[Federal Register Volume 60, Number 250 (Friday, December 29, 1995)]
[Notices]
[Pages 67373-67377]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31513]



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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 21620; 812-9798]


Voyageur Fund Managers, Inc., et al.; Notice of Application

December 22, 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: Voyageur fund Managers, Inc. (the ``Sponsor''), Voyageur 
Unit Investment Trust, Voyageur Equity Trust, Voyageur Tax-Exempt 
Trust, and any future unit investment trusts sponsored by the Sponsor 
(together with the three above-named unit investment trusts, the 
``Trusts'') and their respective series (each, a ``Series'').

Relevant Act Sections: Order requested under section 6(c) granting an 
exemption from sections 2(a)(32), 2(a)(35), 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: (a) Permitting the 
Trusts to impose sales charges on a deferred basis and to waive the 
deferred sales charge in certain cases; (b) permitting certain offers 
of exchange involving the Trusts; (c) exempting the Sponsor from having 
to take for its own account or place with others $100,000 worth of 
units in certain Trusts; (d) permitting certain Trusts to distribute 
capital gains resulting from redemptions of portfolio securities within 
a reasonable time after receipt; and (e) permitting a terminating 
Series of the Voyageur Equity trust to sell portfolio securities to a 
new Series of that Trust under the circumstances described below.

FILING DATE: The application was filed on October 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 January 16, 
1996, 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 
reasons for the request, and the issues contested. Persons who wish to 
be notified of a hearing may request such notification by writing to 
the SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C. 
20549. Applicants, c/o Voyageur Fund Managers, Inc., 90 South Seventh 
Street, Suite 4400, Minneapolis, Minnesota 55402.

FOR FURTHER INFORMATION CONTACT:
H.R. Hallock, Jr., Special Counsel, at (202) 942-0564 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 may be obtained for a fee from 
the SEC's Public Reference Branch.

Applicants' Representations

    1. Each of the Trusts is or will be a unit investment trust 
registered under the Act and sponsored by the Sponsor. The investment 
objectives of the Trusts may differ. The principal underwriter for the 
Trusts is or will be Voyageur Fund Distributor, Inc. (the 
``Distributor''). The Sponsor and Distributor are each indirect wholly-
owned subsidiaries of Dougherty Financial Group, Inc.
    2. Each of the Trusts consists or will consist of one or more 
separate Series. Each Series is created by a trust indenture among the 
Sponsor, a banking institution or trust company as trustee, and an 
evaluator. The Sponsor acquires a portfolio of securities which it 
deposits with the trustee in exchange for certificates representing 
units of fractional undivided interest in the deposited portfolio 
(``Units''). The Sponsor will deposit substantially more than $100,000 
of debt or equity securities, depending on the objective of the 
particular Series, for each Series.
    3. The Units are then offered to the public through the Distributor 
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. The sales 
charge is the maximum amount applicable to a Series and is currently 
approximately 4.9% of the public offering price. 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.
    4. The Distributor 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. 
If the Distributor discontinues maintaining such a market at any time 
for any Trust, holders of Units (``Unitholders'') of such Trust may 
redeem their Units through the trustee.
    5. Distribution payments of tax-exempt or taxable income, depending 
on the investment objective of a particular Trust, will be made to 
Unitholders on an annual, semi-annual, quarterly or monthly basis. The 
Trusts generally are permitted to distribute to Unitholders any capital 
gains earned in connection with the sale of portfolio shares along with 
the Trust's regular distributions in reliance on paragraph (c) of rule 
19b-1.

A. The Deferred Sales Charge

    1. Applicants seek an order permitting them to impose a deferred 
sales charge (``DSC'') and to reduce or waive the DSC under certain 
circumstances. Under Applicants' proposal, the Sponsor will determine 
the maximum amount of the sales charge per Unit. The Sponsor and 
Distributor will have discretion to defer the collection of all or part 
of such 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 Distributor anticipates collecting a portion of the total 
sales charge immediately upon purchase of Trust Units. The balance of 
the sales charge will be collected in installments 

