[Federal Register Volume 62, Number 28 (Tuesday, February 11, 1997)]
[Notices]
[Pages 6283-6288]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-3266]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-22492; 812-10396]


John Nuveen & Co. Incorporated and Nuveen Tax-Free Unit Trusts; 
Notice of Application

February 4, 1997.
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: John Nuveen & Co. Incorporated (the ``Sponsor''), Nuveen 
Tax-Free Unit Trusts (the ``Nuveen Trust''), and any future trusts 
sponsored by the Sponsor (together with the Nuveen Trust, the 
``Trusts''), and their respective series (each, a ``Series'' or a 
``Trust Series'').

RELEVANT ACT SECTIONS: Order requested under section 6(c) for an 
exemption from sections 2(a)(32), 2(a)(35), 12(d)(3), 14(a), 19(b), 
22(d), and 26(a)(2) of the Act, and rules 19b-1 and 22c-1 thereunder; 
under section 11(a) for an exemption from section 11(c); and under 
sections 6(c) and 17(b) for an exemption from section 17(a).

SUMMARY OF APPLICATION: Applicants request an order to permit: (a) the 
Trust to impose sales charges on a deferred basis, and to waive the 
deferred sales charge in certain circumstances; (b) certain offers of 
exchange involving the Trusts; (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; (e) a terminating 
Series of a Trust to sell portfolio securities to a new Series of the 
Trust; and (f) certain Trust Series to invest up to 10.5%, and certain 
other Trust Series to invest up to 20.5% of their assets in the 
securities of issuers that derived more than 15% of their gross 
revenues in their most recent fiscal year from securities related 
activities.

FILING DATE: The application was filed on October 15, 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 March 3, 1997, 
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: 333 West Wacker Drive, Chicago, IL 60606.

FOR FURTHER INFORMATION CONTACT: Christine Y. Greenlees, Senior 
Counsel, at (202) 942-0581, or Mary Kay Frech, 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.

Applicants' Representations

    1. Each Trust is or will be a unit investment trust registered as 
an investment company under the Act. Each of the Trusts is sponsored by 
the Sponsor, and is made up of one or more Series of separate unit 
investment trusts issuing securities registered or to be registered 
under the Securities Act of 1933. Each Series is created by a Trust 
Indenture (the ``Indenture'') between the Sponsor and a banking 
institution or trust company as trustee (the ``Trustee''). The Sponsor 
is a wholly-owned subsidiary of The John Nuveen Company, of which 
approximately 78% is owned by The St. Paul Companies, Inc.
    2. The fundamental structures of the Trusts and the various Series 
are similar in most respects, however, the investment objectives may 
differ. In all cases, the Sponsor will acquire a portfolio of 
securities which it then deposits with the Trustee in exchange for 
certificates representing units of fractional undivided interest 
(``Units'') in the deposited portfolio. 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 front-end 
sales charge. This sales charge is the maximum amount applicable to any 
particular Series of a Trust and currently ranges from 4.9% to 2.5% of 
the public offering price, depending on the term of the underlying 
securities. The Sponsor may reduce the sales charge under certain 
circumstances, which will be disclosed in the prospectus. Any such 
reduction will be made in accordance with rule 22d-1.
    3. 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. 
Investors may purchase Units on the secondary market at the current 
public offering price plus a front-end sales charge. 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.

A. Deferred Sales Charge

    1. The Sponsor proposes to implement a program for one or more 
Trust Series under which part or all of the sales charge would be 
deferred. Under applicants' deferred sales charge (``DSC'') proposal, 
the Sponsor will determine both the maximum amount of the sales charge 
per Unit, and whether to defer the collection of all or part of the 
sales 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 the purchase of Trust Units. The balance of the 
sales charge will be collected over the Collection Period for the 
particular Trust Series. A ratable portion of the sales charge 
remaining to be collected will be deducted from each Unitholder's 
distributions on the Units (``Distribution Deductions'') during the 
Collection Period until the total amount of the sales charge per Unit 
is collected. If distribution income is insufficient to pay a DSC 
installment, the Trustee, pursuant to the powers granted in the 
Indenture, will have the ability to sell portfolio securities in an 
amount

