[Federal Register Volume 64, Number 144 (Wednesday, July 28, 1999)]
[Notices]
[Pages 40921-40923]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-19226]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 23916; 812-11542]
Nuveen Unit Trusts and John Nuveen & Co., Inc.; Notice of
Application
July 21, 1999.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application under section 12(d)(1)(J) of the
Investment Company Act of 1940 (the ``Act'') for an exemption from
section 12(d)(1) 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 OF APPLICATION: Applicants Nuveen Unit Trusts (``Trust'') and
John Nuveen & Co., Inc. (the ``Sponsor'') request an order (a) under
section 12(d)(1)(J) of the Act that would permit each series of the
Trust and any future trusts sponsored by the Sponsor (``Series'') to
offer its shares to the public with a sales load that exceeds the 1.5%
limit of section 12(d)(1)(F)(ii) and (b) under sections 6(c) and 17(b)
of the Act for an exemption from section 17(a) of the Act to permit the
Trust to invest in affiliated registered investment companies within
the limits of section 12(d)(1)(F) of the Act.
APPLICANTS: Nuveen Unit Trusts and John Nuveen & Co., Inc.
FILING DATES: The application was filed on December 4, 1998, and
amended on June 16, 1999.
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 applicant with a copy of the request, personally or by
mail. Hearing requests should be received by the Commission by 5:30
p.m. on August 16, 1999 and should be accompanied by proof of service
on applicant, 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 may request notification of a hearing by writing to
the Commission's Secretary.
ADDRESSES: Secretary, Commission, 450 5th Street NW, Washington, DC
20549-0609. Applicants, 333 West Wacker Drive, Chicago, IL 60606.
FOR FURTHER INFORMATION CONTACT: Janet M. Grossnickle, Attorney-
Adviser, at (202) 942-0526, or Mary Kay Frech, 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 5th Street NW, Washington, DC
20549-0102 (tel. 202-942-8090).
Applicants' Representations
1. The Trust is a unit investment trust (``UIT'') registered under
the Act. The Sponsor, a broker-dealer registered under the Securities
Exchange Act of 1934 and member of the National Association of
Securities Dealers, Inc. (``NASD''), is the sponsor for each Series.
Each Series will be created under state law pursuant to a trust
agreement that will contain information specific to that Series, and
will incorporate by reference a master trust agreement between the
Sponsor and a financial institution that satisfies the criteria in
section 26(a) of the Act (the ``Trustee''). The trust agreement and the
master trust agreement are referred to collectively as the ``Trust
Agreement.''
2. Each Series will contain a portfolio of shares of registered
investment companies or series thereof (the ``Funds''). Applicants
anticipate that certain of the Funds selected may be advised and/or
distributed by the Sponsor or one of its affiliates (``Affiliated
Funds''). However, applicants anticipate that most of the Funds
selected will be unaffiliated with the Sponsor (``Unaffiliated
Funds''). Applicants state that the Trust's investments in Affiliated
Funds and Unaffiliated Funds will comply with section 12(d)(1)(F) of
the Act in all respects except for the sales load restriction in
section 12(d)(1)(F)(ii). Applicants believe that the proposed structure
of the Series will provide investors with a cost-effective means of
investing in a diversified pool of securities of registered investment
companies that has been professionally selected by the Sponsor.
3. Each of the Funds will be registered as a closed-end investment
company, an open-end investment company, or a UIT. In addition, certain
of the Funds may be either an open-end investment company or a UIT that
has received exemptive relief under the Act to sell its shares at
negotiated prices on an exchange (``Exchange Funds''). The shares of
the Funds will be deposited in each Series at net asset value,\1\ or,
if the Fund shares are listed on a national securities exchange or
traded on the Nasdaq National Market System (``Nasdaq-NMS''), at their
market value.\2\ Market value will be determined by an evaluator, and
will be based on the closing sale prices (or, if unavailable, the
closing ask prices) for the securities traded on an exchange or on the
Nasdaq-NMS.
