[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