[[Page 67374]]
over the Collection Period for the particular Trust. To the extent that 
distribution income is sufficient to pay a DSC installment, such 
deductions will be collected from distributions on a holder's Units 
(``Distribution Deductions''). If distribution income is insufficient 
to pay a DSC installment, the trustee, pursuant to the powers granted 
in the trust indenture, will have the ability to sell portfolio 
securities in an amount necessary to provide the requisite payments. If 
a Unitholder redeems or sells to the Sponsor his or her Units before 
the total sales charge has been collected from installment payments, 
the Sponsor intends to deduct the remainder of any DSC from sale or 
redemption proceeds.
    3. For purposes of calculating the amount of the DSC due upon 
redemption or sale of Units, it will be assumed that Units on which the 
sales charge has been paid in full are liquidated first. Any Units 
liquidated 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, unless the investor directs otherwise. The 
Sponsor or Distributor may choose in the future to waive the DSC in 
connection with redemption or sales of Units under certain 
circumstances. Any such waiver will be disclosed in the prospectus for 
each Trust affected and will be implemented in accordance with rule 
22d-1.
    4. The Sponsor believes that the operation and implementation of 
the DSC program will be adequately disclosed and explained to potential 
investors as well as Unitholders. The prospectus for each Trust 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 will also contain disclosure pertaining to the trustee's 
ability to sell Trust securities in the event that income generated by 
the Trust portfolio is partially or wholly insufficient to pay for DSC 
expenses. The securities confirmation statement for each Unitholder's 
purchase transaction will state both the front-end sales charge 
imposed, if any, and the amount of the DSC to be imposed. In addition, 
each annual report will provide Unitholders with information as to the 
amount of annual DSC payments made by the Trust during the previous 
fiscal year on both a Series and per Unit basis.

B. The Exchange Option

    1. Applicants also seek exemptive relief to allow certain offers of 
exchange among the Series of the Trusts (the ``Exchange Option''). The 
Exchange Option will extend to all exchanges of Unites, regardless of 
whether such Units are subject to a front-end sales charge or a DSC, 
and includes exchanges in connection with the termination of a Trust. 
An investor who purchases Units under the Exchange Option will pay a 
lower aggregate sales charge than that paid by a new investor, subject 
to the limited exceptions described below. While Units of an applicable 
Trust are normally sold on the secondary market with maximum sales 
charges of approximately 5.5% of the public offering price, the sales 
charge on Units acquired pursuant to the proposed Exchange Option 
generally will be reduced to a flat fee of $25 per Unit ($25 per 100 
Units in the case of a Series whose Units initially cost approximately 
$10 per Unit, or $25 per 1,000 Units in the case of a Series whose 
Units initially cost approximately $1.00 per Unit).
    2. An adjustment will be made if Units of any Trust are exchanged 
within five months of their acquisition for Units of a Trust with a 
higher sales charge (the ``Five Months Adjustment''), or for exchanges 
of Units that impose Distribution Deductions for Units of a Trust that 
impose a front-end sales charge occurring at any time before the 
Distribution Deductions had at least equaled the per Unit sales charge 
then applicable (the ``DSC Front-end Adjustment''). In such cases, the 
exchange fee will be the greater of (i) $25 per Unit (or its 
equivalent) or (ii) an amount that, together with the sales charge 
already paid on the Units being exchanged, equals the normal sales 
charge on the Units of a Trust being acquired through such exchange 
determined as of the date of the exchange.
    3. Under the Exchange Option, if DSC Units are exchanged for DSC 
Units of another Trust, 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 will 
not be collected at the time of exchange, except in the case of any 
exchange to a Trust not having a DSC.

C. Purchase and Sale Transactions Between Series

    1. Applicants finally seek exemptive relief to permit certain 
terminating Series of the Voyageur Equity Trust to sell their portfolio 
securities to new Series in the Voyageur Equity Trust. Certain Series 
of the Voyageur Equity Trust (referred to herein individually either as 
the ``State Trusts'' or the ``Index Trusts'' and, collectively, as the 
``Rollover Trusts'') will have the specific characteristics described 
below.
    2. The State Trusts will contain equity securities of companies 
paying the highest dividends located in a particular state or states 
that meet certain capital requirements, as specified below. The 
investment objective of the State Trusts will be to provide an above-
average total return through a combination of potential capital 
appreciation and dividend income by investing in a designated number of 
the highest dividend yielding companies (``Eligible Companies''), as of 
a specified day which is one of several days before the State Trust is 
created which (a) have their principal operations located in a 
specified state or states, and (b) have a market capitalization in 
excess of $250 million. Applicants anticipate that many of the 
securities of Eligible companies will be traded on a national 
securities exchange or on the Nasdaq National Market System (``Nasdaq-
NMS'').
    3. The Index Trusts will contain a portfolio of equity securities 
which represents a portion of a specific published index (and 
``Index''). Each Index Trust will consist of a portfolio that contains 
equity securities (``Equity Securities'') which are (a) actively traded 
(i.e., have had an average daily trading volume in the preceding six 
months of at 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, as amended, or a foreign securities 
exchange (a ``Foreign Exchange'') that meets the qualifications set 
forth in a proposed amendment to rule 12d3-1(d)(6) under the Act \1\ 
and which releases daily closing prices, or (ii) the Nasdaq-NMS and (b) 
included in an Index. The investment objective of each 

[[Page 67375]]
Index Trust will be to seek a greater total return than that achieved 
by the stocks constituting the entire Index over the life of the Index 
Trust. To achieve this objective, each Index Trust will consist of a 
specified number of the highest dividend yielding stocks in such 
trusts' respective Index.

