[Federal Register Volume 60, Number 99 (Tuesday, May 23, 1995)]
[Notices]
[Pages 27365-27366]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-12597]



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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-21079; 812-9496]


Quest for Value Distributors, et al.; Notice of Application

May 17, 1995.

AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of application for exemption under the Investment 
Company Act of 1940 (the ``Act'').

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APPLICANTS: Quest for Value's Unit Investment Laddered Trust Series 
(``Quilts'') and Quest for Value Distributors (``Quest Distributors'' 
or the ``Sponsor'').

RELEVANT ACT SECTIONS: Order requested under sections 11(a) and 11(c).

SUMMARY OF APPLICATION: Applicants request an order to permit certain 
offers of exchange between unit investment trusts.

FILING DATES: The application was filed on February 23, 1995, and 
amended on April 12, 1995 and May 5, 1995.

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 June 12, 1995, 
and should be accompanied by proof of service on applicants, in the 
form of an affidavit or, for lawyers, a certificate of service. Hearing 
requests should state the nature of the writer's interest, the reason 
for the request, and the issues contested. Persons who wish to be 
notified of a hearing may request notification by writing to the SEC's 
Secretary.

ADDRESSES: Secretary: SEC, 450 5th Street NW, Washington, DC 20549. 
Applicants: Two World Trade Center, 225 Liberty Street, New York, New 
York 10080-6116.

FOR FURTHER INFORMATION CONTACT: Elaine M. Boggs, Staff Attorney (202) 
942-0572, or C. David Messman, Branch Chief, at (202) 942-0564 
(Division of Investment Management, Office of Investment Company 
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application is available for a fee at the 
SEC's Public Reference Branch.

Applicants' Representations

    1. Quilts is a series of unit investment trusts registered under 
the Act and is sponsored by Quest Distributors. Quilts consists of 
Quilts Monthly Income--U.S. Treasury Series 1, Quilts Asset Builder--
U.S. Series 3, Quilts Income--Corporate Series 1, and Quilts Municipal 
Insured Series 1. Applicants also request relief for future series of 
Quilts and subsequently issued unit investment trusts sponsored by the 
Sponsor or a sponsor controlled by or under common control with the 
Sponsor and registered (or to be registered) under the Securities Act 
of 1933 and the Act (collectively with Quilts, the ``Trusts'').
    2. The sales charge for initial investment in the Trusts currently 
ranges between .85% to 4.5% of the public offering price, subject to 
discounts for certain volume transactions. Quest Distributors intends 
to maintain a secondary market for the units of each series, although 
it is not obligated to do so. The sales charge upon units sold in the 
secondary market ranges from .85% to 4.5% plus net accrued interest.
    3. Applicants propose to offer an exchange privilege to unitholders 
of the Trusts at a reduced sales charge (the ``Exchange Privilege''). 
Unitholders would be able to exchange any of their units for units in 
one or more available series of the Trusts (the ``Exchange Trust''). 
Applicants also propose to offer a rollover privilege to unitholders of 
the Trusts at a reduced sales charge (the ``Rollover Privilege''). 
Unitholders would be able to ``roll over'' their units in a series 
which is terminating for units of one or more new series of the Trusts 
(the ``Rollover Trust'').
    4. To exercise the Exchange or Rollover Privilege, a unitholder 
must notify the Sponsor. Exercise of the Exchange or Rollover Privilege 
is subject to the following conditions: (a) The Sponsor must be 
maintaining a secondary market in units of the Trust held by the 
unitholder and units of the Trust to be acquired in the exchange, (b) 
at the time of the exchange, there must be units of the Exchange or 
Rollover Trust to be acquired available for sale, and (c) exchanges 
will be in whole units only.
    5. Unitholders who wish to exchange units under the Exchange or 
Rollover Privileges within the first five months of purchase will not 
be eligible for the reduced sales charge. Such unitholders will be 
charged a sales load equal to the greater of (a) the reduced sales load 
or (b) an amount which, when added to the sales charge paid by the 
unitholder upon his or her original purchase of units of the Trusts, 
would equal the sales charge applicable to the direct purchase of the 
newly acquired units, determined as of the date of exchange.

Applicants' Legal Analysis

    1. Section 11(a) requires SEC approval of an offer to exchange 
securities between open-end investment companies if the exchange occurs 
on any basis other than the relative net asset values of the securities 
to be exchanged. Section 11(c) makes section 11(a) applicable to any 
type of exchange offer of securities of registered unit investment 
trusts for the securities of any other investment company, irrespective 
of the basis of exchange.
    2. Applicants represent that unitholders will not be induced or 
encouraged to participate in the exchange privilege through an active 
advertising or sales campaign. Quest Distributors recognizes its 
responsibility to its customers against generating excessive 
commissions through churning and asserts that the sales charge 
collected will not be a significant economic incentive to salesmen to 
promote inappropriately the exchange privilege. Applicants further 
believe that the Exchange and Rollover Privileges are 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.

[[Page 27366]]

Applicant's Conditions

    If the requested order is granted, applicants agree to the 
following conditions:
    1. The prospectus for each series and any sales literature or 
advertising that mentions the existence of the Exchange Privilege or 
the Rollover Privilege will disclose that the Exchange and the Rollover 
Privilege are subject to termination and that their terms are subject 
to change.
    2. Whenever the Exchange Privilege or the Rollover Privilege 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 Privilege or the Rollover Privilege, 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 an Exchange 
Trust or a Rollover Trust under section 22(e) of the Act and the rules 
and regulations thereunder, or
    ii. An Exchange Trust or a Rollover 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.
    3. An investor who purchases units under the Exchange or Rollover 
Privilege will pay a lower aggregate sales charge than that which would 
be paid for the units by a new investor.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margatet H. McFarland,
Deputy Secretary.
[FR Doc. 95-12597 Filed 5-22-95; 8:45 am]
BILLING CODE 8010-01-M