[Federal Register Volume 66, Number 53 (Monday, March 19, 2001)]
[Notices]
[Pages 15508-15511]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-6687]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 24892; 812-12130]


Nuveen Investments, et al.; Notice of Application

March 13, 2001.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order under section 12(d)(1)(J) of 
the Investment Company Act of 1940 (``Act'') for an exemption from 
sections 12(d)(1)(A), (B), and (C) of the Act and under sections 6(c) 
and 17(b) of the Act for an exemption from section 17(a) of the Act.

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SUMMARY: Applicants request an order to permit certain registered unit 
investment trusts to acquire shares of registered management 
investmentcompanies and unit investments trusts both within and outside 
the same group of investment companies.

APPLICANTS: Nuveen Investments, Nuveen Tax-Free Unit Trusts and Nuveen 
Unit Trusts.

FILING DATES: The application was filed on June 8, 2000, and amendments 
were filed on January 2, 2001, and February 26, 2001.

HEARING OR NOTIFICATION OF HEARING: An order granting the application 
will be issued unless the Commission orders a hearing. Interested 
persons may request a hearing by writing to the Commission's Secretary 
and serving applicants with a copy of the request, personally or by 
mail. Hearing requests should be received by the Commission by 5:30 
p.m. on April 5, 2001, 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 Commission's Secretary.

ADDRESSES: Secretary, Commission, 450 Fifth Street, NW., Washington, DC 
20549-0609. Applicants, 333 West Wacker Drive, Chicago, IL 60606.

FOR FURTHER INFORMATION CONTACT: Michael W. Mundt, Branch Chief, at 
(202) 942-0564 (Office of Investment Company Regulation, Division of 
Investment Management).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee at the 
Commission's Public Reference Branch, 450 Fifth Street, NW., 
Washington, DC 20549-0102, (202) 942-8090.

Applicants' Representation

    1. The Nuveen Unit Trusts and Nuveen Tax-Free Unit Trusts 
(``Trusts'') and their series (``Trust Series'') are unit investment 
trusts registered under the Act and sponsored by Nuveen Investments 
(``Sponsor''). The Sponsor, a Delaware corporation, is a wholly-owned 
subsidiary of The John Nuveen Company.
    2. Applicants requests relief to permit the Trusts Series to invest 
in (a) registered investment companies that are part of the same 
``group of investment companies'' (as that term is defined in section 
12(d)(1)(G) of the Act) as the Trust (``Affiliated Funds''), and (b) 
registered investment companies that are not part of the same group of 
investment companies as the Trust (``Unaffiliated Funds,'' together 
with the Affiliated Funds, the ``Funds''). The Unaffiliated Funds may 
include unit investment trusts (``Unaffiliated Underlying Trusts'') and 
open-end or closed-end management investment companies (``Unaffiliated 
Underlying

[[Page 15509]]

Funds''). Certain of the Unaffiliated Underlying Trusts or Unaffiliated 
Underlying Funds may be ``exchange-traded funds'' that are registered 
under the Act as unit investment trusts or open-end management 
investment companies and have received exemptive relief to sell their 
shares on a national securities exchange at negotiations prices. 
Applicants request that the relief also apply to future Trust Series 
and unit investment trusts registered under the Act and sponsored by 
the Sponsor that invest in the Funds.\1\
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    \1\ All investment companies that currently intend to rely on 
the requested order are named as applicants. Any other investment 
company that relies on the order in the future will comply with the 
terms and conditions of the application.
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    3. Applicants states that the requested relief will benefit 
unitholders by providing investors with a professionally selected, 
diversified portfolio of investment company shares through a single 
investment vehicle.

