[Federal Register Volume 61, Number 69 (Tuesday, April 9, 1996)]
[Notices]
[Pages 15840-15843]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-8707]



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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-21871; 812-10024]


EVEREN Unit Investment Trusts, Series 44, et al.

April 3, 1996.
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: EVEREN Unit Investment Trusts, Series 44 and EVEREN 
Securities Inc.

RELEVANT ACT SECTIONS: Order requested under section 6(c) of the Act 
for an exemption from section 12(d)(3) of the Act, and under sections 
6(c) and 17(a) of the Act for an exemption from section 17(a) of the 
Act.

SUMMARY OF APPLICATION: EVEREN Unit Investment Trusts, Series 44 
requests an order on behalf of itself and certain subsequent series 
(collectively, the ``Series'') to permit (a) certain Series (the 
``Defined Ten Series'') to invest up to 10.5% and other Series (the 
``Defined Five Series'') to invest up to 20.5% of their respective 
total assets in securities of issuers that derived more than fifteen 
percent of their gross revenues in their most recent fiscal year from 
securities related activities; and (b) certain terminating Series to 
sell portfolio securities to new Series.

FILING DATE: The application was filed on March 1, 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 April 29, 1996 
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 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 5th Street NW., Washington, D.C. 20549. 
Applicants, 70 West Wacker, 29th Floor, Chicago, Illinois 60601.

FOR FURTHER INFORMATION CONTACT:
Sarah A. Buescher, Staff Attorney, at (202) 942-0573, 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.

Applicants' Representations

    1. Each Series will be a series of EVEREN Unit Investment Trusts 
(the ``Trust''), a unit investment trust registered under the Act. 
EVEREN Securities Inc. is the Trust's depositor (the ``Sponsor'').
    2. The Defined Ten Series will invest approximately 10%, but in no 
event more than 10.5%, of the value of the Series' total assets in each 
of the ten common stocks in the Dow Jones Industrial Average (the 
``DJIA''), the Financial Times Index (the ``FT Index'') or the Hang 
Seng Index with the highest dividend yields as of no more than three 
days prior to the Series' initial date of deposit, and hold those 
stocks for a specified period (approximately two years). The Defined 
Five Series will invest approximately 20%, but in no event more than 
20.5%,\1\ of the value of the Series' total assets in each of the five 
lowest dollar price per share stocks of the ten common stocks in the 
DJIA having the highest dividend yields no more than three business 
days prior to the Series' initial date of deposit, and hold those 
stocks for a specified period (approximately two years).

    \1\ The Sponsor will attempt to purchase equal values of each of 
the common stocks in a Series' portfolio. However, it is more 
efficient if securities are purchased in 100 share lots and 50 share 
lots. As a result, applicants may choose to purchase securities of a 
securities related issuer which represent over 10%, but in no event 
more than 10.5% of a Defined Ten Series' assets and over 20%, but in 
no event more than 20.5%, of a Defined Five Series' assets on the 
initial date of deposit to the extent necessary to enable the 
Sponsor to meet its purchase requirements and to obtain the best 
price for the securities.
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    3. The DJIA comprises 30 common stocks chosen by the editors of The 
Wall Street Journal. The DJIA is the property of the Dow Jones & 
Company, Inc., which is not affiliated with any Series or the Sponsor 
and does not participate in any way in the creation of any Series or 
the selection of its stocks. The FT Index comprises 30 common stocks 
chosen by the editors of The Financial Times (London) as representative 
of British industry and commerce. The Hang Seng Index comprises 33 of 
the stocks listed on the Hong Kong stock exchange and includes 
companies intended to represent four major market sectors: commerce and 
industry, finance, properties, and utilities. The Hang Seng Index is a 
recognized indicator of stock market performance in Hong Kong. The 
publishers of 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.
    4. The securities deposited in each Series will be chosen solely 
according to the formula described above, and will not necessarily 
reflect the research opinions or buy or sell recommendations of the 
Sponsor. The Sponsor is authorized to determine the date of deposit, to 
purchase securities for deposit in the Series and to supervise each 
Series' portfolio. The Sponsor will have no discretion as to which 
securities are purchased. Securities deposited in a Series may include 
securities of issuers that derived more than fifteen percent of their 
gross revenues in their most recent fiscal year from securities related 
activities.
    5. During the 90-day period following the initial date of deposit, 
the Sponsor may deposit additional securities while maintaining to the 
extent practicable the original proportionate relationship among the 
number of shares of each stock in the portfolio. Deposits made after 
this 90-day period must replicate exactly (subject to certain limited 
exceptions) the proportionate relationship among the face amounts of 
the securities comprising the portfolio at the end of the initial 90-
day period.
    6. The Series' portfolios will not be actively managed. Sales of 
portfolio securities will be made in connection with redemptions of 
units issued by a Series, payment of expenses and at termination of the 
Series. The Sponsor has no discretion as to when securities will be 
sold except that it is authorized to sell securities in extremely 
limited circumstances, such as a default by the issuer in the payment 
of any of its outstanding obligations, a decrease in the price of the 
security or other credit factors so that in the opinion of the Sponsor, 
the retention of the securities would be detrimental to the Series.
    7. Each Series will have a contemplated date (a ``Rollover Date'') 
on which holders of units in that Series (a ``Rollover Trust Series'') 
may at their option redeem their units in the Rollover Trust Series and 
receive in return units of a subsequent Series of the same type (a 
``New Trust Series'') which is created on or about the Rollover 
Date.\2\ Each Rollover Trust Series will have a portfolio that contains 
securities (``Equity Securities'') that are