[[Page 6284]]

necessary to provide the requisite payments. If a Unitholder redeems 
his or her Units before the total sales charge has been collected from 
installment payments, the Sponsor intends to deduct any amount of 
unpaid DSC from sale or redemption proceeds. Applicants represent that 
the total of all these amounts will in no event exceed the maximum 
sales charge per Unit.
    3. For purposes of determining whether a DSC applies to a 
particular redemption or sale of Units, the Sponsor will assume that 
Units on which the total aggregate of Distribution Deductions has been 
collected are liquidated first. Any Units disposed of 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. 
Therefore, the DSC will be the balance of the sales charge per Unit, 
determined as of the date of purchase, which remains owing and 
uncollected. The Sponsor may in the future choose to waive the DSC in 
connection with redemption or sales of Units under certain 
circumstances. Any such waiver of the DSC will be disclosed in the 
prospectus and will be implemented in accordance with rule 22d-1.
    4. The Sponsor believes that 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 also will disclose that the 
Trustee may sell Trust securities in the event that income generated by 
the Trust portfolio is insufficient to pay for DSC expenses. Applicants 
also state that each annual report will provide Unitholders with 
information as to the aggregate amount of annual DSC payments made by 
the Trust during the previous fiscal year on both a Series and per Unit 
basis. Further, the securities confirmation statement for each 
Unitholder's purchase transaction will state both the front-end sales 
charge and the DSC that will be imposed, and that the DSC will be 
withdrawn in regular installments from distribution payments made to 
Unitholders.

B. Exchange Option and Rollover Option

    1. Applicants also seek an exemption to permit offers of exchange 
among Series of the Trusts (the ``Exchange Option''), and offers of 
exchange made in connection with the termination of Trust Series (the 
``Rollover Option''). The Exchange Option will extend to all exchanges 
of Units sold either with a front-end sales charge or with a DSC. The 
Rollover Option will give Unitholders the ability to ``roll over'' any 
or all of their Units in a Series of a Trust (each, a ``Rollover 
Trust'') that is terminating for Units of a new Trust Series of the 
same type (a ``New Trust'') at a reduced sales charge.
    2. An investor who purchases Units under either the Exchange Option 
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 maximum sales charges ranging 
from 4.9% to 2.5% of the public offering price (5.5% to 0% for sales on 
the secondary market) to a flat fee (e.g., $25 per 100 Units for Units 
of a Series whose initial cost was approximately $10 per Unit, or $25 
per 1,000 Units for Units of a Series whose initial cost was 
approximately $1.00 per Unit) or a percentage of the public offering 
price. An adjustment will be made if Units of any Trust Series are 
exchanged within five months of their acquisition for Units of a Trust 
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 Trust 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: 
(a) the reduced sales charge, or (b) an amount which, together with the 
sales charge already paid on the Units being exchanged, equals the 
normal sales charge on the Units of the Trust Series being acquired 
through such exchange (the ``Exchange Trust''), determined as of the 
date of the exchange. The Sponsor may waive, with appropriate 
disclosures, such exchange fee, and reserves the right to vary the 
sales charge normally applicable to a Series, to vary the charge 
applicable to exchanges, and to modify, suspend, or terminate the 
Exchange Option as set forth in the conditions to the application.
    4. Under the Exchange Option, if DSC Units are exchanged for DSC 
Units of 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, except in the case of any exchange to a Series not having a 
DSC.
    5. Under the Rollover Option, Unitholders of Rollover Trusts may 
elect by a certain date (the ``Rollover Notification Date'') to redeem 
their Units in a terminating Rollover Trust, and invest in Units of a 
New Trust, which is created on or about the Rollover Notification Date, 
at a reduced sales charge. Unitholders making such an election will be 
referred to as ``Rollover Unitholders.'' The applicable sales charge 
upon the initial investment in a Rollover Trust typically is 2.9% of 
the public offering price, while the reduced sales charge applicable to 
a Rollover Unitholder's investment in a New Trust usually will be 1.9% 
of the public offering price.