Applicants' Legal Analysis

A. Section 12(d)(1)

    1. Section 12(d)(1)(A) of the Act prohibits a registered investment 
company from acquiring shares of an investment company if the 
securities represent more than 3% of the total outstanding voting stock 
of the acquired company, more than 5% of the total assets of the 
acquiring company, or, together with the securities of any other 
investment companies, more than 10% of the total assets of the 
acquiring company. Section 12(d)(1)(B) of the act prohibits a 
registered open-end investment company from selling its shares to 
another investment company if the sale will cause the acquiring company 
to own more than 3% of the acquired company's voting stock, or if the 
sale will cause more than 10% of the acquired company's voting stock to 
by owned by investment companies generally. Section 12(d)(1)(C) 
prohibits an investment company, other investment companies having the 
same investment adviser, and companies controlled by such investment 
companies, from acquiring more than 10% of the outstanding voting stock 
of a registered closed-end management investment company.
    2. Section 12(d)(1)(G) provides, in relevant part, that section 
12(d)(1) will not apply to securities of a registered open-end 
investment company or unit investment trust acquired by a registered 
unit investment trust if the acquired company and the acquiring company 
are part of the same group of investment companies, provided that 
certain other requirements contained in section 12(d)(1)(G) are met. 
Applicants state that they may not rely on section 12(d)(1)(G) because 
a Trust Series will invest in Unaffiliated Funds in addition to 
Affiliated Funds.
    3. Section 12(d)(1)(J) of the Act provides that the Commission may 
exempt any person security, or transaction, or any class or classes of 
persons, securities or transactions, from any provisions of section 
12(d)(1) if the exemption is consistent with the public interest and 
the protection of investors. Applicants seek an exemption under section 
12(d)(1)(J) to permit a Trust Series to acquire shares of a Fund and a 
permit a Fund to sell shares to a Trust Series beyond the limits set 
forth in sections 12(d)(1)(A), (B), and (C).
    4. Applicants state that the proposed arrangement will not give 
rise to the policy concerns underlying sections 12(d)(1)(A), (B), and 
(C), which include concerns about undue influence by a fund or funds 
over underlying funds, excessive layering of fees, and overly complex 
fund structures. Accordingly, applicants believe that the requested 
exemption is consistent with the public interest and protection of 
investors.
    5. Applicants state that the proposed arrangement will not result 
in undue influence by a Trust Series or its affiliates over Funds. To 
limit the control that a Trust Series may have over an Unaffiliated 
Fund, applicants propose a condition prohibiting the Sponsor, the Trust 
Series, and certain affiliates (individually or in the aggregate) from 
controlling an Unaffiliated Fund within the meaning of section 2(a)(9) 
of the Act. To limit further the potential for undue influence over 
Unaffiliated Funds, applicants propose conditions 2 through 6, stated 
below, to preclude a Trust Series and its affiliated entities from 
taking advantage of an Unaffiliated Fund with respect to transactions 
between the entities and to ensure that transactions will be on an 
arm's length basis.
    6. As an additional assurance that an Unaffiliated Fund understands 
the implications of an investment by a Trust Series under the requested 
order, a Trust Series and Unaffiliated Fund will execute an agreement 
prior to the investment stating that the board of directors of the 
Unaffiliated Fund, if any, and the investment adviser to or sponsor of 
the Unaffiliated Fund understand the terms and conditions of the order 
and agree to fulfill their responsibilities under the order. Applicants 
note that an Unaffiliated Fund may choose to reject an investment from 
the Trust Series.
    7. Applicants do not believe that the proposed arrangement will 
involve excessive layering of fees. Applicants state that a condition 
to the order would provide that any sales charges and/or service fees 
(as those terms are defined in Rule 2830 of the Conduct Rules of the 
National Association of Securities Dealers (``NADS Conduct Rules'')) 
charged with respect to Units of a Trust Series will not exceed the 
limits applicable to a fund of funds as set forth in Rule 2830 of the 
NASD Conduct Rules. In addition, the trustee to a Trust Series 
(``Trustee'') will waive or offset fees otherwise payable by the Trust 
Series in an amount at least equal to any compensation (including fees 
paid pursuant to plan adopted by an Unaffiliated Underlying Fund under 
rule 12b-1 under the Act (``12b-1 Fees'')) received by the Sponsor or 
Trustee, or an affiliated person of the Sponsor or Trustee, from an 
Unaffiliated Fund in connection with the investment by a Trust Series 
in the Unaffiliated Fund.
    8. Applicants state that the proposed arrangement will not create 
an overly complex fund structure. Applicants not that a Fund will be 
prohibited from acquiring securities of any investment company in 
excess of the limits contained in section 12(d)(1)(A). Applicants also 
represent that a Trust Series' prospectus and sales literature will 
contain concise, ``plain English'' disclosure designed to inform 
investors of the unique characteristics of the trust of funds 
structure, including, but not limited to, its expense structure and the 
additional expenses of investing in Funds.

