

[Federal Register: May 18, 2006 (Volume 71, Number 96)]
[Notices]               
[Page 28890-28892]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18my06-91]                         

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 27317; 812-13156]

 
Van Kampen Asset Management, et al.; Notice of Application

May 12, 2006.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order under sections 6(c) and 
23(c)(3) of the Investment Company Act of 1940 (the ``Act'') for an 
exemption from rule 23c-3 under the Act.

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Applicants: Van Kampen Asset Management (the ``VK Adviser''), Van 
Kampen Funds Inc. (the ``VK Distributor''), Van Kampen Senior Loan Fund 
(formerly known as Van Kampen Prime Rate Income Trust) (the ``VK 
Trust''), Morgan Stanley Investment Advisors Inc. (the ``MS Adviser''), 
Morgan Stanley Distributors Inc. (the ``MS Distributor'') and Morgan 
Stanley Prime Income Trust (the ``MS Trust'', and, together with the VK 
Trust, the ``Trusts'').

Summary of Application: Applicants request an order under sections 6(c) 
and 23(c)(3) of the Act for an exemption from certain provisions of 
rule 23c-3 to permit certain registered closed-end investment companies 
to make repurchase offers on a monthly basis.

Filing Dates: The application was filed on January 25, 2005 and amended 
on December 29, 2005 and May 5, 2006.

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 applicants with a copy of the request, personally or by 
mail. Hearing requests should be received by the Commission by 5:30 
p.m. on June 6, 2006, 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 who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street, NE., Washington, DC 20549-1090; Applicants, c/o Charles B. 
Taylor, Esq., Skadden, Arps, Slate, Meagher & Flom LLP, 333 West Wacker 
Drive, Chicago, Illinois 60606.

FOR FURTHER INFORMATION CONTACT: Shannon Conaty, Senior Counsel, at 
(202) 551-6827, or Janet M. Grossnickle, Branch Chief, at (202) 551-
6821 (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 
Commission's Public Reference Branch, 100 F Street, NE., Washington, DC 
20549-0102 (tel. (202) 551-8090).

Applicants' Representations

    1. Each of the Trusts is a closed-end management investment company 
registered under the Act and organized as a Massachusetts business 
trust. The VK Adviser and the MS Adviser, both investment advisers 
registered under the Investment Advisers Act of 1940 (the ``Advisers 
Act''), serve as investment adviser to the VK Trust and the MS Trust, 
respectively. The VK Distributor, a broker-dealer registered under the 
Securities Exchange Act of 1934 (the ``Exchange Act''), distributes the 
VK Trust's shares and serves as the VK Trust's administrator. The MS 
Distributor, a broker-dealer registered under the Exchange Act, 
distributes the MS Trust's shares. The VK Adviser, the VK Distributor, 
the MS Adviser and the MS Distributor are all direct or indirect 
wholly-owned subsidiaries of Morgan Stanley. Applicants request that 
any relief granted also apply to any registered closed-end management 
investment company that operates as an interval fund pursuant to rule 
23c-3 for which the VK Adviser, the VK Distributor, the MS Adviser, the 
MS Distributor or any entity controlling, controlled by or under common 
control (within the meaning of section 2(a)(9) of the Act) with the VK 
Adviser, the VK Distributor, the MS Adviser or the MS Distributor acts 
as investment adviser, principal underwriter or administrator 
(collectively, the ``Other Trusts'').\1\
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    \1\ All entities currently intending to rely on the requested 
relief have been named as applicants. Any entity that relies on the 
requested order in the future will do so only in accordance with the 
terms and conditions of the application.
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    2. The VK Trust's investment objective is to provide a high level 
of current income, consistent with the preservation of capital. The VK 
Trust invests primarily in adjustable rate senior loans made to 
corporations and other borrowers. Under normal market conditions, the 
VK Trust invests at least 80% of its net assets (plus any borrowings 
for investment purposes) in adjustable rate senior loans. The VK Trust 
may also invest up to 20% of its total assets in senior loans that are 
not secured by any specific collateral, senior loans made to borrowers 
located outside the U.S. (provided no more than 5% of these loans or 
other assets are non-U.S. dollar denominated), and in any combination 
of warrants and equity securities incidental to investment in senior 
loans, junior debt securities, high quality short-term debt securities, 
credit-linked deposits and Treasury Inflation Protected Securities (or 
other inflation-indexed bonds issued by the U.S. government, its 
agencies or instrumentalities).
    3. The MS Trust's investment objective is to provide a high level 
of current income, consistent with the preservation of capital. The MS 
Trust

