Federal Register / Vol. 60, No. 76 / Thursday, April 20, 1995 / Notices 19801

available to the Commission upon

request.

8. Each Fund will notify all

Participating Insurance Companies that

separate account prospectus disclosure

regarding potential risks of mixed and

shared funding may be appropriate.

Each Fund will disclose in its

prospectus that: (a) Shares of the Fund

are offered to insurance company

separate accounts to fund both variable

annuity and variable life insurance

contracts and to Qualified Plans, (b) due

to differences of tax treatment and other

considerations, the interests of various

Contract owners participating in the

Funds and the interests of Qualified

Plans investing in the funds may

conflict, and (c) the Board of such fund

will monitor for the existence of any

material conflicts and determine what

action, if any, should be taken.

9. Each Fund will comply with all

provisions of the 1940 Act requiring

voting by shareholders (which for these

purposes, shall be the persons having

voting interests in the shares of the

Funds), and, in particular, each Fund

will either provide for annual meetings

(except to the extent that the

Commission may interpret Section 16 of

the 1940 Act not to require such

meetings) or comply with Section 16(c)

of the 1940 Act, as well as Section 16(a),

and if applicable, Section 16(b) of the

1940 Act. Further each Fund will act in

accordance with the Commission’s

interpretation of the requirements of

Section 16(a) with respect to periodic

elections of directors and with whatever

rules the Commission may promulgate

with respect thereto.

10. If and to the extent that Rules 6e–

2 and 6e–3(T) are amended (or if Rule

6e–3 under the 1940 Act is adopted) to

provide exemptive relief from any

provisions of the 1940 Act or the rules

thereunder with respect to mixed and

shared funding on terms and conditions

materially different from any

exemptions granted in the order

requested by the Applicants, then the

Funds and the Participating Insurance

Companies, as appropriate, shall take

such steps as may be necessary to

comply with Rules 6e–2 and 6e–3(T) as

amended, and Rule 6e–3, as adopted, to

the extent applicable.

11. No less than annually, the

Participating Insurance Companies,

and/or Montgomery and/or its affiliated

advisors shall submit to each Board

such reports, materials or data as such

Board may reasonably request so that

the Board may carry out fully the

obligations imposed upon it by the

conditions contained in the application.

Such reports, materials and data shall be

submitted more frequently if deemed

appropriate by the applicable Board.

The obligations of Participating

Insurance Companies to provide these

reports, materials and data shall be a

contractual obligation of all

Participating Insurance Companies

under the agreements governing their

participation in the Funds.

12. In the event that a Qualified Plan

should ever become an owner of 10% or

more of the assets of a Fund, such

Qualified Plan will execute a fund

participation agreement with such

Fund. A Qualified Plan shareholder will

execute an application containing an

acknowledgment of this condition at the

time of its initial purchase of shares of

the Fund.

Conclusion

For the reasons and upon the facts

stated above, Applicants believe that the

requested exemptions 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.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–9841 Filed 4–19–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. IC–21008; 812–9404]

Nike Securities L.P., et al.; Notice of

Application

April 14, 1995.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of Application for

Exemption under the Investment

Company Act of 1940 (the ‘‘Act’’).

APPLICANTS: Nike Securities L.P. (the

‘‘Sponsor’’) and The First Trust of

Insured Municipal Bonds, The First

Trust GNMA, The First Trust of Insured

Municipal Bonds—Multi-State, The

First Trust Advantage Fund, The First

Trust Special Situations Trust, The First

Trust Combined Series (the ‘‘Trusts’’),

and their respective series.

RELEVANT ACT SECTIONS: Order requested

pursuant to section 6(c) for exemptions

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

and 26(a)(2) of the Act and rule 22c–1

thereunder, and pursuant to section

11(a) for an exemption from section

11(c).

SUMMARY OF APPLICATION: Applicants

seek to impose sales charges on a

deferred basis, waive the deferred sales

charge in certain cases, and exchange

Trust units having front-end and

deferred sales charges.

FILING DATE: The application was filed

on December 30, 1994, and was

amended on March 29, 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

May 9, 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 request, the reason for the

request, and the issues contested.

