[Federal Register Volume 61, Number 120 (Thursday, June 20, 1996)]
[Notices]
[Pages 31564-31568]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-15774]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-22017; 812-9830]


National Financial Services Corporation, et al.; Notice of 
Application

June 14, 1996.
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: National Financial Services Corporation (the ``Sponsor'') 
and Fidelity Unit Investment Trusts, Fidelity Defined Trusts, Series 1 
and Subsequent Series (the ``Trust'').

RELEVANT ACT SECTIONS: Order requested pursuant to section 6(c) for 
exemptions 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; pursuant to 
section 11(a) for an exemption from section 11(c); and pursuant to 
sections 6(c) and 17(b) for an exeption from section 17(a).

SUMMARY OF APPLICATION: Applicants request an order to allow: (a) the 
Trust and any future unit investment trust sponsored by the Sponsor 
(collectively, the ``Trusts'') to implement a deferred sales charge 
program; (b) the exchange of units of different series of the Trusts 
(each, a ``Series'') and, in addition, certain exchange transactions 
made in connection with the termination of a Series into a new Series 
of the same Trust; (c) units of the Trusts to be publicly offered 
without requiring the Sponsor to take for its own account or place with 
others $100,000 worth of units in those Trusts; (d) certain Trusts to 
distribute capital gains resulting from the sale of portfolio 
securities within a reasonable time after receipt; and (e) a 
terminating Series of a Trust to sell portfolio securities to a new 
Series of that Trust.

FILING DATES: The application was filed on October 26, 1995, and 
amended and fully restated applications were filed on February 26 and 
June 7, 1996.

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 July 9, 1996, 
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, N.W., Washington, D.C. 
20549. Applicants, 82 Devonshire Street, Boston, MA 02109.

FOR FURTHER INFORMATION CONTACT: H.R. Hallock, Jr., Special Counsel, at 
(202) 942-0564, 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.

Applicant's Representations

    1. The Sponsor, a registered broker-dealer, is a wholly-owned 
subsidiary of Fidelity Global Brokerage Group, Inc., which in turn is a 
wholly-owned subsidiary of FMR Corp. The Sponsor engages in various 
securities trading, brokerage and clearing activities as well as 
serving as sponsor of the Trust.
    2. The Trust is a unit investment trust registered as an investment 
company under the Act, and any future Trust sponsored by the Sponsor 
similarly will be a registered unit investment trust. Fidelity Defined 
Trusts, Series 1, consists of three underlying portfolios: Laddered 
Government Series 1, Short Treasury Portfolio; Laddered Government 
Series 2, Short/Intermediate Treasury Portfolio; and Rolling Government 
Series 1, Short Treasury Portfolios.
    3. Each of the Trusts is or will be sponsored by the Sponsor and is 
or will be made up of one or more Series issuing securities registered 
or to be registered under the Securities Act of 1933. Each Series is or 
will be created by a Trust Indenture among the Sponsor, a banking 
institution or trust company as trustee, and an evaluator.

[[Page 31565]]

    4. While the structure of particular Trusts and particular Series 
may differ in various respects depending on the nature of the 
underlying portfolios, the Sponsor in each case will acquire 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 in each case will 
deposit substantially more than $100,000 of debt or equity securities, 
or a combination thereof, depending on the investment objective of the 
particular Series, for each Series. The Units are then offered to the 
public through the Sponsor 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 sales 
charge.
    5. The Sponsor 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 Sponsor discontinues maintaining such a market at any time for 
any Series, holders of Units (``Unitholders'') of such a Series may 
redeem their Units through the trustee.
    6. Distribution payments of tax-exempt or taxable income, depending 
on a particular Trust's investment objective, will be made to 
Unitholders on an annual, semi-annual, quarterly or monthly basis. The 
Trusts generally will distribute to Unitholders any capital gains 
realized in connection with the sale of portfolio securities along with 
the Trust's regular distributions in reliance on paragraph (c) of rule 
19b-1.