    \1\ Investment Company Act Release No. 17096 (Aug. 3, 1989) 
(proposing amendments to rule 12d3-1). The proposed amended rule 
defined a ``Qualified Foreign Exchange'' to mean a stock exchange in 
a country other than the United States where: (1) Trading generally 
occurred at least four days a week; (2) there were limited 
restrictions on the ability of acquiring companies to trade their 
holdings on the exchange; (3) the exchange had a trading volume in 
stocks for the previous year of at least U.S. $7.5 billion; and (4) 
the exchange had a turnover ratio for the preceding year of a least 
20% of its market capitalization. The version of the amended rule 
that was adopted did not include the part of the proposed amendment 
defining the term ``Qualified Foreign Exchange.''
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    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 Series of the same type (the ``New 
Trust'') for the next period. With respect to the Index Trusts, the New 
Trust will be based on the same Index, using the same number of current 
top dividend yielding stocks in the Index. With respect to the State 
Trusts, the New Trust will be based on the same number of current top 
dividend yielding companies located in the same state or states and 
that meet the minimum capital requirements. Each Rollover Trust has a 
specified date upon which Unitholders in the terminating Rollover Trust 
may at their option redeem their Units in the terminating trust and 
receive in return Units in the New Trust which is created on or about 
the date such option may be exercised.
    5. In connection with its termination, each Rollover Trust will 
sell all of its portfolio securities 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. Because there normally will be 
some overlap between the portfolios of each Rollover Trust and the 
corresponding New Trust, this procedure will result in substantial 
brokerage commissions on portfolio securities of the same issue that 
are borne by the Rollover Trust and the New Trust and, consequently, 
the Unitholders of both the Rollover Trust and the New Trust. In light 
of these costs, Applicants request an exemptive order to allow any 
Index Trust to sell Equity Securities, and the State Trusts to sell 
securities of the Eligible companies, that are listed on an Exchange or 
Nasdaq-NMS and actively traded (as described above), to their 
respective New Trusts and to permit the New Trusts to purchase such 
securities at the closing sale prices of the securities on the 
applicable Exchange or on Nasdaq-NMS on the sale date. As required by 
Condition C.3. and 4., below, these transactions must be effected in 
compliance with rule 17a-7, except for certain provisions of paragraph 
(e) thereof.
    6. 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 
Nasdaq-NMS for the sale date of the securities subject to such sale. 
The trustee will countersign the certificate, unless the trustee 
disagrees with the price listed on the certificate, in which event the 
trustee will immediately inform the Sponsor and return the certificate 
to the Sponsor with corrections duly noted. If the Sponsor can verify 
the corrected price, the Sponsor will ensure that the price of Units of 
the New Trust, and distribution to Unitholders 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, 
indepenently published list of closing sales prices for the date of the 
transaction.

Applicants' Legal Analysis

    1. Applicants request an exemption under section 6(c) granting 
relief from sections 2(a)(32), 2(a)(35), 22(d) and 26(a)(2) and rule 
22c-1 to permit Applicants to assess a DSC, and to waive the DSC under 
certain circumstances. Applicants also request an exemption under 
section 11(a) for relief from section 11(c) to enable them to implement 
the Exchange Option. In addition, Applicants request an exemption 
pursuant to sections 6(c) and 17(b) granting relief from section 17(a) 
to permit Rollover Trusts to sell portfolio securities to a New Trust 
and to permit the New Trusts to purchase such securities. Finally, 
Applicants seek an exemption under section 6(c) granting relief from 
sections 14(a) and 19(b) and rule 19b-1 to the extent described below.
    2. Section 2(a)(32) defines a ``redeemable security'' as a security 
that, upon its presentation to the issuer, entitles 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 
seek an exemption from section 2(a)(32) so that Units subject to a DSC 
are considered redeemable securities for purposes of the Act.\2\

    \2\ Without 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.''
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    3. Section 2(a)(35), 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 requires that the price of a redeemable security 
issued by an investment company for purposes of sale, redemption, and 
repurchase be based on the security's current net asset value. 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 
seek an exemption from this rule.
    5. Section 22(d) requires an investment company and its principal 
underwriter and dealer to sell securities only at a current public 
offering price 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 ``at prices which reflect scheduled variations 
in, or elimination of, the sales load.'' Because rule 22d-1 does not 
extend to scheduled variations in DSCs, Applicants seek relief from 
section 22(d) to permit them to waive or reduce their DSC in certain 
instances.
    6. Section 26(a)(2), 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 need an exemption to permit the 
trustee to collect the DSC installments from Distribution Deductions or 
Trust assets and disburse them to the Sponsor.
    7. Section 6(c) provides, in relevant part, that the SEC, by order 
upon application, may conditionally or uconditionally exempt any person 
or transaction, or any class or classes of persons or transactions, 
from any provision or provisions of the Act or of any rule thereunder, 
if and to the extent that such exemption is appropriate in the public 
interest and consistent with the protection of investors and the 