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\1\ Funds eligible for inclusion in a Series will either be no-
load Funds or Funds which, although they offer shares with a front-
end sales charge to the public, agree to waive any otherwise
applicable front-end sales load with respect to all shares sold or
deposited in any Series.
\2\ Applicants state that a Series will purchase and sell shares
of Exchange Funds through market transactions on a securities
exchange or on the Nasdaq-NMS.
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4. Simultaneously with the deposit of Fund shares into a Series,
the Trustee will deliver to the Sponsor registered certificates for
units (``Units'') that represent the entire ownership of the Series.
During the initial public offering, these Units will be offered at
prices based on the aggregate underlying value of the Fund shares, plus
a sales charge. The sales charge (either a front end or a deferred
sales load, or a combination thereof) \3\ shall not, when aggregated
[[Page 40922]]
with any sales charge or service fees paid by the Series with respect
to shares of the Funds, exceed the limits set forth in Rule 2830 of the
Conduct Rules of the National Association of Securities Dealers (``NASD
Conduct Rules'').
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\3\ The Trust has received exemptive relief to assess a sales
load on a deferred basis. See John Nuveen & Co. Inc., Investment
Company Act Rel. Nos. 22492 (Feb. 4, 1997) (notice) and 22545 (Mar.
5, 1997) (order).
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5. No Series will invest in a Fund with a rule 12b-1 plan, unless
the Fund limits the plan fees to a maximum annual rate of .25% of the
Fund's average daily net assets. If the Trustee receives service fees
under a rule 12b-1 plan from the Funds to compensate it for providing
servicing and sub-accounting functions with respect to Fund shares held
by a Series, the Trustee will reduce its regular fee to the Series
directly by the fees it receives from the Funds and rebate any excess
fees it receives to the Series. Any fees so rebated will be utilized by
the Series to absorb other bona fide Series expenses. To the extent
that these fees exceed the total Series expenses, the excess will be
distributed along with other income earned by the Series.
Applicants' Legal Analysis
Section 12(d)(1) of the Act
1. Section 12(d)(1)(A) of the Act provides that no registered
investment company may acquire securities of another investment company
if such securities represent more than 3% of the acquired company's
outstanding voting stock, more than 5% of the acquiring company's total
assets, or if such securities, together with the securities of any
other acquired investment companies, represent more than 10% of the
acquiring company's total assets.
2. Section 12(d)(1)(F) of the Act provides that section 12(d)(1)
shall not apply to an acquiring company if the company and its
affiliates own no more than 3% of an acquired company's securities,
provided that the acquiring company does not impose a sales load of
more than 1.5% on its shares. In addition, the section provides that no
acquired company is obligated to honor any acquiring company redemption
request in excess of 1% of the acquired company's securities during any
period of less than 30 days, and the acquiring company must vote is
acquired company shares either in accordance with instructions from its
shareholders or in the same proportion as all other shareholders of the
acquired company. The Series will invest in the Funds in reliance on
section 12(d)(1)(F).
3. Section 12(d)(1)(J) provides that the Commission may exempt
persons or transactions from any provision of section 12(d)(1) if and
to the extent such exemption is consistent with the public interest and
the protection of investors. Applicants request relief under section
12(d)(1)(J) of the Act from section 12(d)(1)(F) to permit a Series to
offer and sell Units to the public with a sales load that exceeds 1.5%.
4. Applicants have agreed, as a condition to the relief, that any
sales charges, distribution-related fees, and service fees relating to
Units, when aggregated with any sales charges, distribution-related
fees, and service fees paid by the Trust relating to its acquisition,
holding, or disposition of shares of the Funds, will not exceed the
limits set forth in Rule 2830 of the NASD Conduct Rules. Applicants
believe that it is appropriate to apply the NASD's Rule to the proposed
arrangement in place of the sales load limitation in section
12(d)(1)(F) because the proposed limit would cap the aggregate sales
charges of the Units and the underlying Funds, and because the proposed
limit is consistent with the limit recently adopted in section
12(d)(1)(G) of the Act. Applicants assert that the NASD's specific
sales charge rules more accurately reflect today's regulatory
environment with respect to the methods by which investment companies
finance sales expenses. Applicants contend that section 12(d)(1)(F), on
the other hand, was adopted more than a quarter of a century ago and
does not reflect the changes in the pricing practices of the industry.