A. Deferred Sales Charge Program

    1. Applicants request an exemption to permit them to impose a 
deferred sales charge (``DSC'') on Units, and to reduce or waive the 
DSC under certain circumstances. Under applicants' proposal, the 
Sponsor will determine both the amount of the sales charge per Unit and 
whether to defer the collection of all or part of such 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 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 terms of the trust indenture, 
may 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 any unpaid DSC 
expense from sale or redemption proceeds.
    3. For purposes of calculating the amount of the DSC due upon 
redemption or sale of Units, the Sponsor will assume 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. 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.
    4. The Sponsor believes the DSC program will be adequately 
disclosed to potential investors as well as Unitholders. The prospectus 
for each Trust Series 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 disclose that the 
trustee may sell portfolio securities in the event that income 
generated by the portfolio is 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.

B. The Exchange and Rollover Options

    1. Applicants propose to permit certain offers of exchange among 
the Series of the Trusts (the ``Exchange Option'') and to permit 
certain offers of exchange made in connection with the termination of 
certain Trust Series (the ``Rollover Option''). The Exchange Option 
will extend to exchanges of Units sold either with a front-end sales 
charge or with DSC for Units of another Trust Series sold either with a 
front-end sales charge or with a DSC. The Rollover Option will extend 
to exchanges of Units in certain terminating Series of a Trust (the 
``Rollover Trusts'') for Units of a new Trust Series of the same type 
(the ``New Trusts'').
    2. An investor who purchases Units under either the Exchange or the 
Rollover Option will pay a lower sales charge than that which would be 
paid by a new investor. The reduced sales charge imposed will be 
reasonably related to the expenses incurred in connection with the 
administration of the program, which may include an amount that will 
fairly and adequately compensate the Sponsor and the participating 
underwriters and brokers for their services in providing the program.
    3. The sales charge on Units acquired pursuant to the Exchange 
Option generally will be reduced from the normally higher sales charge 
on secondary market transactions to a flat fee of $25 per Unit (for 
Units of a Series whose initial cost was approximately $1,000 per 
Unit), or its equivalent, depending on the cost of Units in a 
particular Series. 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 (the ``Five Months Adjustment''). An 
adjustment also will be made 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 (plus any 
portion of the sales charge on the exchanged Units collected up front) 
have at least equaled the per Unit sales charge then applicable on the 
acquired Units (the ``DSC Front-end Exchange Adjustment''). In cases 
involving either the Five Months or the DSC Front-end Exchange 
Adjustment, the exchange fee will be the greater of $25 per Unit (or 
its equivalent) 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.
    4. Under the Exchange Option, if DSC Units are exchanged for DSC 
Units or 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 due 
on the initial investment will not be collected at the time of 
exchange.

[[Page 31566]]

    5. Under the Rollover Option, Unitholders of Rollover Trusts may 
elect by a certain date (the ``Rollover Notification Date'') to redeem 
their Units in the terminating Rollover Trust and invest in Units in 
the New Trust, which is created on or about the Rollover Notification 
Date, at a reduced sales charge. The applicable sales charge upon the 
initial investment in the Rollover Trust typically is 2.9% of the 
public offering price, while the reduced sales charge applicable to 
investment in the New Trust by Unitholders electing the Rollover Option 
usually will be 1.9% of the public offering price.