Persons may request notification of a

hearing by writing to the SEC’s

Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

Street NW., Washington, DC 20549.

Applicants, c/o Nike Securities L.P.,

1001 Warrenville Road, suite 3000,

Lisle, Illinois 60532.

SUPPLEMENTARY INFORMATION: The

following is a summary of the

application. The complete application

may be obtained for a fee at the SEC’s

Public Reference Branch.

Applicants’ Representations

1. Each of the Trusts is a unit

investment trust sponsored by the

Sponsor. Each of the Trusts consists of

one or more separate series (‘‘Series’’).

Applicants request that the relief sought

herein apply to any future Trusts

sponsored by the Sponsor, and any

future Series of the Trusts.

2. 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 Units

are then offered to the public through

the Sponsor, underwriters, 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 frontend sales charge. The sales charge

currently ranges from 1.85% to 5.50% of

the public offering price, generally

depending on the terms of the

underlying securities. The Sponsor may

reduce the sales charge under certain

circumstances, which will be disclosed

in the prospectus. Any such reduction
19802 Federal Register / Vol. 60, No. 76 / Thursday, April 20, 1995 / Notices

1Without an exemption, a Trust selling Units

subject to a deferred sales charge could not meet the

definition of a unit investment trust under section

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

investment trust as an investment company that

issues only ‘‘redeemable securities.’’

will be made in accordance with rule

22d–1.

3. Applicants seeks an order under

section 6(c) exempting them from

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

of the Act and rule 22c–1 thereunder, to

the extent necessary to permit them to

impose a deferred sales charge (‘‘DSC’’)

on Units, and 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 will

have the 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.

4. The Sponsor 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 over

the Collection Period for the particular

Trust Series. 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 balance of the sales

charge may be collected as a DSC at the

time of redemption or sale. The Sponsor

does not presently intend to deduct the

remainder of any DSC from sale or

redemption proceeds.

5. 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.

6. The Sponsor may adopt a

procedure of waiving the DSC in

connection with redemptions or sales of

Units under certain circumstances. Any

such waiver will be disclosed in the

prospectus for each Series subject to the

waiver, and will be implemented in

accordance with rule 22d–1.

7. 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 deducted in

regular installments. 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.

8. Applicants also seeks an order

under section 11(a) exempting them

from section 11(c) to the extent

necessary to permit an exchange option

(‘‘Exchange Option’’). The Exchange

Option will extend to all exchanges of

Units, regardless of whether such Units

are subject to a front-end sales charge or

a DSC. An investor who purchases Units

under the Exchange Option will pay a

lower aggregate sales charge than that

which would be paid by a new investor.

While Units of an applicable Series are

normally sold on the secondary market

with maximum sales charges ranging

from 1.85% to 5.80% of the public

offering price, the sales charge on Units

acquired pursuant to the Exchange

Option will generally be reduced to a

flat fee of $20 per Unit ($20 per 100

Units in the case of a Series whose Units

initially cost approximately $10 per

Unit, or $20 per 1,000 Units in the case

of a Series whose Units initially cost

approximately $1.00 per Unit). An

adjustment will be made if Units of any

Series are exchanged within five months

of their acquisition for Units of a Series

with a higher sales charge, or if Units

that impose Distribution Deductions are

exchanged for Units of a Series that

imposes a front-end sales charge at any

time before the Distribution Deductions

have at least equaled the per Unit sales

charge then applicable. In such cases,

the exchange fee will be the greater of

$20 per Unit (or its equivalent,

depending on the cost of Units in a

particular Series) or an amount which,

together with the sales charge already

paid on the Units being exchanged,

equals the normal sales charge on the

acquired Units.

9. Under the Exchange Option, if DSC

Units are exchanged for DSC Units of

another Series, the reduced sales charge

will be collected in connection with

such an exchange. The Distribution

Deductions will continue to be taken

from the investment income generated

by the newly acquired Units, or

proceeds from the sale of Trust portfolio

securities, as the case may be, until the

original balance of the sales charge

owed on the initial investment has been

collected. The DSC will not be collected

at the time of exchange, except in the

case of any exchange to a Series not

having a DSC.

Applicants’ Legal Analysis

1. Under section 6(c), the SEC may

exempt any person or transaction from

any provision of the Act or any rule

thereunder 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.

