[Federal Register Volume 60, Number 66 (Thursday, April 6, 1995)]
[Notices]
[Pages 17600-17602]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-8422]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-20979; 812-9444]
Van Kampen Merritt Equity Opportunity Trust, Series, 7, et al.;
Notice of Application
March, 30, 1995.
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: Van Kampen Merritt Equity Opportunity Trust, Series 7 and
Van Kampen American Capital Distributors, Inc. (``Van Kampen
American'').
RELEVANT ACT SECTIONS: Order requested under sections 6(c) and 17(b)
from section 17(a).
SUMMARY OF APPLICATION: Applicants request an order to permit a
terminating series of a unit investment trust to sell portfolio
securities to a new series of the trust.
FILING DATES: The application was filed on January 25, 1995 and amended
on March 22, 1995.
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 24, 1995
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 [[Page 17601]] 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 5th Street N.W., Washington, D.C. 20549.
Applicants, c/o Van Kampen Merritt Inc., One Parkview Plaza, Oakbrook
Terrace, Illinois 60181.
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. Van Kampen Equity Opportunity Trust (the ``Trust'') is a unit
investment trust registered under the Act that will consist of a series
(each a ``Trust Series'' or ``Series'') of unit investment trusts. Van
Kampen American is the sponsor and depositor for each Trust Series.
Applicants request that the relief sought herein apply to future
similar Series of the Trust.
2. Each Trust Series will contain a portfolio of equity securities
that represents a portion of a specific index (an ``Index''). The
investment objective of each Trust Series is to seek a greater total
return than that achieved by the stocks comprising the entire related
Index over the life of the Trust Series. To achieve this objective,
each Trust Series will consist of a specified number of the highest
dividend yielding stocks in the Series' respective Index. The sponsor
of the Series intends that, as each Series terminates, a new Series
based on the appropriate Index will be offered for the next period.
3. Each Trust Series has or will have a contemplated date (a
``Rollover Date'') on which holders of units in that Trust 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''). The New Trust Series
will be created on or about the Rollover Date, and have a portfolio
that contains securities (``Equity Securities'') that are (i) 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 25,000
United States dollars) on an exchange (a ``Exchange'') which is either
(a) a national securities exchange that meets the qualifications of
section 6 of the Securities Exchange Act of 1934 or (b) 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 and that releases daily closing prices, and (ii) included in a
published Index.
4. There is normally some overlap from year to year in the stocks
having the highest dividend yields in an Index and, therefore, between
the portfolios of each Rollover Trust Series and the New Trust Series.
For example, of the ten securities selected for inclusion in United
States Portfolio, Series 1 on April 1, 1994, nine are still among the
top ten dividend yielding stocks as of the date of the application.
Upon termination, each United States Portfolio Rollover Trust Series
will sell all of its portfolio securities on the New York Stock
Exchange as quickly as practicable. Similarly, a New Trust Series will
acquire its portfolio securities in purchase transactions on the New
York Stock Exchange. This procedure creates brokerage commissions on
portfolio securities of the same issue that are borne by the holders of
units of both the Rollover Trust Series and the New Trust Series.
Applicants, therefore, request an order to permit any Rollover Trust
Series to sell portfolio securities to a New Trust Series.
5. In order to minimize the possibilities of overreaching in these
transactions, the applicants agree that Van Kampen American 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 for the
sale date of the securities subject to such sale. The trustee will then
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 Van Kampen American orally
of any such disagreement and returns the certificate within five days
to Van Kampen American with corrections duly noted. Upon Van Kampen
American's receipt of a corrected certificate, if Van Kampen American
can verify the corrected price by reference to an independently
published list of closing sales prices for the date of the
transactions, Van Kampen American 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 Van Kampen American disagrees with the trustee's
corrected price, Van Kampen American 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 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 are affiliates of one another. Each Trust Series will
have an identical or common Sponsor that may be considered to control
each Trust Series.
2. Section 17(b) provides that the SEC shall 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 the registered investment company involved; and (c) the
proposed transaction is consistent with the general provisions of the
Act. 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.
Applicants believe that the proposed transactions satisfy the
requirements of sections 6(c) and 17(b).
3. Rule 17a-7 under the Act permits registered investment companies
that are 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).
4. Applicants represent that purchases and sales between Series
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. Applicants further believe that the current practice of
buying and selling on the open market leads to unnecessary brokerage
fees and is [[Page 17602]] therefore contrary to the general purposes
of the Act. In order to minimize the possibility of overreaching,
applicants have agreed to comply with the conditions discussed below.
Applicants' Conditions
Applicants agree that the order granting the requested relief shall
be subject to the following conditions:
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 on the sale date, without
any brokerage charges or other remuneration except customary transfer
fees, it 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 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
under delegated, authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-8422 Filed 4-5-95; 8:45 am]
BILLING CODE 8010-01-M