C. Purchase and Sale Transactions Between a Rollover Trust and a New 
Trust

    1. Applicants also request an exemption to permit any Rollover 
Trust to sell their portfolio securities to a New Trust, and the New 
Trust to purchase these securities. Each Rollover Trust 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 a 
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 (``Foreign 
Exchange'') that meets the qualifications set forth in a proposed 
amendment to rule 12d3-1(d)(6) under the Act,\1\ and

[[Page 6285]]

which releases daily closing prices, or (ii) the Nasdaq-National Market 
System (``Nasdaq-NMS''); and (b) included in an 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. The investment objective of each Rollover Trust is to seek a 
greater total return than that achieved by the stocks comprising 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 securities in such Rollover Trust's 
respective Index, or in a specified number of the lowest dollar price 
per share of the highest dividend yielding securities in such Rollover 
Trust's respective Index. For example, certain Rollover Trusts (the 
``Ten Series'') will invest for a specified period in approximately 
equal values in the ten common stocks contained in the Dow Jones 
Industrial Average (the ``DJIA''), the Financial Times Industrial 
Ordinary Share Index (the ``FT Index''), or the Hang Seng Index, having 
the highest yields as of no more than three business days prior to the 
Ten Series' initial date of deposit. In addition, other Rollover Trusts 
(the ``Five Series'') will pursue their objective by investing for a 
specified period in approximately equal values in the common stocks of 
the five companies with the lowest dollar price per share of the ten 
companies in the DJIA, the FT Index, or the Han Seng Index, having the 
highest dividend yields as of no more than three business days prior to 
the Five Series' initial date of deposit.
    3. The securities deposited in each Rollover Trust are chosen 
solely according to the formulas described above and set forth in the 
prospectus for the Rollover Trust. The Sponsor will not have any 
discretion as to which securities are purchased, because securities are 
initially purchased in accordance with the formulas described above. 
The Rollover Trust's portfolios will not be actively managed and will 
not be altered to reflect changes to those stocks comprising the top 
dividend yielding stocks (or lowest priced stocks of the top dividend 
yielding stocks) in an Index on a date after the Rollover Trust's 
initial date of deposit. The Sponsor does not have discretion as to 
when securities will be sold, except that the Sponsor is authorized to 
sell securities in extremely limited circumstances, such as a default 
by the issuer on the payment on any of its outstanding obligations, a 
decline in the price of an Equity Security, or other credit factors 
that, in the opinion of the Sponsor, would cause the retention of the 
securities to be detrimental to the Rollover Trust.
    4. 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 securities (or 
of the lowest price per share securities of the highest dividend 
yielding securities, whichever is applicable) in the Index.
    5. There normally is some overlap from year to year of the highest 
dividend yielding securities (or the lowest dollar price per share 
stocks of the highest dividend yielding securities) in an Index and, 
therefore, between the portfolios of each terminating Rollover Trust 
and the related New Trust. For example, of the ten highest dividend 
yielding securities on the DJIA as of May 1995, eight were among the 
top ten dividend yielding securities at approximately the same time the 
following year.
    6. In connection with its termination, each Rollover Trust will 
sell all of its portfolio securities on an Exchange or Nasdaq-NMS as 
quickly as practicable, 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 purchase transactions on an exchange or non 
Nasdaq-NMS. This procedure will result in substantial brokerage 
commissions on portfolio securities of the same issue that are borne by 
the Unitholders of both the Rollover Trust and the New Trust.
    7. In light of these costs, applicants request exemptive relief to 
permit any Rollover Trust having the characteristics described above to 
sell Equity Securities to a New Trust, and to permit the New Trust to 
purchase Equity Securities at the closing sales price of such 
securities on the applicable Exchange or on Nasdaq-NMS on the sale 
date, provided that applicants comply with rule 17a-7 under the Act, 
except for paragraph (e) thereof, as discussed below.
    8. In order 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, as recited in their 
respective registration statements and reports filed under the Act; (b) 
the date of such transaction; and (c) the closing sales price on the 
Exchange or on Nasdaq-NMS for the sale date of the securities subject 
to such sale. The Trustee will then countersign the certificate, unless 
the Trustee disagrees with the price listed on the certificate, in 
which event the Trustee will immediately inform the Sponsor orally of 
any such disagreement and returns the certificate within five days to 
the Sponsor with corrections duly noted. Upon the Sponsors receipt of a 
corrected certificate, if the Sponsor can verify the corrected price by 
reference to an independently published list of closing sales prices 
for the date of the transactions, the Sponsor will ensure that the 
price of Units of the New Trust, and distributions to Unitholders of 
the Rollover Trust with regard to redemption of their Units or 
termination 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.