[[Page 28891]]

invests primarily in collateralized senior loans made to corporations, 
partnerships or other entities. Under normal market conditions, the MS 
Trust invests at least 80% of its total assets in collateralized senior 
loans. The MS Trust may also invest up to 20% of its total assets in 
cash or short-term high quality money market instruments, credit-linked 
deposits, junior debt securities or securities with a lien on 
collateral that is lower than a senior claim on collateral, and in 
loans that hold the most senior position in a borrower's capital 
structure, but are unsecured.
    4. The VK Trust continuously offers three classes of shares to the 
public at net asset value. The VK Trust currently operates as an 
``interval fund'' pursuant to rule 23c-3 under the Act, and makes 
quarterly tender offers to repurchase its shares.\2\ The MS Trust 
continuously offers one class of shares to the public at net asset 
value, but it intends to add multiple classes of shares. The MS Trust 
also intends to operate as an ``interval fund'' pursuant to rule 23c-3 
under the Act, and make quarterly tender offers to repurchase its 
shares.\3\ Applicants request an order to permit each of the VK Trust 
and the MS Trust (and any Other Trust) to offer to repurchase a portion 
of its common shares at one-month intervals, rather than the three, 
six, or twelve-month intervals specified by rule 23c-3. Shares of the 
VK Trust and the MS Trust are offered with initial or deferred sales 
charges and certain classes of the VK Trust's shares also carry asset-
based distribution and service fees.\4\ The Trusts or any Other Trust 
may in the future offer additional classes of common shares with a 
front-end sales charge, an EWC and/or asset-based distribution or 
service fees. The Trusts' common shares are not offered or traded in 
the secondary market and are not listed on any exchange or quoted on 
any quotation medium.
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    \2\ From its inception in 1989 until February 2005, the VK Trust 
considered each quarter to offer to repurchase a portion of its 
outstanding shares at their then-current net asset value pursuant to 
rule 13e-4 of the Exchange Act. In February 2005, the VK Trust began 
operating as an interval fund making quarterly repurchases pursuant 
to Rule 23c-3.
    \3\ From its inception in 1989, the MS Trust has considered each 
quarter to offer to repurchase a portion of its outstanding shares 
at their then-current net asset value pursuant to rule 13e-4 of the 
Exchange Act. The MS Trust is currently in the process of converting 
to an interval fund making quarterly repurchases pursuant to Rule 
23c-3.
    \4\ The VK Trust currently offers Class A, B and C shares. (The 
VK Trust also has IB shares and IC shares which are not continuously 
offered.) Each class of continuously offered shares is subject to 
annual asset-based distribution and service fees. Class B and C 
shares are subject to early withdrawal charges (``EWCs''). The MS 
Trust's single class of shares is not subject to any annual asset-
based distribution and service fees, but is subject to an EWC. The 
applicants previously obtained exemptive relief from the Commission 
as it relates to the imposition of EWCs. See In the Matter of Van 
Kampen Investment Advisory Corp., et al., Investment Company Act 
Rel. Nos. 25924 (February 3, 2003) (notice) and 25951 (March 3, 
2003) (order).
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    5. Each of the Trusts and any Other Trust will disclose in its 
prospectus and annual reports its fundamental policy to make monthly 
offers to repurchase a portion of its common shares at net asset value, 
less deduction of a repurchase fee, if any, as permitted by rule 23c-
3(b)(1), and the imposition of EWCs as permitted pursuant to exemptive 
relief previously granted by the Commission. The fundamental policy 
will be changeable only by a majority vote of the holders of such 
trust's outstanding voting securities. Under the fundamental policy, 
the repurchase offer amount will be determined by the board of trustees 
