[Federal Register Volume 59, Number 211 (Wednesday, November 2, 1994)]
[Notices]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-27164]


[[Page Unknown]]

[Federal Register: November 2, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Rel. No. IC-20664; 812-8166]

 

Equity Securities Trust (Series 1, Signature Series, Gabelli 
Communications Income Trust and Subsequent Series), et al.; Notice of 
Application

October 27, 1994.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of application for exemption under the Investment 
Company Act of 1940 (``ACT'').

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APPLICANTS: Equity Securities Trust (Series 1, Signature Series, 
Gabelli Communications Income Trust and Subsequent Series), Mortgage 
Securities Trust (CMO Series 1 and Subsequent Series), Municipal 
Securities Trust (Series 1 and Subsequent Series) (including Insured 
Municipal Securities Trust, Series 1 and Subsequent Series, and 5th 
Discount Series and Subsequent Series), New York Municipal Trust 
(Series 1 and Subsequent Series), A Corporate Trust (Series 1 and 
Subsequent Series) (collectively, the ``Trusts''); Bear, Stearns & Co. 
Inc. (``Bear Stearns''); and Gruntal & Co., Incorporated (``Gruntal'').

RELEVANT ACT SECTIONS: Sections 11(a) and 11(c).

SUMMARY OF APPLICATION: Applicants request an order to permit 
unitholders of the Trusts of exchange their units for units in other 
Trusts at a reduced sales charge. The order would supersede a prior 
order and include the Equity Securities Trust in the exchange program.

FILING DATES: The application was filed on November 12, 1992, and 
amended on January 26, 1994 and October 19, 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 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 November 21, 
1994, and should be accompanied by proof of service on the 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 
reasons for the request, and the issues contested. Persons who wish to 
be notified of a hearing may request such notification by writing to 
the SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street NW., Washington, D.C. 
20549; Bear, Sterns & Co. Inc. and the Trusts, 245 Park Avenue, New 
York, New York 10167; Gruntal & Co. Incorporated, 14 Wall Street, New 
York, New York 10005.

FOR FURTHER INFORMATION CONTACT: Mary Kay Frech, Senior Attorney, at 
(202) 942-0579, 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 from 
the SEC's Public Reference Branch.

Applicant's Representations

    1. The Trusts are registered under the Act as unit investment 
trust, and their units of interest are registered under the Securities 
Act of 1933. Bear Stearns, one of the cosponsors of the Equity 
Securities Trust, sponsors the Trusts and numerous other unit 
investment trusts. Gruntal, also a cosponsor of the Equity Securities 
Trust, sponsors various other unit investment trusts with Bear Stearns 
(Bear Stearns and Gruntal are collectively referred to as the 
``Sponsors''). Each Trust is organized under a Trust Indenture and 
Agreement between the Trust, the Sponsors, and United States Trust 
Company of New York or Bank of New York, as trustee, which varies from 
Trust to Trust.
    2. On August 28, 1991, the SEC issued an order (the ``Prior 
Order'')\1\ permitting unitholders of the Trusts, except the Equity 
Securities Trust, to exchange their units for units in another 
available Trust or Trusts, except the Equity Securities Trust, upon 
payment of a reduced sales charge. The Prior order also permits a 
conversion offer in which the unitholders of any registered unit 
investment trust for which there is no active secondary market may 
redeem their units with their respective trustees and apply the 
proceeds to the purchase of units of one or more of the Trusts, except 
the Equity Securities Trust, upon payment of the same reduced sales 
charge.