B. Section 17(a)

    1. Section 17(a) of the Act generally prohibits sales or purchases 
of securities between a registered investment company and any 
affiliated person of the company. Section 2(a)(3) of the Act defines an 
``affiliated person'' of another person to include (a) any person 
directly or indirectly owning, controlling, or holding with power to 
vote, 5% or more of the outstanding voting securities of the other 
person; (b) any person 5% or more of whose outstanding voting 
securities are directly or indirectly owned, controlled, or held with 
power to vote by the other person; and (c) any person directly or 
indirectly controlling, controlled by, or under common control with the 
other person.
    2. Applicants state that a Trust Series and Affiliated Funds might 
be deemed to be under the common control of the Sponsor or an entity 
controlling, controlled by, or under common control with the Sponsor. 
Applicants also state that a Trust Series and a Fund might become 
affiliated persons if the Trust

[[Page 15510]]

Series acquires more than 5% of the Fund's outstanding voting 
securities. In light of these possible affiliations, section 17(a) 
could prevent a Fund from selling shares to and redeeming shares from a 
Trust Series.
    3. Section 17(b) of the Act authorizes the Commission to grant an 
order permitting a transaction otherwise prohibited by section 17(a) if 
it finds that (a) the terms of the proposed transaction are fair and 
reasonable and do not involve overreaching on the part of any person 
concerned; (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. Section 
6(c) of the Act permits the Commission to exempt any person or 
transactions from any provisions of the Act if 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.
    4. Applicants submit that the proposed arrangement satisfies the 
standards for relief under sections 17(b) and 6(c) of the Act. 
Applicants state that the terms of the arrangement are fair and 
reasonable and do not involve overreaching. Applicants note that the 
consideration paid for the sale and redemption of shares of the Funds 
will be based on the net asset values of the Funds. Applicants state 
that the proposed arrangement will be consistent with the polices of 
each Trust Series and Fund, and with the general purposes of the Act.

