[Federal Register Volume 59, Number 105 (Thursday, June 2, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-13382]
[[Page Unknown]]
[Federal Register: June 2, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-20320; 812-8980]
The First Trust Special Situations Trust, Oppenheimer Global and
Treasury Securities Trust, Series 1 and Subsequent Series, et al.;
Notice of Application
May 26, 1994.
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: The First Trust Special Situations Trust, Oppenheimer
Global and Treasury Securities Trust, Series 1 and Subsequent Series
(the ``Trust''); Oppenheimer Global Fund, Oppenheimer Fund, Oppenheimer
Gold & Special Minerals Fund, Oppenheimer Global Growth & Income Fund,
Oppenheimer Equity Income Fund, Oppenheimer Main Street Income & Growth
Fund; Oppenheimer Asset Allocation Fund; Oppenheimer Global Bio-Tech
Fund; Oppenheimer Total Return Fund, Inc., Oppenheimer Discovery Fund,
Oppenheimer Time Fund, Oppenheimer Special Fund, and Oppenheimer Target
Fund, on behalf of themselves and any open-end management investment
companies, other than money market or no-load funds (i.e., companies
that do not impose a sales load, deferred sales load, or bear
distribution expenses pursuant to a rule 12b-1 plan), that may in the
future be advised by Oppenheimer Management Corporation or an adviser
owned directly or indirectly by it or its parent corporation,
Oppenheimer Acquisition Corp. (the ``Funds''); Oppenheimer Management
Corporation (the ``Adviser''); Oppenheimer Funds Distributor, Inc. (the
``Distributor''); and Nike Securities L.P. (``Nike,'' together with any
sponsor controlled by or under common control with Nike, the
``Sponsor'').
RELEVANT ACT SECTIONS: Order requested under section 6(c) for an
exemption from sections 12(d)(1), 14(a), 19(b), and 22(d) and rule 19b-
1; under sections 11 (a) and (c) to permit certain offers of exchange;
and under section 17(d) and rule 17d-1 to permit certain affiliated
transactions.
SUMMARY OF APPLICATION: Applicants seek an order: (a) Permitting series
of the Trust to invest in shares of one of the Funds and zero coupon
obligations; (b) exempting the Sponsor from having to take for its own
account or place with others $100,000 worth of units in the Trust; (c)
permitting the Trust to distribute capital gains resulting from
redemptions of Fund shares along with the Trust's regular
distributions; (d) permitting waiver of any contingent deferred sales
charge otherwise applicable on Fund shares that the Trust has
purchased; (e) permitting certain offers of exchange involving the
Trust; and (f) permitting certain affiliated transactions involving the
Trust.
FILING DATES: The application was filed on May 6, 1994. Counsel, on
behalf of applicants, has agreed to file a further amendment during the
notice period to make certain technical changes. This notice reflects
the changes to be made to the application by such further amendment.
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 June 20, 1994,
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 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 SEC's
Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street, NW., Washington, DC 20549.
Applicants: Nike, 1001 Warrenville Road, Lisle, Illinois 60532;
Oppenheimer Main Street Income & Growth Fund, Oppenheimer Total Return
Fund, Inc., and Oppenheimer Equity Income Fund, 3410 South Galena
Street, Denver, Colorado 80231; Other applicants, Two World Trade
Center, New York, New York 10048-0203.
FOR FURTHER INFORMATION CONTACT: James E. Anderson, 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 of the Funds is a registered open-end management investment
company. The Adviser serves as the Funds' investment adviser, and the
Distributor serves as the Funds' principal underwriter. In accordance
with the terms of an exemptive order, certain of the Funds offer
multiple classes of shares with front-end sales loads, and in certain
instances, contingent deferred sales charges (``CDSCs'').\1\ Each of
the existing Funds has adopted a rule 12b-1 plan.
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\1\Oppenheimer Management Corporation, Investment Company Act
Release Nos. 19821 (Oct. 28, 1993) (notice) and 19894 (Nov. 23,
1993) (order).
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2. The Trust is a registered unit investment trust that will offer
units in series (``Trust Series''), each of which will contain shares
of one of the Funds that normally are offered with a sales load and
U.S. Government zero coupon obligations (``zero coupon obligations'').
The Trust's objective is to provide protection of capital while
providing for capital appreciation through investments in zero coupon
obligations and shares of the Funds. Each Trust Series will be
organized pursuant to a trust indenture which will incorporate a master
trust agreement relating to the entire Trust and which will name a
qualified bank as trustee (the ``Trustee'').
3. Each Trust Series will be sponsored by the Sponsor, who will
perform the functions typical of unit investment trust sponsors,
including: depositing fund shares in the Trust Series; acquiring zero
coupon obligations and depositing them in the Trust Series; arranging
for the evaluation of the zero coupon obligations by an independent
evaluator (but not shares of the Funds since the Funds calculate net
asset value daily); offering units to the public; and maintaining a
secondary market in units. The Sponsor expects to deposit in each Trust
Series substantially more than $100,000 aggregate value of zero coupon
obligations and Fund shares. Simultaneously with such deposit, the
Trustee will deliver to the Sponsor registered certificates for units
which will represent the entire ownership of the Trust Series.