D. Investments in Securities Related Issuers on Certain Indexes

    1. Applicants also request an exemption to permit the Ten Series to 
acquire securities of an issuer that derives more than 15% of its gross 
revenues from ``securities related activities'' (as defined in rule 
12d3-1(d)(1)), provided that: (a) Those securities are included in the 
DJIA, the FT Index, or the Hang Seng Index; (b) they have one of the 
ten highest yields of stocks comprising the DJIA, the FT Index, or the 
Hang Seng Index no more than three business days prior to the initial 
date of deposit; and (c) the value of the securities deposited of each 
securities related issuer represents no more than approximately 10%, 
but in no event more than 10.5%, of the value of that Ten Series' total 
assets as of its initial date of deposit. In addition, Applicants 
request an exemption to permit the Five Series to acquire securities of 
an issuer that derives more than 15% of its gross revenues from 
``securities related activities'' (as defined in rule 12d3-1(d)(1)), 
provided that: (a) those securities are included in the DJIA, the FT 
Index, or the Hang Seng Index; (b) they are securities of one of the 
five companies with the lowest dollar price per share of the ten stocks 
in the DJIA, the FT Index, or the Hang Seng Index having the highest 
dividend yield as of no more than three business days prior to the 
initial date of deposit; and (c) the value of the securities deposited 
of each securities related issuer represents no more than

[[Page 6286]]

approximately 20%, but in no event more than 20.5%, of the value of 
that Five Series' total assets as of its initial date of deposit.
    2. As noted above, the Ten Series and the Five Series will contain 
a portfolio of Equity Securities which represents a portion of the 
DJIA, the FT Index, or the Hang Seng Index. The DJIA comprises 30 
widely-held common stocks listed on the New York Stock Exchange that 
are chosen by the editors of The Wall Street Journal. The FT Index 
comprises widely-held common stocks listed on the London Stock Exchange 
that are chosen by the editors of the The Financial Times (London). The 
FT Index is an unweighted average of 30 companies representative of 
British industry and commerce. The Hang Seng Index is a weighted 
average of 33 companies representative of Hong Kong industry. The 
publishers of the Dow Jones & Company, Inc. (owner of the DJIA), the FT 
Index, and the Hang Seng Index are unaffiliated with any Series or the 
Sponsor and do not participate in any way in the creation of any Series 
or the selection of its stocks.
    3. Certain of the stocks currently comprising the DJIA, the FT 
Index, and the Hang Seng Index are issued by companies with 
subsidiaries engaged in ``securities related activities'' (as defined 
in rule 12d3-1(d)(1)), revenues of which may from time to time 
represent more than 15% of the issuer's gross revenues. It also is 
possible that additional companies in the DJIA, the FT Index, and the 
Hang Seng Index may acquire companies engaged in or enter into those 
business in the future.