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.1

3. Section 2(a)(35) defines the term

‘‘sales load’’ to be the difference

between the sales price and the

proceeds to the issuer, less any expenses

not properly chargeable to sales or

promotional expenses. Because a DSC is

not charged at the time of purchase, an

exemption from section 2(a)(35) is

necessary.

4. Rule 22c–1, promulgated pursuant

to the Commission’s authority under

section 22(c), 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
Federal Register / Vol. 60, No. 76 / Thursday, April 20, 1995 / Notices 19803

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.

7. Applicants believe that

implementation of the DSC program in

the manner described above would be

fair and in the best interests of the

Unitholders of the Trusts. Thus,

granting the requested order would be

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.

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. 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.

Applicants’ Conditions

Applicants agree that any order

granting the requested relief will be

subject to the following conditions:

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 important 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.

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 DSC will include in its prospectus the

table required by item 2 of Form N–1A

(modified as appropriate to reflect the

differences between unit investment

trusts and open-end management

investment companies) and a schedule

setting forth the number and date of

each installment payment.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–9724 Filed 4–19–95; 8:45 am]

BILLING CODE 8010–01–M

DEPARTMENT OF TRANSPORTATION

Coast Guard

[CGD 95–031]

Application for Recertification of Cook

Inlet Regional Citizens’ Advisory

Council

AGENCY: Coast Guard, DOT.

ACTION: Notice of availability; request

for comments.

SUMMARY: The Coast Guard announces

the availability of the application for

recertification submitted by the Cook

Inlet Regional Citizens’ Advisory

Council (CIRCAC) for June 1, 1995

through May 31, 1996. The application

may be reviewed at the Cook Inlet

Regional Citizens’ Advisory Council’s

Office, 910 Highland Avenue, Kenai,

Alaska 99611–8033, between the hours

of 8 a.m. to 5 p.m., Monday through

Friday, except Federal holidays. The

telephone number is (907) 283–7222.

The Coast Guard seeks comments on the

application from interested groups. The

Coast Guard will publish a later notice

in the Federal Register to notify the

public of its decision regarding the

recertification request.

DATES: Comments must be received on

or before June 5, 1995.

ADDRESSES: Comments may be mailed to

the Executive Secretary, Marine Safety

Council (G–LRA/3406) (CGD 95–031),

U.S. Coast Guard Headquarters, 2100

Second Street, SW., Washington, DC

20593–0001, or may be delivered to

room 3406 at the same address between

8 a.m. and 3 p.m., Monday through

Friday, except Federal holidays. The

telephone number is (202) 267–1477.

Comments will be available for

inspection or copying at room 3406,

U.S. Coast Guard Headquarters, between

the hours of 8 a.m. to 3 p.m., Monday

through Friday, except Federal holidays.

Please submit two copies of all

comments and attachments in an

unbound format, no larger than 81⁄2 by

11 inches, suitable for copying and

electronic filing. Persons wanting

acknowledgment of receipt of comments

should enclose stamped, self-addressed

postcards or envelopes.

FOR FURTHER INFORMATION CONTACT: Mrs.

Janice Jackson, Marine Environmental

Protection Division, (202) 267–0500.

SUPPLEMENTARY INFORMATION: Under the

Oil Terminal and Oil Tanker

Environmental Oversight and

Monitoring Act of 1990 (33 U.S.C. 2732)

(the Act), the Coast Guard may certify,

on an annual basis, an alternative

voluntary advisory group (advisory

group) in lieu of Regional Citizens’

Advisory Councils for Cook Inlet and

Prince William Sound Alaska. The

Coast Guard published guidelines on

December 31, 1992, to assist groups

seeking recertification under the Act (57

FR 62600). The Coast Guard issued a

policy statement on July 7, 1993 (58 FR

36505), to clarify the factors that the

Coast Guard would be considering in

making its determination as to whether

advisory groups should be certified in

accordance with the Act; and the

procedures which the Coast Guard

would follow in meeting its certification

responsibilities under the Act.

The Coast Guard has received an

application for recertification of

CIRCAC, the currently certified advisory

group for the Cook Inlet region. In