[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]


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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'').

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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.
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    \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).
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    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