[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