4. Units of the Trust Series will be offered to the public
initially at prices based on the net asset value of the Fund shares
selected for deposit in the Trust Series plus the offering side value
of the zero coupon obligations contained therein plus a sales charge.
The Trust Series will redeem units at prices based on the aggregate bid
side evaluation of the zero coupon obligations plus the net asset value
of the Fund shares.
5. With the deposit of the securities in the Trust Series on the
initial date of deposit, the Sponsor will have established a
proportionate relationship between the principal amounts of zero coupon
obligations and Fund shares in the Trust Series. The Sponsor will be
permitted under the trust agreement to deposit additional securities,
but will maintain the original proportionate relationship between the
principal amounts of zero coupon obligations and Fund shares in the
Trust Series. Fund shares may be redeemed only to meet redemptions by
unitholders or to pay Trust Series expenses in the event that
distributions received on Fund shares prove insufficient to cover the
expenses.
6. The Trust Series will be structured so that each Trust Series
will contain a sufficient amount of zero coupon obligations to assure
that, at the specified maturity date for such Trust Series, the
purchaser of a unit will receive back the approximate total amount of
the original investment in the Trust Series, including the sales
charge. The Sponsor intends to maintain a secondary market for Trust
Series units based on the aggregate bid side evaluation of the zero
coupon obligations and the net asset value of the Fund shares, but is
not obligated to do so. In the event that the Sponsor does not maintain
a secondary market, the trust agreement will provide that the Sponsor
will not instruct the Trustee to sell zero coupon obligations from any
Trust Series until shares of the Fund have been liquidated, unless the
Trustee is able to sell such zero coupon obligations and still maintain
at least the original proportionate relationship to unit value and,
further, that zero coupon obligations cannot be sold to meet Trust
Series expenses.
7. The sales load that normally would be applicable on sales of
underlying Fund shares will be waived. The Sponsor and the Distributor
will rebate to the Trustee any rule 12b-1 fees they receive on shares
of the Funds held by the Trust Series.
8. Applicants have taken certain steps to reduce the impact of the
termination of a Trust Series on the Fund deposited therein. First, the
Trust Series will, with respect to all unitholders still holding units
at the scheduled termination and to the extent desired by such
unitholders, transfer the registration of their proportionate number of
Fund shares from the Trust Series to the investor in lieu of redeeming
such shares. Second, the Fund will offer all such unitholders the
option of investing the proceeds from the zero coupon obligations in
Fund shares at net asset value (i.e., without the imposition of the
normal sales load). The Fund also will offer unitholders the option of
investing all distributions from the Trust Series during the life of
the Trust Series in Fund shares at net asset value.
Applicants' Legal Conclusions
1. Section 12(d)(1) generally limits acquisition by an investment
company of shares of a registered investment company in the following
ways: (1) The acquiring company may not acquire more than 3% of the
voting stock of the acquired company; (2) the securities of the
acquired company may not amount to more than 5% of the value of the
assets of the acquiring company; and (3) securities of the acquired
company and all other investment companies may not represent more than
10% of the assets of the acquiring company.
2. A major purpose of section 12(d)(1) is to prevent the
duplication of costs and other adverse consequences to investors
incident to the pyramiding of investment companies. This proposal is
structured to eliminate the pyramiding of expenses. No sales charge or
distribution fee will be imposed on Fund shares deposited in the Trust.
No investment advisory fee will be charged with respect to the Trust
Series since they will be unmanaged, and no evaluation fee will be
charged with respect to Fund shares in the Trust Series. Another
concern addressed by 12(d)(1) is potentially abusive control problems
that could result from the concentration of voting power in a fund
holding company. To address this concern, applicants have agreed that
shares of a Fund that are held by a Trust Series will be voted by the
Trustee in the same proportion as all other shares of that Fund not
held by the Trust Series are voted. Another concern underlying section
12(d)(1) is the possibility of large-scale redemptions of shares of the
underlying fund. The trust agreement will, however, permit the Trust
Series to sell Fund shares only when necessary to meet redemptions or
pay Trust Series expenses. Neither the Trustee nor the Sponsor will
have any discretionary authority to determine when shares of the
underlying Funds are to be sold or to substitute shares of another Fund
for those deposited in a Trust Series. The threat to a Fund from large-
scale redemptions is further reduced by the fact that each Trust Series
is prohibited from acquiring more than 10% of the outstanding shares of
any Fund.
3. Section 14(a) requires that investment companies have $100,000
of net worth prior to making a public offering. Applicants recognize
that by withdrawing certificates representing the entire beneficial
ownership of the Trust Series, the Sponsor may be deemed to be reducing
the Trust Series' net worth below the requirements of section 14(a).
Applicants intend to comply in all respects with the requirements of
rule 14a-3, which provides an exemption from section 14(a), except that
the Trust Series would not restrict its portfolio to ``eligible trust
securities.''