of the relevant Trust or Other Trust (``Board'') prior to each 
repurchase offer. The Trusts and any Other Trust will comply with rule 
23c-3(b)(8)'s requirements with respect to its trustees who are not 
interested persons of the VK Trust, the MS Trust or Other Trust, as 
applicable, within the meaning of section 2(a)(19) of the Act 
(``Disinterested Trustees'') and their legal counsel. Under its 
fundamental policy, each Trust and Other Trust will make monthly offers 
to repurchase not less than 5% of its outstanding shares at the time of 
the repurchase request deadline. The repurchase offer amounts for the 
then-current monthly period, plus the repurchase offer amounts for the 
two monthly periods immediately preceding the then-current monthly 
period, will not exceed 25% of the outstanding common shares of the 
relevant Trust or Other Trust.
    6. The prospectus of each Trust and Other Trust will state the 
means to determine the repurchase request deadline and the maximum 
number of days between each repurchase request deadline and the 
repurchase pricing date. Each Trust's or Other Trust's repurchase 
pricing date normally will be the same date as the repurchase request 
deadline and pricing will be determined after close of business on that 
date.
    7. Pursuant to rule 23c-3(b)(1), each Trust and any Other Trust 
will repurchase shares for cash on or before the repurchase payment 
deadline, which will be no later than seven calendar days after the 
repurchase pricing date. Each Trust and Other Trust currently intends 
to make payment by the third business day following the repurchase 
pricing date. Each Trust and Other Trust will make payment for shares 
repurchased in the previous month's repurchase offer at least five 
business days before sending notification of the next repurchase offer. 
The VK Trust has not and currently does not intend to deduct any 
repurchase fees from the repurchase proceeds payable to tendering 
shareholders, but the Trusts and Other Trusts reserve the right to do 
so in compliance with rule 23c-3(b)(1).
    8. Each Trust and Other Trust will provide common shareholders with 
notification of each repurchase offer no less than seven days and no 
more than fourteen days prior to the repurchase request deadline. The 
notification will include all information required by rule 23c-
3(b)(4)(i). Each Trust and Other Trust will file the notification and 
the Form N-23c-3 with the Commission within three business days after 
sending the notification to its respective common shareholders.
    9. Each Trust and Other Trust will not suspend or postpone a 
repurchase offer except pursuant to the vote of a majority of its 
Disinterested Trustees, and only under the limited circumstances 
specified in rule 23c-3(b)(3)(i). The Trusts and any Other Trust will 
not condition a repurchase offer upon tender of any minimum amount of 
shares. In addition, each of the Trusts and any Other Trust will comply 
with the pro ration and other allocation requirements of rule 23c-
3(b)(5) if common shareholders tender more than the repurchase offer 
amount. Further, each Trust and any Other Trust will permit tenders to 
be withdrawn or modified at any time until the repurchase request 
deadline, but will not permit tenders to be withdrawn or modified 
thereafter.
    10. From the time a Trust or any Other Trust sends its notification 
to shareholders of the repurchase offer until the repurchase pricing 
date, a percentage of such trust's assets equal to at least 100% of the 
repurchase offer amount will consist of: (a) Assets that can be sold or 
disposed of in the ordinary course of business at approximately the 
price at which such trust has valued such investment within a period 
equal to the period between the repurchase request deadline and the 
repurchase payment deadline; or (b) assets that mature by the next 
repurchase payment deadline. In the event the assets of a Trust or 
Other Trust fail to comply with this requirement, the Board will cause 
such trust to take such action as it deems appropriate to ensure 
compliance.
    11. In compliance with the asset coverage requirements of section 
18 of

