[Federal Register Volume 61, Number 170 (Friday, August 30, 1996)]
[Notices]
[Pages 46006-46008]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22230]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-22169; 812-10210]


Van Kampen American Capital Equity Opportunity Trust, et al.; 
Notice of Application

August 23, 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: Van Kampen American Capital Equity Opportunity Trust (the 
``Trust''), Series 25 and subsequent series, and Van Kampen American 
Capital Distributors, Inc. (``Van Kampen American'' or the 
``Sponsor'').

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

SUMMARY OF APPLICATION: Applicants request an order to permit a 
terminating series of the Trust, a unit investment trust, to sell 
portfolio securities to a new series of the Trust.

FILING DATE: The application was filed on June 18, 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 September 17, 
1996 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

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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 Fifth Street, N.W., Washington, D.C. 
20549. Applicants, One Parkview Plaza, Oakbrook Terrace, IL 60181.

FOR FURTHER INFORMATION CONTACT: Christine Y. Greenlees, Senior 
Counsel, (202) 942-0581, or Elizabeth G. Osterman, Assistant Director, 
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 at the 
SEC's Public Reference Branch.

Applicants' Representations

    1. The Trust, a unit investment trust registered under the Act, 
will consist of a series of unit investment trusts (each a ``Trust 
Series'' or ``Series''). Each Trust Series will be similar but separate 
and designated by a different series number. Van Kampen American is the 
Sponsor for each Trust Series.
    2. Each Trust Series will contain a portfolio of common stocks of 
aggressive growth companies. The investment objective of each Trust 
Series is to seek capital appreciation. Currently, Van Kampen American 
Capital Equity Opportunity Trust, Series 25 consists of one underlying 
unit investment trust, the Aggressive Growth Series, Internet Trust 1, 
which invests in actively traded equity securities issued by aggressive 
growth companies engaged in either the enabling technology or 
communication services areas of the Internet.
    3. Applicants anticipate that many, if not all, of the portfolio 
securities in each Trust Series will be actively traded (i.e., have had 
an average daily trading volume in the preceding six months of at least 
500 shares and equal in value to at least 25,000 United States dollars) 
on (a) an exchange (an ``Exchange'') which is either a national 
securities exchange which meets the qualifications of section 6 of the 
Securities Exchange Act of 1934 or a foreign securities exchange that 
meets the qualifications set forth in the proposed amendment to rule 
12d3-1(d) (6) under the Act, as proposed by the SEC,\1\ and that 
releases daily closing prices, or (b) the Nasdaq-National Market System 
(``Nasdaq-NMS'') (the securities meeting the foregoing tests are 
referred to herein as ``Equity Securities''). For example, all of the 
portfolio securities in the Internet Trust 1 are listed on a national 
securities exchange or the Nasdaq-NMS.
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    \1\ 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 registered investment 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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    4. Each Trust Series will terminate on a date after a specified 
period, generally one year. The Sponsor intends that, as each Trust 
Series terminates, a new Trust Series (``New Trust Series'') containing 
a portfolio of common stocks of aggressive growth companies with an 
investment objective of capital appreciation will be offered for the 
next period.
    5. Each Trust Series has or will have a contemplated date (the 
``Rollover Date'') on which holders of units in that Trust Series (the 
``Rollover Trust Series'') may at their option redeem their units in 
the Rollover Trust Series and receive in return units of a New Trust 
Series, which will be created on or about the Rollover Date.
    6. Applicants anticipate that there will be some overlap from one 
year to the next in the aggressive growth stocks selected for each 
Trust Series and, therefore, between the portfolios of each Rollover 
Trust Series and the related New Trust Series. In connection with its 
termination, absent relief, each Rollover Trust Series would sell all 
of its securities on the applicable Exchange or Nasdaq-NMS as quickly 
as practicable, but over a period of time so as to minimize any adverse 
impact on the market price. Likewise, a New Trust Series would acquire 
its securities in purchase transactions on the applicable Exchange or 
on Nasdaq-NMS. This procedure would result in brokerage commissions on 
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 exemptive order to permit any Rollover Trust 
Series to sell Equity Securities to a New Trust Series and a New Trust 
Series to purchase such securities.
    7. In order to minimize overreaching, the Sponsor will certify to 
the trustee of the relevant Trust Series, 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 
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 on 
Nasdaq-NMS 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 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 
correct price by reference to an independently published list of 
closing sales prices for the date of the transaction, 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 17(a) of the Act makes it unlawful for an affiliated 
person of a registered investment company to sell securities to, or 
purchase securities from, the company. Each Trust Series will have an 
identical or common Sponsor, Van Kampen American. Since the Sponsor of 
each Trust may be considered to control each Trust Series, it is likely 
that each Trust Series would be considered an affiliate of the others.
    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

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requirements of sections 6(c) and 17(b). \2\
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    \2\ Section 17(b) applies to a specific proposed transaction, 
rather than an ongoing series of future transactions. See Keystone 
Custodian Funds, 21 S.E.C. 295, 298-99 (1945). Section 6(c) 
frequently is used, along with section 17(b), to grant relief from 
section 17(a) to permit an ongoing series of future transactions.
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    3. Rule 17a-7 under the Act permits registration 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 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 Trust 
Series will be consistent with the policy of each Trust Series, 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 therefore contrary to the general purposes of the 
Act.
    5. Applicants state that the condition that the securities must be 
actively traded on an Exchange or the Nasdaq-NMS protects against 
overreaching. This condition ensures that there will be current market 
prices available and thus, an independent basis for determining that 
the terms of the transaction are fair and reasonable. In addition, 
applicants note that, as a condition to the requested relief, the 
Trustee will review the procedures relating to the purchase and sale of 
Equity Securities. Furthermore, the Sponsor must certify to the Trustee 
that a transaction is consistent with the policy of both the Rollover 
Trust Series and New Trust Series, as set forth in their respective 
registration statements and reports filed under the Act. Lastly, the 
portfolio companies held in a Trust Series are described in the Trust 
Series' prospectus for investors to review. In light of these 
procedures, applicants believe that they satisfy the standards of 
sections 6(c) and 17(b), and thus, an exemption from section 17(a) is 
warranted.

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 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 the application relating to 
the sale of Equity Securities from a Rollover Trust Series to a New 
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 the order will be maintained as provided in 
rule 17a-7(f).

    For the SEC, by the Division of Investment Management, under 
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-22230 Filed 8-29-96; 8:45 am]
BILLING CODE 8010-01-M