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Federal Register / Vol. 62, No. 28 / Tuesday, February 11, 1997 / Notices6287section 14(a) as requiring that the initialcapital investment in an investmentcompany be made without any intentionto dispose of the investment. Applicantsstate that, under this interpretation, aTrust Series would not satisfy section14(a) because of the Sponsor’s intentionto sell all the Units thereof. Rule 14a–3 exempts unit investment trusts fromthis provision if certain conditions arecomplied with, one of which is that thetrust invest only in ‘‘eligible trustsecurities,’’ as defined in the rule.Applicants intend that certain futureSeries of the Trusts (collectively, the‘‘Equity Trusts’’) will invest all or aportion of their assets in EquitySecurities, and therefore may not relyon this rule because Equity Securitiesare not eligible trust securities.Applicants, therefore, request anexemption under section 6(c) from thenet worth requirement of section 14(a).Applicants will comply in all respectswith rule 14a–3, except that the EquityTrusts will not restrict their portfolioinvestments to ‘‘eligible trustsecurities.’’10. Section 19(b) of the Act and rule19b–1 provide that, except underlimited circumstances, no registeredinvestment company may distributelong-term gains more than once everytwelve months. Rule 19b–1(c), undercertain circumstances, excepts a unitinvestment trust investing in ‘‘eligibletrust securities’’ (as defined in rule 14a–3) from the requirements of rule 19b–1.Because the Equity Trusts do not limittheir investments to ‘‘eligible trustsecurities,’’ such Trusts will not qualifyfor the exemption in paragraph (c) ofrule 19b–1. Therefore, applicantsrequest an exemption under section 6(c)from section 19(b) and rule 19b–1 to theextent necessary to permit capital gainsearned in connection with the sale ofportfolios securities to be distributed toUnitholders along with the EquityTrust’s regular distributions. In all otherrespects, applicants will comply withsection 19(b) and rule 19b–1.11. Applicants believe that thedangers which section 19(b) and rule19b–1 are designed to prevent do notexist in the Equity Trusts. Any gainsfrom the sale of portfolio securitieswould be triggered by the need to meetTrust expenses, DSC installments, or byrequests to redeem Units, events overwhich the Sponsor and the EquityTrusts have no control. Applicantsacknowledge that the Sponsor hascontrol over the actual redemption ofUnits to the extent it makes a market inUnits. Applicants assert, however, thatthe Sponsor has no incentive to redeemor permit the redemption of Units inorder to generate capital gains for thepurpose against which section 19(b) andrule 19b–1 were designed to protect.Moreover, since principal distributionsmust be clearly indicated inaccompanying reports to Unitholders asa return of principal and will berelatively small in comparison tonormal dividend distributions, there islittle danger of confusion from failure todifferentiate among distributions.12. Section 17(a) of the Act makes itunlawful for an affiliated person of aregistered investment company topurchase securities from, or sellsecurities to such registered investmentcompany. Investment companies undercommon control may be consideredaffiliated persons of one another. EachSeries will have an identical or commonSponsor, John Nuveen & Co.Incorporated. As the Sponsor of eachSeries might be considered to controleach Series, it is likely that each Serieswould be considered an affiliatedperson of the others.13. Section 17(b) of the Act providesthat the SEC may exempt a proposedtransaction from section 17(a) ifevidence establishes that: (a) the termsof the proposed transaction arereasonable and fair and do not involveoverreaching; (b) the proposedtransaction is consistent with thepolicies of each registered investmentcompany involved; and (c) the proposedtransaction is consistent with thegeneral purposes of the Act. As notedabove, under section 6(c), the SEC mayexempt classes of transactions if, and tothe extent that, such exemption isnecessary or appropriate in the publicinterest, and consistent with theprotection of investors and the purposesfairly intended by the policy andprovisions of the Act. Because section17(b) applies to a specific proposedtransaction and not to ongoing series offuture transactions, applicants alsorequest relief from section 17(a) undersection 6(c). Applicants believe that theproposed transactions satisfy therequirements of sections 6(c) and 17(b).14. Rule 17a–7 under the Act permitsregistered investment companies thatmight be deemed affiliates solely byreason of common investment advisers,directors, and/or officers, to purchasesecurities from, or sell securities to, oneanother at an independently determinedprice, provided certain conditions aremet. Paragraph (e) of the rule requiresan investment company’s board ofdirectors to adopt and monitor theprocedures for these transactions toassure compliance with the rule. A unitinvestment trust does not have a boardof directors and, therefore, may not relyon the rule. Applicants represent thatthey will comply with all of theprovisions of rule 17a–7, other thanparagraph (e).15. Applicants submit that theproposed transactions will be consistentwith the policy of the Trust, as onlysecurities that otherwise would bebought and sold on the open marketpursuant to the policy of each TrustSeries will be involved in the proposedtransactions. In addition, applicantsstate that such purchases from and/orsales to such affiliated investmentcompanies will take place only upon theoccurrence of a redemption of Units orthe termination of a Rollover Trust andthe creation of a New Trust. Applicantsfurther believe that the current practiceof buying and selling on the openmarket leads to unnecessary brokeragefees, and is therefore contrary to thegeneral purposes of the Act.16. Section 12(d)(3) of the Actprohibits an investment company fromacquiring any security issued by anyperson who is a broker, dealer,underwriter, or investment adviser. Rule12d3–1, in relevant part, exempts fromsection 12(d)(3) purchases by aninvestment company of securities of anissuer that derived more than 15% of itsgross revenues in its most recent fiscalyear from securities related activities,provided that, among other things,immediately after such acquisition, theacquiring company has invested notmore than 5% of the value of its totalassets in securities of the issuer.17. Applicants seek an exemptionunder section 6(c) from the provisionsof section 12(d)(3) to permit each TenSeries to invest up to approximately10%, but in no event more than 10.5%,of the value of any Ten Series’ assets inthe securities of an issuer of any of theten highest dividend yielding stocks inthe DJIA, the FT Index, or the HangSeng Index that derives more than 15%of its gross revenues from securitiesrelated activities. Similarly, applicantsseek an exemption to permit each FiveSeries to invest up to approximately20%, but in no event more than 20.5%,of the value of any Five Series’ assets inthe securities of an issuer of any of thefive stocks having the lowest dollarprice per share of the ten highestyielding stocks in the DJIA, the FTIndex, or the Hang Seng Index, thatderives more than 15% of its grossrevenues from securities relatedactivities. Applicants represent thateach Ten Series and Five Series willcomply with all of the conditions of rule12d3–1, except the conditionprohibiting an investment companyfrom investing more than 5% of thevalue of its total assets in securities ofa securities related issuer.