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(a) actively traded (i.e., have had an average daily trading volume in 
the preceding six months of at least 500 shares equal in value to at 
least U.S. $25,000) on an exchange (an ``Exchange'') which is either 
(i) a national securities exchange which meets the qualifications of 
section 6 of the Securities Exchange Act of 1934, (ii) a foreign 
securities exchange that meets the qualifications set out in the 
proposed amendment to rule 12d3-1(d)(6) under the Act as proposed by 
the SEC \3\ and that releases daily closing prices, or (iii) the Nasdaq 
National Market System (the ``Nasdaq-NMS'') and (b) included in a 
published index.

    \2\ Applicants previously received an order under section 11(a) 
of the Act for an exemption from section 11(c) of the Act to permit 
certain offers of exchange involving the Trust. See Investment 
Company Act Release Nos. 20991 (Apr. 6, 1995) (notice) and 21043 
(May 5, 1995) (order).
    \3\ Investment Company Act Release No. 17096 (Aug. 3, 1989) 
(proposing amendments to rule 12d3-1). The proposed amended rule 
defined a ``Qualified Foreign Exchange'' to mean a stock exchange in 
a country other than the United States where: (1) trading generally 
occurred at least four days a week; (2) there were limited 
restrictions on the ability of acquiring companies to trade their 
holdings on the exchange; (3) the exchange had a trading volume in 
stocks for the previous year of at least U.S. $7.5 billion; and (4) 
the exchange had a turnover ratio for the preceding year of at least 
20% of its market capitalization. The version of the amended rule 
that was adopted did not include the part of the proposed amendment 
defining the term ``Qualified Foreign Exchange.''
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    8. There is normally some overlap from one year to the next in the 
stocks having the highest dividend yields in an index or the lowest 
priced per share stocks of the highest dividend yielding stocks in the 
DJIA and, therefore, between the portfolios of a Rollover Trust Series 
and the related New Trust Series. Upon termination, a Rollover Trust 
Series will sell all of its portfolio securities on the applicable 
Exchange or Nasdaq-NMS. In addition, a New Trust Series will acquire 
its portfolio securities in purchase transactions on an applicable 
Exchange or Nasdaq-NMS. Because the New Trust Series will likely 
contain duplicate securities, there may be substantial brokerage 
commissions on the purchase and sale of portfolio securities of the 
same issuer that would be borne by the holders of units of both the 
Rollover Trust Series and the New Trust Series. Applicants therefore 
request an exemption from section 17(a) to permit a Rollover Trust 
Series to sell Equity Securities to a New Trust Series and a New Trust 
Series to purchase those Equity Securities at the closing sales prices 
of such Equity Securities on the applicable Exchange or Nasdaq-NMS on 
the sale date, provided applicants comply with rule 17a-7 under the Act 
(other than certain provisions of paragraph (e) described herein).
    9. In order to minimize overreaching, applicants agree that the 
Sponsor will certify to the trustee, within five days of each sale from 
a Rollover Trust Series to a New Trust Series, (a) that the transaction 
is consistent with the policy of both the Rollover Trust Series and the 
New Trust Series, 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 Nasdaq-
NMS for the sale date of the securities subject to such sale. The 
trustee then will countersign the certificate, unless, in the unlikely 
event that the trustee disagrees with the closing sales price listed on 
the certificate, the trustee immediately informs the Sponsor orally of 
any such disagreement and returns the certificate within five days to 
the Sponsor with corrections duly noted. Upon the Sponsor's 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 Series, and distributions to holders of 
the Rollover Trust Series with regard to redemption of their units or 
termination of the Rollover Trust Series, accurately reflect the 
corrected price. To the extent that 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.

