[Federal Register Volume 59, Number 142 (Tuesday, July 26, 1994)] [Unknown Section] [Page 0] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 94-18137] [[Page Unknown]] [Federal Register: July 26, 1994] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Rel No. IC-20418; 812-8374] The First Trust Special Situations Trust et al.; Application July 20, 1994. AGENCY: Securities and Exchange Commission (``SEC''). ACTION: Notice of application for exemption under the Investment Company Act of 1940 (the ``Act''). ----------------------------------------------------------------------- APPLICANTS: The First Trust Special Situations Trust (the ``Rollover Trust''), and Nike Securities L.P. (``Nike''). RELEVANT ACT SECTIONS: Order requested under sections 11(a) and 11(c). SUMMARY OF APPLICATION: Applicants seek an order to permit certain offers of exchange of units of a terminating Rollover Trust series for units of subsequently offered Rollover Trust series. FILING DATE: The application was filed on April 29, 1993 and amended on July 22, 1993 and July 12, 1994. 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 servicing 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 August 20, 1994, and should be accompanied by proof of service on applicants, in the form of an affidavit or, for lawyers, a certificate of service. Hearing requests should state the nature of the writer's interest, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by writing to the SEC's Secretary. ADDRESSES: Secretary: SEC, 450 5th Street NW., Washington, DC 20549. Applicants: 1001 Warrenville Road, Lisle, Illinois 60532. FOR FURTHER INFORMATION CONTACT:Fran Pollack-Matz, Senior Attorney (202) 942-0570, 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 is available for a fee at the SEC's Public Reference Branch. Applicants' Representations 1. The Rollover Trust will consist of a series of unit investment trusts (the ``Series'') registered under the Act. The units representing undivided interests in each Series will be registered under the Securities Act of 1933. Nike sponsors the Rollover Trust and numerous other unit investment trusts (the ``Sponsor''). Applicants also request relief for subsequent series of the Rollover Trust sponsored by Nike or a sponsor controlled by or under common control with Nike. 2. Each Series will pursue an investment objective which is consistent with a specified investment philosophy. The first Series of the Rollover Trust will be the Target Equity Trust, Value Ten Series (the ``Value Ten Series''). The Value Ten Series' objective will be to provide an above-average total return through a combination of dividend income and capital appreciation by investing in a portfolio consisting of common stocks of a specified number of companies in the Dow Jones Industrial Average having the highest dividend yield (the ``Equity Securities'') as of the opening of business on the day prior to the Series' initial date of deposit.\1\ Future Series of the Rollover Trust may be similar to the Value Ten Series or may consist of Series with a different investment philosophy, a different number of common stocks, or a different duration. The Sponsor intends to maintain a secondary market for the units of each Series, although it is not obligated to be so. --------------------------------------------------------------------------- \1\The Rollover Trust has exemptive relief to permit its series to invest up to 10% of a series' assets in securities of issuers that derived more than 15% of their gross revenues from securities related activities. See, Investment Company Act Release Nos. 19864 (Nov. 12, 1993) (notice) and 19940 (Dec. 8, 1992) (order). --------------------------------------------------------------------------- 3. Each Series will terminate on a date (the ``Mandatory Termination Date'') which is a specified term (e.g., one, three or five years) after the Series' initial date of deposit. Commencing on the Mandatory Termination Date, Equity Securities will be sold in connection with termination of the Series. The Sponsor will determine the manner, timing and execution of the sale of the Equity Securities. A specified number of days prior to the Mandatory Termination Date of the Trust, the trustee will provide notice thereof to all unit holders. 4. Absent an election discussed below, unit holders will receive a cash distribution evidencing their pro rata share of the proceeds from the liquidation of the Equity Securities in the Series. Unit holders who own at least a specified number of units (e.g., 2,500 units), however, may elect to receive a distribution of Equity Securities in connection with the termination of the Trust. 5. Unit holders may elect alternatively to have all of their units redeemed in kind on a predetermined date prior to the Mandatory Termination Date, and to have the distributed Equity Securities sold by the trustee, and the proceeds of such sale reinvested in the units of a new Series (the ``Reinvestment Trust Series'') at a reduced sales charge. The option of unit holders to make such election is referred to as the ``Rollover Option'' and unit holders making such election are referred to as ``Rollover Unit Holders''. The portfolio of the Reinvestment Trust Series will contain a specified number of common stocks selected by the Sponsor pursuant to the same investment philosophy which was followed in selecting the common stocks in the terminating Series. The number of common stocks in the Reinvestment Trust Series and the approximate duration of the Reinvestment Trust Series will be the same as those of the terminating Trust Series. 6. The applicable sales charge upon the initial investment in the Rollover Trust will be 3.6% of the public offering price while the reduced sales charge applicable to Rollover Unit Holders will be no more than 2.0% of the public offering price. Applicants' Legal Analysis 1. Section 11(a) requires SEC approval of an offer to exchange securities between open-end investment companies if the exchange occurs on any basis other than the relative net asset values of the securities to be exchanged. Section 11(c) makes section 11(a) applicable to any type of exchange offer of securities of registered unit investment trusts for the securities of any other investment company, irrespective of the basis of exchange. 2. Applicants represent that Rollover Unit Holders will not be induced or encouraged to participate in the Rollover Option through an active advertising or sales campaign. The Sponsor recognizes its responsibility to its customers against generating excessive commissions through churning and claims that the sales charge collected will not be a significant economic incentive to salesmen to promote inappropriately the Rollover Option. Applicants further believe that the Rollover Option 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' Conditions If the requested order is granted, applicants agree to the following conditions: 1. Whenever the 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 to be given if the only material effect of an amendment is to reduce or eliminate the sales charge payable at the time of a rollover; and (b) No notice need to be given if, under extraordinary circumstances, either (i) There is a suspension of the redemption of units of the Rollover Trust under section 22(e) of the Act and the rules and regulations thereunder, or (ii) A Reinvestment Trust Series 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. The sales charge collected at the time of any rollover shall not exceed 2.0% of the public offering price of the unit being acquired on each rollover. 3. The prospectus of each Reinvestment Trust Series and any sales literature or advertising that mentions the existence of the Rollover Option will disclose that the Rollover Option is subject to modification, termination or suspension. For the Commission, by the Division of Investment Management, pursuant to delegated authority. Margaret H. McFarland, Deputy Secretary. [FR Doc. 94-18137 Filed 7-25-94; 8:45 am] BILLING CODE 8010-01-M