4. Section 19(b) and rule 19b-1 provide that, except under limited
circumstances, no registered investment company may distribute long-
term gains more than once every twelve months. These provisions were
designed to remove the temptation to realize capital gains on a
frequent and regular basis and to eliminate attempts by investment
advisers to time distributions to be advantageous to shareholders.
Moreover, there was concern that investors would be confused by a
failure to distinguish between regular distributions of capital gains
and distributions of investment income. Applicants request an exemption
from Rule 19b-1 to the extent necessary to permit capital gains earned
in connection with the redemption of Fund shares to be distributed to
unitholders along with the Trust Series' regular distributions. The
requested exemption is consistent with the purposes of section 19(b)
and rule 19b-1 because the dangers of manipulation of capital gains and
confusion between capital gains and regular income distributions does
not exist in the Trust Series. The Trust Series and their Sponsor have
substantially no control over events, other than the selection of the
portfolio, which might trigger capital gains (i.e., the tendering of
units for redemption). Moreover, because distributions of capital are
clearly indicated in accompanying reports to unitholders as a return of
principal, the danger of confusion is not present in the operations of
the Trust Series.
5. Section 22(d) generally prohibits a registered investment
company from selling its shares except at a current offering price
described in the prospectus. Applicants request an exemption from the
provisions of section 22(d) to permit the waiver of any otherwise
applicable CDSC where: (a) The Sponsor has purchased such shares in
connection with the sale of units; (b) the proceeds of zero-coupon
obligations upon termination of a Trust Series, and distributions from
a Trust Series made during the existence of the Trust Series, ahve been
reinvested by a unitholder in additional Fund shares; and (c) a Trust
Series at maturity has transferred a unitholder's proportionate number
of Fund shares from the Trust Series to the unitholder in lieu of
redeeming such shares. Waiver of the sales load will not harm the Funds
or remaining shareholders. All Funds whose shares are subject to any
sales load will fully disclose the waiver provision in their
prospectuses.
6. Section 11(a) makes it unlawful for an registered open-end
investment company or principal underwriter for such company to make
certain offers of exchange on any basis other than the relative net
asset value of the securities to be exchanged, unless the terms of the
exchange offer have first been approved by the SEC. Section 11(c)
provides that section 11(a) will be applicable to any type of exchange
offer involving securities of a registered unit investment trust,
irrespective of the basis of exchange. Applicants seek an order
pursuant to section 11 (a) and (c) approving the termination option
described below. At the termination of the Trust Series, unitholders
still holding units at maturity will have the option of either (a)
transferring the registration of their proportionate number of Fund
shares from the Trust Series to a registration in the investor's name,
or (b) receiving a cash distribution. Such unitholders also will have
the option of either (a) reinvesting the proceeds of the zero-coupon
obligations in additional shares of the Fund (without imposition of the
normal sales load), or (b) receiving a cash distribution. The exchange
will be made on the basis of the net asset value of the Fund shares.
7. Section 17(d) and rule 17d-1 make it unlawful for any affiliated
person of, or principal underwriter for a registered investment
company, or any affiliated person of either of them, acting as a
principal, to engage in a joint transaction with the investment company
unless the joint transaction has been approved by the SEC. Applicants
believe that the proposed arrangements are consistent with the
provisions, policies, and purposes of the Act, and participation by
each registered investment company is not on a basis less advantageous
than that of other participants.
Applicants' Conditions
Applicants agree to the following as conditions to the granting of
the requested order:
1. The Trustee will not redeem Fund shares except to the extent
necessary to meet redemptions of units by unitholders, or to pay Trust
expenses should distributions and rebated 12b-1 fees received on Fund
shares prove insufficient to cover such expenses.
2. Any rule 12b-1 fees received by the Sponsor or the underwriters
of Fund shares in connection with the distribution of Fund shares to
the Trust will be promptly rebated to the Trustee.
3. No one Trust Series will, at the time of any deposit of any Fund
shares, hold as a result of that deposit, more than 10% of the then-
outstanding shares of a Fund.
4. All Trust Series investing in shares of the same Fund will be
structured so that their maturity dates will be at least thirty days
apart from one another.
5. Applicants will comply in all respect with the requirements of
rule 14a-3, except that the Trust Series will not restrict their
portfolio investments to ``eligible trust securities.''
6. Shares of a Fund which are held by a Trust Series will be voted
by the Trustee of the Trust, and the Trustee will vote all shares of a
Fund held in a Trust Series in the same proportion as all other shares
of that Fund not held by the Trust are voted.
7. No sales charge or redemption fee will be imposed on any shares
of the Funds deposited in any Trust Series or on any shares acquired by
unitholders through reinvestment of dividends or distributions or
through reinvestment at termination.
8. Applicants agree to comply with rule 6c-10 as currently
proposed, and as it may be reproposed, adopted or amended.
9. The prospectus of each Trust Series and any sales literature or
advertising that mentions the existence of a reinvestment option will
disclose that unitholders who elect to invest in Fund shares will incur
a rule 12b-1 fee.
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-13382 Filed 6-1-94; 8:45 am]
BILLING CODE 8010-01-M