Applicants' Legal Analysis

    1. Section 12(d)(3) of the Act, with limited exceptions, prohibits 
an investment company from acquiring any security issued by any person 
who is a broker, dealer, underwriter, or investment adviser. Rule 12d3-
1 under the Act exempts the purchase of securities of an issuer that 
derived more than fifteen percent 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 five percent of the value of its 
total assets in securities of the issuer.
    2. Section 6(c) of the Act provides that the SEC may exempt any 
person, transaction, or class of transactions from any provision of the 
Act or any rule thereunder, if and to the extent that the 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.
    3. The Series request an exemption under section 6(c) from section 
12(d)(3) to permit a Defined Ten Series to invest up to approximately 
10%, but in no event more than 10.5%, of the value of its total assets 
in securities of an issuer that derives more than fifteen percent of 
its gross revenues from securities related activities. Applicants also 
request an exemption from section 12(d)(3) to permitted a Defined Five 
Series to invest up to approximately 20%, but in no event more than 
20.5%, of the value of its total assets in securities of an issuer that 
derives more than fifteen percent of its gross revenues from securities 
related activities. Each Series undertakes to 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.
    4. Section 12(d)(3) was intended to prevent investment companies 
from exposing their assets to the entrepreneurial risks of securities 
related businesses, to prevent potential conflicts of interest, and to 
eliminate certain reciprocal practices between investment companies and 
securities related businesses. One potential conflict could occur if an 
investment company purchased securities or other interests in a broker-
dealer to reward that broker-dealer for selling fund shares, rather 
than solely on investment merit. Applicants believe that this concern 
does not arise in connection with its application because neither the 
Series nor the Sponsor have discretion in choosing the portfolio 
securities or amount purchased. The security must first be included in 
the appropriate index, which are each unaffiliated with the applicants, 
and must also qualify as either one of the ten highest dividend 
yielding stocks or one of the five lowest dollar price per share stocks 
in the ten highest dividend yielding stocks in the DJIA.
    5. Applicants also believe that the effect of a Series' purchase on 
the stock of parents of broker-dealers would be de minimis. The common 
stocks of securities related issuers represented in the DJIA, the FT 
Index and the Hang Seng Index are widely held, have active markets, and 
potential purchases by any Series would represent an insignificant 
amount of the outstanding common stock and the trading volume of any of 
these issues. Therefore, applicants believe that it is highly unlikely 
that purchases of these securities by a Series would have any 
significant impact on the securities' market value.
    6. Another potential conflict of interest could occur if an 
investment company directed brokerage to a broker-dealer in which the 
company has invested to enhance the broker-dealer's

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profitability or to assist it during financial difficulty, even though 
that broker-dealer may not offer the best price and execution. To 
preclude this type of conflict, applicants agree, as a condition of 
this application, that no company held in the portfolio of a Defined 
Ten or Defined Five Series nor any affiliate thereof will act as a 
broker for any Series in the purchase or sale of any security for such 
Series' portfolio. In light of the above, applicants believe that their 
proposal meets the section 6(c) standards.
    7. Section 17(a) of the Act generally makes it unlawful for an 
affiliated person of a registered investment company to sell securities 
to or purchase securities from the company. Investment companies under 
common control may be considered affiliates of one another. The Series 
may be under common control because they have a common sponsor.
    8. Pursuant to section 17(b), 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 policy of each registered investment company concerned; and (c) the 
proposed transaction is consistent with the general purposes of the 
Act. Under section 6(c), the SEC may exempt classes of transactions 
from the Act. Applicants believe that the proposed sales of Equity 
Securities from a Rollover Trust Series to a New Trust Series satisfy 
the requirements of sections 6(c) and 17(b).
    9. 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 
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).
    10. Applicants represent that purchases and sales between Series 
will be consistent with the policy of a Rollover Trust Series and a New 
Trust Series, as only securities that would otherwise be bought and 
sold on the open market pursuant to the policy of each Series will be 
involved in the proposed transactions. Applicants further believe that 
the current practice of buying and selling on the open market leads to 
unnecessary brokerage fees on sales of securities and is therefore 
contrary not only to the policies of a Series but to the general 
purposes of the Act.

Applicants' Conditions

    Applicants and each Series agree that any order granting the 
application will be made subject to the following conditions:
    A. Condition with respect to exemption from section 12(d)(3):
    No company held in the Defined Ten Series' portfolio or the Defined 
Five Series' portfolio, nor any affiliate thereof, will act as broker 
for any Defined Ten Series or any Defined Five Series in the purchase 
or sale of any security for such Series' portfolio.
    B. Conditions with respect to exemption from section 17(a):
    1. Each sale of Equity Securities by a Rollover Trust Series to a 
New Trust Series 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 Series and New Trust Series.
    3. The trustee of each Rollover Trust Series and New Trust Series 
will (a) review the procedures discussed in this application relating 
to the sale of securities from a Rollover Trust Series and the purchase 
of those securities for deposit in a New Trust Series 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 this order will be maintained as provided in 
rule 17a-7(f).

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-8707 Filed 4-8-96; 8:45 am]
BILLING CODE 8010-01-M