[[Page 67376]]
purposes fairly intended by the policy and provisions of the Act. 
Applicants believe that implementation of the deferred sales charge 
program in the manner described above would be fair and in the best 
interests of the Unitholders of the Trusts. Thus, granting the 
requested relief from sections 2(a)(32), 2(a)(35), 22(d), and 26(a)(2) 
and rule 22c-1 would meet the requirements for an exemption established 
by section 6(c).
    8. Section 11(c) prohibits any offers 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 under section 11(a). Applicants assert 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 incurred in connection with the Exchange Option.
    9. Section 17(a) makes it unlawful for an affiliated person of a 
registered investment company to sell securities to, or purchase 
securities from, the company. Investment companies under common control 
may be considered affiliated persons of one another. Each Series will 
have an identical or common Sponsor, Voyageur Fund Managers, Inc. Since 
the Sponsor of each Series may be considered to control each Series, it 
is likely that each Series would be considered an affiliated person of 
the others.
    10. Section 17(b) provides that the SEC shall 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 the registered investment company involved; and (c) the 
proposed transaction is consistent with the general provisions of the 
Act. As noted above, section 6(c) authorizes the SEC to exempt classes 
of transactions. Applicants believe the proposed sales of portfolio 
securities from a Rollover Trust to a New Trust satisfy the exemptive 
requirements set forth in sections 6(c) and 17(b).
    11. 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).
    12. Applicants represent that purchases and sales between Series 
will be consistent with the policy of each Series, as only securities 
that otherwise would be bought and sold on the open market pursuant to 
the policy of each Series will be involved in the proposed 
transactions. Further, Applicants submit that requiring the Series to 
buy and sell on the open market leads to unnecessary brokerage fees and 
is therefore contrary to the general purposes of the Act.
    13. Section 14(a) requires in substance that investment companies 
have $100,000 of net worth prior to making a public offering. As noted 
previously, the Sponsor will deposit substantially more than $100,000 
of debt or equity securities for each Series. As the Sponsor intends to 
sell all of a Trust Series' Units to the public, however, representing 
the entire beneficial ownership of the Trust, Applicants request 
exemptive relief from the net worth requirement of section 14(a). 
Applicants will comply in all respects with rule 14a-3, which provides 
an exemption from section 14(a), except that the Voyageur Equity Trust 
and certain future Trusts (the ``Equity Trusts'') will not restrict 
their portfolio investments to ``eligible trust securities'' as 
required by the rule.
    14. Section 19(b) and rule 19b-1 make it unlawful, except under 
limited circumstances, for a registered investment company to 
distribute long-term capital 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, 
as noted above, will not restrict their portfolio to ``eligible trust 
securities,'' the Equity Trusts will not qualify for the exemption in 
paragraph (c) of rule 19b-1. Applicants therefore request an exemption 
from section 19(b) and 19b-1 to the extent necessary to permit any 
capital gains earned in connection with the sale of portfolios shares 
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.
    15. Applicants submit 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 redemption of portfolio securities would be triggered by 
the need to meet Trust expenses, deferred sales charge installments, or 
by requests to redeem Units, events over which the Sponsor and the 
Equity Trusts have no control. 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.

Applicants' Conditions

    The Applicants agree that any order granting the application will 
be made subject to the following conditions:

A. Conditions With Respect to DSC Relief and Exchange Option

    1. Whenever the Exchange 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 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 will 
pay a lower aggregate sales charge than that which would be paid for 
the Units by a new investor, unless the Five Months or DSC Front-end 
Exchange Adjustments apply.
    3. The prospectus of each Trust offering exchanges and any sales 
literature or advertising that mentions the existence of the Exchange 
Option will disclose that the Exchange Option is subject to 
modification, termination or suspension, without notice except in 
certain limited cases.
    4. Each Series offering Units subject to a deferred sales charge 
will include in its prospectus the table required by item 2 of Form N-
1A (modified as 

[[Page 67377]]
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 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.''

C. Conditions for Exemption From Section 17(a)

    1. Each sale of Equity Securities by an Index Trust, or Eligible 
Companies' securities by a State 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 Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-31513 Filed 12-28-95; 8:45 am]
BILLING CODE 8010-01-M