Applicants' Legal Analysis

    1. Applicants request an exemption under section 6(c) granting 
relief from sections 2(a)(32), 2(a)(35), 22(d), 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 an exemption under section 11(a) 
granting relief from section 11(c) to enable them to implement the 
Exchange and Rollover Options. In addition, applicants request an 
exemption under sections 6(c) and 17(b) granting relief from section 
17(a) to permit a terminating Series of a Trust to sell portfolio 
securities to a new Series of the Trust. Finally, applicants seek an 
exemption under section 6(c) granting relief from sections 12(d)(3), 
14(a), 19(b), and rule 19b-1 to the extent described below.
    2. Section 2(a)(32) of the Act defines a ``redeemable security'' as 
a security that, upon its presentation to the issuer, entities 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) defines a 
unit investment trust as an investment company that issues only 
``redeemable securities.''
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    3. Section 2(a)(35) of the Act, 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, in relevant part, prohibits a registered investment 
company issuing a redeemable security from selling, redeeming, or 
repurchasing any such security, except at a price based on the current 
net asset value of such security. 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 
rule 22c-1.
    5. Section 22(d) of the Act requires an investment company and its 
principal underwriter and dealers to sell securities issued by such 
investment company only at the current public offering price as 
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. Applicants 
submit that waivers, deferrals or other scheduled variations, if 
disclosed in the relevant prospectus, would be consistent with section 
22(d), and that rule 22d-1 contemplates and permits such waivers, 
deferrals or other scheduled variations if disclosed in the relevant 
prospectus. In the interest of clarity, however, applicants seek relief 
from section 22(d) to permit scheduled variations or waivers of the DSC 
under certain circumstances.
    6. Section 26(a)(2) of the Act, 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 request an 
exemption to permit the trustee to collect the charge from income 
distributions on the Units and disburse them to the Sponsor as 
contemplate by the DSC program.
    7. Section 6(c) of the Act 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 granting the requested relief from sections 
2(a)(32), 2(a)(35), 22(d), 26(a)(2), and rule 22c-1 would meet the 
requirements for an exemption established by section 6(c).
    8. Section 11(c) of the Act prohibits any offer 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. Applicants request an exemption under section 
11(a) from the provisions of section 11(c) to permit exchanges of Units 
of Trust Series sold with front-end or deferred sales charges at 
reduced sales charges, and to permit exchange transactions made in 
connection with the termination of a Series at a reduced sales charge. 
Applicants believe that the reduced sales charge imposed at the time of 
exchange is a reasonable and justifiable expense to be allocated for 
the professional assistance and operational expenses which are 
contemplated in connection with the Exchange and the 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 14(a) of the Act requires in substance that investment 
companies have $100,000 of net worth prior to making a public offering. 
Applicants believe that each Series will comply with this requirement 
because the Sponsor will deposit substantially more than $100,000 of 
debt or equity securities or a combination thereof, depending on the 
objective of the particular Series. Applicants assert, however, that 
the SEC has interpreted

[[Page 6287]]

