. The license

agreement allows applicants to use the

S&P MidCap 400 Index as a basis for

MID CAP SPDRs and to use certain of

Standard & Poor’s trademark rights.

Applicants believe that relief is

necessary because the Trust’s

undertaking to reimburse the Sponsor

(an affiliated person of the Trust) and/

or the AMEX (an affiliated person of the

Sponsor) may constitute a joint

enterprise or joint arrangement in which

the Trust is a participant, in

contravention of section 17(d) and rule

17d–1.

16. Applicants request a temporary

exemption from the requirement

imposed by section 22(e) of the Act to

provide payment or satisfaction of

redemptions within seven days

following tender of a Creation Unit for

redemption. Applicant represents that

the Trust’s clearing agent, NSCC,

currently clears all trades through its

system in five business days and short

settlement of trades will not be available

in connection with the MID CAP SPDR

clearing process. NSCC is closed for

business on certain holidays. Under the

present system, if a Beneficial Owner

were to tender a Creation Unit for

redemption during a seven day period

preceding such a holiday, NSCC’s five

business day settlement system would

result in a redemption on the eighth

calendar day following tender, resulting

in a technical violation of section 22(e).

Applicants request relief to permit

redemption in five business days

following a redemption request until the

effective date of rule 15c6–1 adopted

under the Securities Exchange Act,

which will shorten the settlement

period to three business days. The rule

provides for a transition period during

which securities may settle in four

business days. After the effective date of

the rule, the NSCC will settle in

accordance with the rule and relief from

22(e) will no longer be necessary.

17. Applicants assert that the NSCC is

the appropriate institution to provide

securities clearing services for the Trust.

It is the nation’s largest clearing agency,

clearing 95% of all domestic equity

trades, and has a well-established

reputation in the financial community.

In addition, the clearance and

settlement of four hundred separate

securities essentially as a single

transaction requires sophisticated

clearing services. Applicants have found

that NSCC is able to provide these

services and has enhanced its existing

clearing processes to handle purchases

and redemptions of Creation Units. The

use of NSCC will provide beneficial

owners of MID CAP SPDRs with stateof-the-art securities handling, clearance,

and transfer systems services, which,

given the complexity of mirroring the

component shares of the S&P MidCap

400 Index, is extremely important to all

such owners. Applicants also note that

the Sponsor has found the clearing

process efficient and reliable when

clearing SPDRS for the SPDR Trust.

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 Series 1, by means of filing a

post-effective 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 SEC 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,

MID CAP SPDRs are issued by the Trust

and that the acquisition of MID CAP

SPDRs by investment companies is

subject to the restrictions of section

12(d)(1) of the Act.

By the Commission.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 94–32257 Filed 12–30–94; 8:45 am]

BILLING CODE 8010–01–M

Issuer Delisting; Notice of Application

To Withdraw From Listing and

Registration; (Pratt & Lambert United,

Inc., Common Stock, $.01 Par Value)

File No. 1–994

December 27, 1994.

Pratt & Lambert United, Inc.

(‘‘Company’’) has filed an application

with the Securities and Exchange

Commission (‘‘Commission’’), pursuant

to Section 12(d) of the Securities

Exchange Act of 1934 (‘‘Act’’) and Rule

12d2–2(d) promulgated thereunder, to

withdraw the above specified security

(‘‘Security’’) from listing and

registration on the American Stock

Exchange, Inc. (‘‘Amex’’).

The reasons alleged in the application

for withdrawing the Security from

listing and registration include the

following:

According to the Company, in

addition to being listed on the Amex,

the Security from listing and registration

include the following:

According to the Company, in

addition to being listed on the Amex,

the Security is listed on the New York

Stock Exchange, Inc. (‘‘NYSE’’). The

Security commenced trading on the

NYSE at the opening of business on

December 7, 1994 and concurrently

therewith the Security was suspended

from trading on the Amex.

In making the decision to withdraw

the Security from listing on the Amex,

the Company considered the direct and

indirect costs and expenses attendant on

maintaining the dual listing of its

securities on the NYSE and on the

Amex. The Company does not see any

particular advantage in the dual trading

of the Security and believes that dual

listing would fragment the market for

the Security.

Any interested person may, on or

before January 18, 1995 submit by letter

to the Secretary 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 exchange 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. 94–32307 Filed 12–30–94; 8:45 am]

BILLING CODE 8010–01–M