C. Purchase and Sale Transactions Between Series

    1. Applicants also request an exemption to permit the Rollover 
Trusts to sell their portfolio securities to the New Trusts. Each of 
the Rollover Trusts will contain a portfolio of equity securities (the 
``Equity Securities'') representing a portion of a specific published 
index (an ``Index`'). The Equity Securities in each portfolio will be 
(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 or a foreign 
securities 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 National Market 
System and (b) included in an Index. The investment objective of each 
Rollover Trust will be to seek a greater total return than that 
achieved by the stocks constituting the entire Index over the life of 
the Rollover Trust. To achieve this objective, each Rollover Trust will 
consist of a specified number of the highest dividend yielding stocks 
in such Trusts' respective Index.
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    \1\ Investment Company Act Release No. 17096 (Aug. 3, 1989) 
(proposing amendments to rule 12d3-1). The proposed amendment 
defined a ``Qualified Foreign Exchange'' to mean a foreign stock 
exchange meeting certain standards with respect to trading volume 
and other matters. As subsequently amended, however, the rule 
omitted that proposed definition.
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    2. 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 Trust for the next period. With respect 
to the Rollover Trusts, the New Trust will be based on the same Index, 
using the same number of current top dividend yielding stocks in the 
Index.
    3. In connection with its termination, each Rollover Trust will 
sell all of its portfolio securities as quickly as practicable in the 
applicable market, 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 market 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.
    4. In light of these costs, applicants request exemptive relief to 
allow any Rollover Trust to sell Equity Securities 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.'' The Sale 
Date for securities sold to a New Trust will be, with respect to Units 
that will be exchanged under the Rollover Option, the first day of the 
period between the Rollover Notification Date and the date specified 
for termination of the Rollover Trust. With respect to other sales to 
the New Trust, the Sale Date will be the date the Sponsor deposits cash 
or a letter of credit in a New Trust with instructions to purchase 
securities, to the extent appropriate Equity Securities are available 
from a Rollover Trust by reason of Units tendered for redemption that 
day or termination of the Rollover Trust.
    5. Each sale of Equity Securities by a Rollover Trust to a New 
Trust will satisfy all of the requirements of rule 17a-7, except for 
paragraph (e) thereof. 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, (b) the date of 
such transaction and (c) the closing sales prices on the Exchange or 
Nasdag-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 notify the Sponsor. 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, 
independently published list of closing sales prices for the date of 
the transaction.

Applicants' Legal Analysis

    1. Applicants request and 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 them to assess a DSC, and to waive the DSC under 
certain circumstances. Applicants also request SEC approval under 
sections 11(a) and 11(c) to enable them to implement the Exchange and 
Rollover Options. In addition, applicants request and exemption under 
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 
request an exemption from section 2(a)(32) so that Units subject to a 
DSC are considered redeemable securities for purposes of the Act.\2\
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    \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) defined 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,

[[Page 31567]]

applicants request an exemption from this rule.
    5. Section 22(d) requires an investment company and its principal 
underwriter and dealers 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 with scheduled variations in 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 exempt any person or transaction, or any class or 
classes of persons or transactions, from any provision of the Act or 
any rule thereunder if such exemption is 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. 
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 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 believe that the reduced sales 
charge imposed at the time of exchange is a reasonable and justifiable 
expenses to be allocated for the professional assistance and 
operational expenses incurred in connection with either the Exchange or 
Rollover Option. Applicants further believe that the requirement that a 
person who has acquired Units at a lower sales charge pay the 
difference, if greater than the reduced fixed charge, upon exercising 
the Exchange Option when the Five Months Adjustment or the DSC Front-
end Exchange Adjustment applies is appropriate in order to maintain the 
equitable treatment of various investors in each Trust Series.
    9. Section 17(a) generally 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, National 
Financial Services Corporation. 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 other Series.
    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 purposes 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 as described above 
satisfy the requirements set forth in sections 6(c) and 17(b).
    11. Rule 17a-7 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 Trust 
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 Trust 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. The 
Sponsor will deposit substantially more than $100,000 of 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 an exemption under section 
6(c) 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 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 
will not restrict their investments to ``eligible trust securities,'' 
such Trusts will not qualify for the exemption in paragraph (c) of rule 
19b-1. Applicants therefore request an exemption under section 6(c) 
from section 19(b) and rule 19b-1 to the extent necessary to permit any 
capital gains earned in connection with the sale of portfolios 
securities 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 believe 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 sale of portfolio securities would be triggered by 
the need to meet Trust expenses, DSC 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.

[[Page 31568]]

Applicants' Conditions

    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 and Rollover 
Options

    1. Whenever the Exchange Option or Rollover 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 the Rollover Option, or to delete a Service 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 or the 
Rollover Option will pay a lower sales charge than that which would be 
paid for the Units by a new investor.
    3. The prospectus of each Trust offering exchanges or rollovers and 
any sales literature or advertising that mentions the existence of the 
Exchange Option or the Rollover Option will disclose that such 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.

B. Condition for Exemption From Section 14(a)

    Applications 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 a Rollover 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. 96-15774 Filed 6-19-96; 8:45 am]
BILLING CODE 8010-01-M