Applicant's Conditions

    Applicants agree that the requested order will be subject to the 
following conditions:
    1. (a) The Sponsor, (b) any person controlling, controlled by, or 
under common control with the Sponsor, and (c) any investment company 
and any issuer that would be an investment company but for section 
3(c)(1) or section 3(c)(7) of the Act sponsored or advised by the 
Sponsor or any person controlling, controlled by, or under common 
control with the Sponsor (collectively, the ``Group'') will not control 
(individually or in the aggregate) an Unaffiliated Fund within the 
meaning of section 2(a)(9) of the Act. If, as a result of a decrease in 
the outstanding voting securities of an Unaffiliated Fund, the Group, 
in the aggregate, becomes a holder of more than 35% of the outstanding 
voting securities of the Unaffiliated Fund, the Group will vote its 
shares in the same proportion as the vote of all other holders of the 
Unaffiliated Fund's shares.
    2. A Trust Series and its Sponsor, promoter, and principal 
underwriter, and any person controlling, controlled by, or under common 
control with any of those entities (each a ``Trust Series Affiliate'') 
will not cause any existing or potential investment by the Trust Series 
in shares of an Unaffiliated Fund to influence the terms of any 
services or transactions between the Trust Series or a Trust Series 
Affiliate and the Unaffiliated Fund or its investment adviser, sponsor, 
promoter, and principal underwriter, and any person controlling, 
controlled by, or under common control with any of those entities.
    3. Once an investment by a Trust Series in the securities of an 
Unaffiliated Underlying Fund exceeds the limits of section 
12(d)(1)(A)(i) of the Act, the board of directors of the Unaffiliated 
Underlying Fund, including a majority of the disinterested directors, 
will determine that any consideration paid by the Unaffiliated 
Underlying Fund to a Trust Series or a Trust Series Affiliate in 
connection with any services or transactions: (a) Is fair and 
reasonable in relation to the nature and quality of the services and 
benefits received by the Unaffiliated Underlying Fund; (b) is within 
the range of consideration that the Unaffiliated Underlying Fund would 
be required to pay to another unaffiliated entity in connection with 
the same services or transactions; and (c) does not involve 
overreaching on the part of any person concerned.
    4. No Trust Series or Trust Series Affiliate will cause an 
Unaffiliated Fund to purchase a security from any underwriting or 
selling syndicate in which a principal underwriter is the Sponsor or a 
person of which the Sponsor is an affiliated person (each an 
``Underwriting Affiliate''). An offering during the existence of an 
underwriting or selling syndicate of which a principal underwriter is 
an Underwriting Affiliate is considered an ``Affiliated Underwriting.''
    5. The Board of directors of an Unaffiliated Underlying Fund, 
including a majority of the disinterested directors, will adopt 
procedures reasonably designed to monitor any purchases by the 
Unaffiliated Underlying Fund of securities in Affiliated Underwritings 
once an investment by a Trust Series in the securities of the 
Unaffiliated Underlying Fund exceeds the limits of section 
12(d)(1)(A)(i) of the Act, including any purchases made directly from 
an Underwriting Affiliate. The board of directors will review these 
purchases periodically, but not less frequently than annually, to 
determine whether the purchase were influenced by the investment by the 
Trust Series in shares of the Unaffiliated Underlying Fund. The board 
of directors will consider, among other things, (a) whether the 
purchases were consistent with the investment objectives and policies 
of the Unaffiliated Underlying Fund; (b) how the performance of 
securities purchased in an Affiliated Underwriting compares to the 
performance of comparable securities purchased during a comparable 
period of time in underwritings other than Affiliated Underwritings or 
to a benchmark such as a comparable market index; and (c) whether the 
amount of securities purchased by the Unaffiliated Underlying Fund in 
Affiliated Underwritings and the amount purchased directly from 
Underwriting Affiliates have changed significantly from prior years. 
The board of directors shall take any appropriate actions based on its 
review, including, if appropriate, the institution of procedures 
designed to assure that purchases of securities from Affiliated 
Underwritings are in the best interests of shareholders.
    6. An Unaffiliated Underlying Fund shall maintain and preserve 
permanently in an easily accessible place a written copy of the 
procedures described in the preceding condition, and any modifications, 
and shall maintain and preserve for a period not less than 6 years from 
the end of the fiscal year in which any purchase from an Affiliated 
Underwriting occurred, the first 2 years in an easily accessible place, 
a written record of each purchase made once an investment by a Trust 
Series in the securities of an Unaffiliated Underlying Fund exceeded 
the limits of section 12(d)(1)(A)(i) of the Act, setting forth from 
whom the securities were acquired, the identity of the underwriting 
syndicate's members, the terms of the purchase, and the information or 
materials upon which the board's determinations were made.
    7. Prior to an investment in an Unaffiliated Fund in excess of the 
limit in section 12(d)(1)(A)(i), the Trust Series and the Unaffiliated 
Fund will execute an agreement stating, without limitation, that the 
board of directors of the Unaffiliated Fund, if any, and the investment 
adviser to or sponsor of the Unaffiliated Fund understand the terms and 
conditions of the order and agree to fulfill their responsibilities 
under the order. At the time of its investment in shares of an 
Unaffiliated Fund in excess of the limit in section 12(d)(1)(A)(i), a

[[Page 15511]]

Trust Series will notify the Unaffiliated Fund of the investment. At 
such time, the Trust Series also will transmit to the Unaffiliated Fund 
a list of the names of each Trust Series Affiliate and Underwriting 
Affiliate. The Trust Series will notify the Unaffiliated Fund of any 
changes to the list as soon as reasonably practicable after a change 
occurs. The Unaffiliated Fund and the Trust Series will maintain and 
preserve a copy of the order, the agreement, and the list with any 
updated information for a period not less than 6 years from the end of 
the fiscal year in which any investment occurred, the first 2 years in 
an easily accessible place.
    8. The Trustee will waive or offset fees otherwise payable by a 
Trust Series in an amount at least equal to any compensation (including 
12b-1 Fees) received by the Sponsor or Trustee, or an affiliated person 
of the Sponsor or Trustee, from an Unaffiliated Fund in connection with 
the investment by a Trust Series in the Unaffiliated Fund.
    9. Any sales charges and/or service fees (as those terms are 
defined in Rule 2830 of the NASD Conduct Rules) charged with respect to 
Units of a Trust Series will not exceed the limits applicable to a fund 
of funds as set forth in Rule 2830 of the NASD Conduct Rules.
    10. No Fund will acquire securities of any other investment company 
in excess of the limits contained in section 12(d)(1)(A) of the Act.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-6687 Filed 3-19-01; 8:45 am]
BILLING CODE 8010-01-M