[[Page 28892]]

the Act, any senior security issued by, or other indebtedness of, each 
of the Trusts and any Other Trust will either mature by the next 
repurchase pricing date or provide for such trust's ability to call, 
repay or redeem such senior security or other indebtedness by the next 
repurchase pricing date, either in whole or in part, without penalty or 
premium, as necessary to permit that trust to complete the repurchase 
offer in such amounts determined by its Board.
    12. The Board of each Trust and any Other Trust will adopt written 
procedures to ensure that such trust's portfolio assets are 
sufficiently liquid so that it can comply with its fundamental policy 
on repurchases and the liquidity requirements of rule 23c-3(b)(10)(i). 
The Board will review the overall composition of the portfolio and make 
and approve such changes to the procedures as it deems necessary.

Applicants' Legal Analysis

    1. Section 6(c) of the Act provides that the Commission may exempt 
any person, security, or transaction, or any class or classes of 
persons, securities, or transactions, from any provision of the Act or 
rule thereunder, 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.
    2. Section 23(c) of the Act provides in relevant part that no 
registered closed-end investment company shall purchase any securities 
of any class of which it is the issuer except: (a) On a securities 
exchange or other open market; (b) pursuant to tenders, after 
reasonable opportunity to submit tenders given to all holders of 
securities of the class to be purchased; or (c) under such other 
circumstances as the Commission may permit by rules and regulations or 
orders for the protection of investors.
    3. Rule 23c-3 under the Act permits a registered closed-end 
investment company to make repurchase offers for its common stock at 
net asset value at periodic intervals pursuant to a fundamental policy 
of the investment company. ``Periodic interval'' is defined in rule 
23c-3(a)(1) as an interval of three, six, or twelve months. Rule 23c-
3(b)(4) requires that notification of each repurchase offer be sent to 
shareholders no less than 21 calendar days and no more than 42 calendar 
days before the repurchase request deadline.
    4. Applicants request an order pursuant to sections 6(c) and 23(c) 
of the Act exempting them from rule 23c-3(a)(1) to the extent necessary 
to permit the Trusts and any Other Trust to make monthly repurchase 
offers. Applicants also request an exemption from the notice provisions 
of rule 23c-3(b)(4) to the extent necessary to permit the Trusts and 
any Other Trust to send notification of an upcoming repurchase offer to 
shareholders at least seven days but no more than fourteen calendar 
days in advance of the repurchase request deadline.
    5. Applicants contend that monthly repurchase offers are in the 
shareholders' best interests and consistent with the policies 
underlying rule 23c-3. Applicants assert that monthly repurchase offers 
will provide investors with more liquidity than quarterly repurchase 
offers. Applicants assert that shareholders will be better able to 
manage their investments and plan transactions, because if they decide 
to forego a repurchase offer, they will only need to wait one month for 
the next offer. Applicants also contend that the portfolios of the 
Trusts and any Other Trust will be managed to provide ample liquidity 
for monthly repurchase offers. Applicants do not believe that a change 
to monthly repurchases would necessitate any change in portfolio 
management practices of the Trusts or any Other Trust in order to 
satisfy rule 23c-3. In fact, applicants expect limited or no impact on 
overall portfolio management or performance of such trusts upon 
converting to monthly offers and believe that it may be easier to 
manage the cash of the portfolio for the smaller monthly offers 
compared to the larger quarterly ones.
    6. Applicants propose to send notification to shareholders at least 
seven days, but no more than fourteen calendar days, in advance of a 
repurchase request deadline. Applicants assert that, because the Trusts 
and any Other Trust intend to price on the repurchase request deadline 
and pay by the third business day following the pricing date, the 
entire procedure can be completed before the next notification is sent 
out to shareholders; thus avoiding any overlap. Applicants believe that 
these procedures will eliminate any possibility of investor confusion. 
Applicants also state that monthly repurchase offers will be a 
fundamental feature of the Trusts and any Other Trust, and their 
prospectuses will provide a clear explanation of the repurchase 
program.
    7. Applicants submit that for the reasons given above the requested 
relief is appropriate in the public interest and is consistent with the 
protection of investors and the purposes fairly intended by the policy 
and provisions of the Act.

Applicants' Conditions

    Applicants agree that any order granting the requested relief shall 
be subject to the following conditions:
    1. Each Trust (and any Other Trust relying on this relief) will 
make a repurchase offer pursuant to rule 23c-3(b) for a repurchase 
offer amount of not less than 5% in any one-month period. In addition, 
the repurchase offer amount for the then-current monthly period, plus 
the repurchase offer amounts for the two monthly periods immediately 
preceding the then-current monthly period, will not exceed 25% of the 
Trust's (or Other Trust's) outstanding shares. Each Trust (or Other 
Trust relying on this relief) may repurchase additional tendered shares 
pursuant to rule 23c-3(b)(5) only to the extent the percentage of 
additional shares so repurchased does not exceed 2% in any three-month 
period.
    2. Payment for repurchased shares will occur at least five business 
days before notification of the next repurchase offer is sent to 
shareholders of any Trust (or Other Trust relying on this relief).

    For the Commission, by the Division of Investment Management, 
under delegated authority.
J. Lynn Taylor,
Assistant Secretary.
 [FR Doc. E6-7567 Filed 5-17-06; 8:45 am]

BILLING CODE 8010-01-P