    \1\Investment Company Act Release Nos. 18254 (Aug. 1, 1991) 
(notice) and 18290 (Aug. 28, 1991) (order). The Prior Order amended 
two previous orders: Investment Company Act Release Nos. 11143 (Apr. 
29, 1980) (notice) and 11184 (May 23, 1980) (order); and Investment 
Company Act Release Nos. 11715 (Apr. 1, 1981) (notice) and 11754 
(Apr. 29, 1981) (order).
    3. The Equity Securities Trust is a newly formed unit investment 
trust consisting of a portfolio of common stock, convertible 
securities, American Depository Receipts, and contracts and funds for 
the purchase of such securities. The Equity Securities Trust deposits 
its securities with the trustee, in exchange for certificates 
representing undivided interests or units in the principal and net 
income of the Equity Securities Trust in the ratio of one hundred units 
for the indicated initial aggregate value of securities of the Equity 
Securities Trust.
    4. During the initial public offering period, units of the Trust 
are sold at a sales charge ranging from 3.5% to 5.5%, depending on the 
Trust, subject to certain specified volume discounts for purchases 
exceeding a certain number of units.
    5. The Sponsors, although not obligated to do so, maintain a 
secondary market for the units of all the existing Trusts after the 
initial public offering has been completed. The Sponsors also intend to 
maintain a secondary market for any new Trusts after the initial public 
offering has been completed. The secondary market repurchase and 
reoffer price, both during and after the initial public offering 
period, will be based on the bid prices of the Trust's portfolio 
securities. Any units repurchased by the Sponsors in the secondary 
market may be redeemed by the Sponsors if the Sponsors deem such 
redemption to be in their best interest. If a market for the units is 
not maintained, unitholders will be able to redeem their units with the 
trustee at a price based on the aggregate bid side evaluation of the 
Trust's portfolio securities.
    6. Applicants propose to offer unitholders of the Trusts the 
ability to exchange any or all of their units for units in one or more 
available series of the Trusts at a reduced sales charge (the 
``Exchange Privilege''). Pursuant to the Exchange Privilege, the 
Sponsors' repurchase price during the initial offering period of the 
units being surrendered will be based on the aggregate offer price of 
the Trust's portfolio securities, and, if the initial offering period 
has been completed, will be based on the aggregate bid price of the 
Trust's portfolio securities. Units in a Trust then will be sold to the 
unitholder at a price based on the aggregate offer price of the 
securities in the Trust portfolio during the initial public offering 
period of the Trust (or based on the aggregate bid price of the 
securities in the Trust portfolio if the initial public offering period 
has been completed) plus accrued interest and a reduced sales charge.
    7. The Sponsors reserve the right to suspend, modify, or terminate 
the Exchange Privilege. The Sponsors will provide unitholders with 60 
days prior written notice of any termination or material amended to the 
Exchange Privilege, except as provided in condition 3 below.
    8. Applicants also propose to offer a conversion offer (the 
``Conversion Offer'') to all unitholders of any registered unit 
investment trust in which there is no active secondary market (a 
``Redemption Trust''). Pursuant to the Conversion Offer, unitholders 
may elect to redeem units of a Redemption Trust at the redemption drive 
determined as set forth in the relevant Redemption Trust's prospectus 
and apply the proceeds of the redemption to the purchase of available 
units of one or more series of the Trust. The purchase price for units 
of a series of a Trust will be based on the aggregate offer of the 
Trust's portfolio securities during its initial offering period, or at 
a price based on the aggregate bid price of the Trust's portfolio 
securities if the initial public offering period of the Trust has been 
completed, and will include accrued interest and a reduced sales 
charge.
    9. The Sponsors reserve the right to modify, suspend, or terminate 
the Conversion Offer at any time without prior notice to unitholders of 
a Redemption Trust.
    10. The Exchange Privilege and Conversion Offer are substantially 
similar in all respects to the exchange privilege and conversion offer 
already approved by the SEC in the Prior Order, except the Equity 
Securities Trust, as a newly formed Trust, was not in existence at the 
time that order was issued. The requested relief is necessary to enable 
the Equity Securities Trust to offer the same exchange privilege to its 
unitholders as is already permitted to unitholders of the other Trusts 
pursuant to the Prior Order, and to revise the reduced sales charge 
under the Exchange Privilege and Conversion Offer to be an amount equal 
to a percentage of the public offering price for each unit (or per 
1,000 units for Mortgage Securities Trust or per 100 units for Equity 
Securities Trust). The requested relief will supersede the Prior Order 
in its entirety.

Applicants' Legal Analysis

    1. Section 11(a) of the Act requires SEC approval of an offer to 
exchange securities between open-end investment companies of the 
exchange occurs on any basis other than the relative net asset values 
of the Securities to be exchanged. Section 11(c) of the Act 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 believe that the Exchange Privilege provides 
investors with a convenient means of transferring their interests at a 
reduced sales charge, as their individual investment objectives change, 
into series of the Trust that are better suited to meet these changing 
investment objectives. Applicants also state that the Conversion Offer 
provides investors with a means by which unitholders of a unit 
investment trust in which there is no active secondary market can 
redeem those units and invest the proceeds therefrom, at a reduced 
sales charge, into units of the trusts.

Applicants' Conditions

    The Applicants agree to the following conditions in any order 
granting the requested relief:
    1. Participants in the Exchange Privilege and Conversion Offer for 
the Trusts will, in the purchase and sale of units of the Trusts, be 
subject to the same portfolio pricing terms as are set forth in the 
prospectus for each Trust and will purchase and sell units of the 
Trusts based on the same portfolio pricing terms as all other investors 
who purchase and sell units of the Trusts through the Sponsors or the 
underwriters in regular transactions.
    2. The prospectus for each Trust and any sales literature or 
advertisement that mentions the existence of the Exchange Privilege 
will disclose that the Exchange Privilege is subject to termination and 
that its terms are subject to change.
    3. Whenever the Exchange Privilege 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 last 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 Privilege, 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 a Trust 
under section 22(e) of the Act and the rules and regulations 
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.
    4. During the 60 day period described in condition 3 above, the 
Sponsors will maintain a secondary market in units that could be 
acquired by affected unitholders.
    5. The applicable sales charge for the purchase of units of a Trust 
for Trust unitholders who wish to exercise the Exchange Privilege 
within the first five months from the date of their purchase of units 
of a Trust, where the applicable public offering price for the Trust 
units being purchased includes higher sales charges than the sales 
charges applicable to the units being exchanged, will be the greater of 
the reduced sales charge (up to 1.5% of the public offering price of 
each unit (or per 1,000 units for Mortgage Securities Trust or per 100 
units for the Equity Securities Trust)), or an amount which, when 
coupled with the sales charge actually paid on purchase of the units 
being exchanged, would equal the sales charge applicable to direct 
purchases of the quantity of Trust units being acquired, determined as 
of the date of the exchange.
    6. The applicable sales charge for the purchase of units of a Trust 
for Redemption Trust unitholders who wish to exercise the Conversion 
Offer within the first five months from the date of their purchase of 
units of a Redemption Trust, where the applicable public offering price 
for the Trust units being purchased includes higher sales charges than 
the sales charges applicable to the units being converted, will be the 
greater of the reduced sales charge (up to 1.5% of the price of each 
unit (or per 1,000 units for Mortgage Securities Trust or per 100 units 
for the Equity Securities Trust)), or an amount which, when coupled 
with the sales charge actually paid on purchase of the units being 
converted, would equal the sales charge applicable to direct purchases 
of the quantity of Trusts units being acquired, determined as of the 
date of the conversion.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 94-27164 Filed 11-1-94; 8:45 am]
BILLING CODE 8010-01-M