5. Applicants state that, with respect to shares of closed-end
Funds and Exchange Funds held by a Series, no front-end sales loads,
contingent deferred sales charges or redemption fees will be charged in
connection with the purchase or sale of these Funds by a Series.
Additionally, applicants state that with respect to closed-end Funds,
no rule 12b-1 fees, or other distribution fees will be charged.
Applicants state that, although the Series likely will incur brokerage
commissions in connection with its market purchases of shares of
closed-end Funds and Exchange Funds, these commissions will not differ
materially from commissions otherwise incurred in connection with the
purchase or sale of comparable portfolio securities.
6. Applicants also agree as a condition to the requested relief
that no Series will invest in any underlying Fund which, at the time of
acquisition, owns securities of any other investment company in excess
of the limits contained in section 12(d)(1)(A) of the Act.
Section 17(a) of the Act
7. Section 17(a) of the Act generally prohibits an affiliated
person of a registered investment company from selling securities to,
or purchasing securities from, the company. Section 2(a)(3) of the Act
defines an ``affiliated person'' of another person to include: (a) Any
person that directly or indirectly owns, controls, or holds 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; (c) any person directly or
indirectly controlling, controlled by, or under common control with the
other person; and (d) if the other person is an investment company, any
investment adviser of that company. Applicants submit that the Series
and Affiliated Funds may be deemed to be affiliated persons of one
another by virtue of being under common control of the Sponsor.
Applicants state that purchases and redemptions of shares of the
Affiliated Funds by the Series could be deemed to be principal
transactions between affiliated persons under section 17(a).
8. Section 17(b) provides that the Commission shall exempt a
proposed transaction from section 17(a) if evidence establishes that
(a) the terms of the proposed transaction, including the consideration
to be paid or received, are reasonable and fair and do not involve
overreaching; (b) the proposed transaction is consistent with the
policies of the registered investment company involved; and (c) the
proposed transaction is consistent with the general purposes of the
Act.
9. Section 6(c) of the Act provides that the Commission may exempt
persons or transactions from any provision 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. Applicants request an exemption under
sections 6(c) and 17(b) to permit the Series to purchase and redeem
shares of the Affiliated Funds.
10. Applicants state that the terms of the proposed transactions
will be reasonable and fair and will not involve overreaching because
shares of Affiliated Funds will be sold and redeemed at their net asset
values or, if traded on an exchange or on NASDAQ-NMS, at their market
value. Applicants also state that the investment by the Series in the
Affiliated Funds will be effected in accordance with the
[[Page 40923]]
investment restrictions of the Series and will be consistent with the
policies as set forth in the registration statement of the Series.
Applicants' Conditions
Applicants agree that the order granting the requested relief shall
be subject to the following conditions:
1. Each Series will comply with section 12(d)(1)(F) in all respects
except for the sales load limitation of section 12(d)(1)(F)(ii).
2. Any sales charges, distribution-related fees, and service fees
relating to Units of a Series, when aggregated with any sales charges,
distribution-related fees, and service fees paid by the Series relating
to its acquisition, holding, or disposition of securities of the
underlying Funds, shall not exceed the limits set forth in rule 2830 of
the NASD Conduct Rules.
3. No Series will acquire securities of any Fund which, at the time
of acquisition, owns securities of any other investment company in
excess of the limits contained in section 12(d)(1)(A) of the Act.
4. No Series will terminate within thirty days of the termination
of any other Series that holds shares of one or more common Funds.
5. The prospectus of each Series and any sales literature or
advertising that mentions the existence of an in-kind distribution
option will disclose that holders of Units who elect to receive Fund
shares will incur any applicable rule 12b-1 fees.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-19226 Filed 7-27-99; 8:45 am]
BILLING CODE 8010-01-M