section 14(a) as requiring that the initial capital investment in an 
investment company be made without any intention to dispose of the 
investment. Applicants state that, under this interpretation, a Trust 
Series would not satisfy section 14(a) because of the Sponsor's 
intention to sell all the Units thereof. Rule 14a-3 exempts unit 
investment trusts from this provision if certain conditions are 
complied with, one of which is that the trust invest only in ``eligible 
trust securities,'' as defined in the rule. Applicants intend that 
certain future Series of the Trusts (collectively, the ``Equity 
Trusts'') will invest all or a portion of their assets in Equity 
Securities, and therefore may not rely on this rule because Equity 
Securities are not eligible trust securities. Applicants, therefore, 
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, except that the Equity Trusts will not restrict their portfolio 
investments to ``eligible trust securities.''
    10. Section 19(b) of the Act and rule 19b-1 provide that, except 
under limited circumstances, no registered investment company may 
distribute long-term 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 do not 
limit their investments to ``eligible trust securities,'' such Trusts 
will not qualify for the exemption in paragraph (c) of rule 19b-1. 
Therefore, applicants request an exemption under section 6(c) from 
section 19(b) and rule 19b-1 to the extent necessary to permit 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.
    11. 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. Applicants acknowledge that the Sponsor has control over 
the actual redemption of Units to the extent it makes a market in 
Units. Applicants assert, however, that the Sponsor has no incentive to 
redeem or permit the redemption of Units in order to generate capital 
gains for the purpose against which section 19(b) and rule 19b-1 were 
designed to protect. 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.
    12. Section 17(a) of the Act makes it unlawful for an affiliated 
person of a registered investment company to purchase securities from, 
or sell securities to such registered investment company. Investment 
companies under common control may be considered affiliated persons of 
one another. Each Series will have an identical or common Sponsor, John 
Nuveen & Co. Incorporated. As the Sponsor of each Series might be 
considered to control each Series, it is likely that each Series would 
be considered an affiliated person of the others.
    13. Section 17(b) of the Act provides that the SEC may 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 each registered investment company involved; and 
(c) the proposed transaction is consistent with the general purposes of 
the Act. As noted above, under section 6(c), the SEC may exempt classes 
of transactions if, and to the extent that, such exemption is necessary 
or 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. Because section 17(b) applies to a specific 
proposed transaction and not to ongoing series of future transactions, 
applicants also request relief from section 17(a) under section 6(c). 
Applicants believe that the proposed transactions satisfy the 
requirements of sections 6(c) and 17(b).
    14. Rule 17a-7 under the Act 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).
    15. Applicants submit that the proposed transactions will be 
consistent with the policy of the Trust, 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. In addition, applicants state that such purchases from 
and/or sales to such affiliated investment companies will take place 
only upon the occurrence of a redemption of Units or the termination of 
a Rollover Trust and the creation of a New Trust. Applicants further 
believe that the current practice of buying and selling on the open 
market leads to unnecessary brokerage fees, and is therefore contrary 
to the general purposes of the Act.
    16. Section 12(d)(3) of the Act prohibits an investment company 
from acquiring any security issued by any person who is a broker, 
dealer, underwriter, or investment adviser. Rule 12d3-1, in relevant 
part, exempts from section 12(d)(3) purchases by an investment company 
of securities of an issuer that derived more than 15% of its gross 
revenues in its most recent fiscal year from securities related 
activities, provided that, among other things, immediately after such 
acquisition, the acquiring company has invested not more than 5% of the 
value of its total assets in securities of the issuer.
    17. Applicants seek an exemption under section 6(c) from the 
provisions of section 12(d)(3) to permit each Ten Series to invest up 
to approximately 10%, but in no event more than 10.5%, of the value of 
any Ten Series' assets in the securities of an issuer of any of the ten 
highest dividend yielding stocks in the DJIA, the FT Index, or the Hang 
Seng Index that derives more than 15% of its gross revenues from 
securities related activities. Similarly, applicants seek an exemption 
to permit each Five Series to invest up to approximately 20%, but in no 
event more than 20.5%, of the value of any Five Series' assets in the 
securities of an issuer of any of the five stocks having the lowest 
dollar price per share of the ten highest yielding stocks in the DJIA, 
the FT Index, or the Hang Seng Index, that derives more than 15% of its 
gross revenues from securities related activities. Applicants represent 
that each Ten Series and Five Series will comply with all of the 
conditions of rule 12d3-1, except the condition prohibiting an 
investment company from investing more than 5% of the value of its 
total assets in securities of a securities related issuer.

[[Page 6288]]

    18. Applicants submit that the purpose of section 12(d)(3) was to: 
(a) prevent investment companies from exposing their assets to the 
entrepreneurial risks of securities related businesses; (b) prevent 
potential conflicts of interest; (c) eliminate certain reciprocal 
practices between investment companies and securities related 
businesses; and (d) ensure that investment companies maintain adequate 
liquidity in their portfolios. Applicants assert that the proposed 
transaction does not give rise to the type of abuses section 12(d)(3) 
was designed to address. Applicants also believe that the requested 
relief meets the standards for an exemption set forth in section 6(c).

Applicants' Conditions

    Applicants agree that any order granting the requested relief shall 
be subject to the following conditions:

A. Conditions With Request 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 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 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 Exchange 
Option or Rollover 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 12(d)(3)

    No company held in the Ten Series' portfolio or the Five Series' 
portfolio, nor any affiliate thereof, will act as broker for any Ten 
Series or Five Series in the purchase or sale of any security for such 
Series' portfolio.

C. Condition for Exemption From Section 14(a)

    Applicants 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.''

D. 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 SEC, by the Division of Investment Management, under 
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-3266 Filed 2-10-97; 8:45 am]
BILLING CODE 8010-01-M