[Federal Register Volume 64, Number 158 (Tuesday, August 17, 1999)]
[Notices]
[Pages 44771-44773]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-21329]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-23945; 812-11652]
Oppenheimer Senior Floating Rate Fund, et al.; Notice of
Application
August 12, 1999.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of an application for an order under section 6(c) of the
Investment Company Act of 1940 (``Act'') for an exemption from sections
18(c) and 18(i) of the Act, under sections 6(c) and 23(c)(3) of the Act
for an exemption from rule 23c-3 under the Act, and pursuant to section
17(d) of the Act and rule 17d-1 under the Act.
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SUMMARY OF APPLICATION: Applicants request an order to permit certain
registered closed-end investment companies to issue multiple classes of
shares, and impose asset-based distribution fees and early withdrawal
charges.
APPLICANTS: Oppenheimer Senior Floating Rate Fund (``Fund''),
OppenheimerFunds Distributor, Inc. (``Distributor''), and
OppenheimerFunds, Inc. (``Adviser'').
FILING DATES: The application was filed on June 10, 1999. Applicants
have agreed to file an amendment during the notice period, the
substance of which is reflected in this notice.
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 1,
1999, 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, N.W., Washington, D.C.
20549-0609; Andrew J. Donohue, Esq., OppenheimerFunds, Inc., Two World
Trade Center, New York, NY 10048.
FOR FURTHER INFORMATION CONTACT: John K. Forst, Attorney Advisor, at
(202) 942-0569, or Mary Kay Frech, 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 at the
SEC's Public Reference Branch, 450 Fifth Street, N.W., Washington, D.C.
20549-0102 (telephone (202) 942-8090).
Applicants' Representations
1. The Fund is a closed-end management investment company
registered under the Act and organized as a Massachusetts business
trust. The Adviser is registered under the Investment Advisers Act of
1940 and will serve as investment adviser to the Fund. The Distributor,
a broker-dealer registered under the Securities Exchange Act of 1934,
will distribute the Fund's shares. Applicants request that the order
also apply to any other registered closed-end investment company for
which the Adviser or the Distributor or any entity controlling,
controlled by, or under common control with the Adviser or the
Distributor acts as investment adviser or principal underwriter.\1\
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\1\ Any registered closed-end investment company relying on this
relief in the future will do so in a manner consistent with the
terms and conditions of the application.
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2. The Fund's investment objective is to seek a high level of
current income and preservation of capital. The Fund will invest
primarily in senior secured floating rate loans made by commercial
banks, investment banks and finance companies to commercial and
industrial borrowers (``Loans''). Under normal circumstances, at least
80% of the Fund's total assets will be invested in Loans. Up to 20% of
the Fund's total assets may be invested in U.S. dollar-denominated
loans to certain foreign borrowers, junior debt obligations, short-term
investment-grade or non-investment-grade debt obligations, secured and
unsecured loans and equity securities, including stocks and warrants.
3. The Fund intends to continuously offer its shares to the public
at net asset value. The Fund's shares will not be offered or traded in
the secondary market and will not be listed on any exchange or quoted
on any quotation medium. The Fund intends to operate as an ``interval
fund'' pursuant to rule 23c-3 under the Act and make periodic
repurchase offers to its shareholders.
4. The Fund seeks the flexibility to be structured as a multiple-
class fund and currently intends to offer three classes of shares. The
Fund will offer Class B Shares at net asset value without a front-end
sales charge, but subject to an early withdrawal charge (``EWC'') on
shares that are repurchased by the Fund within five years of the end of
the month in which they were purchased. Class B shares will
automatically convert to Class A shares 72 months after the end of the
month in which they were purchased. The Fund may in the future offer
Class A shares with a front-end sales charge. The Fund will offer Class
C shares at net asset value without a front-end sales charge, but
subject to an EWC on shares that are repurchased by the Fund within one
year of the end of the month in which they were purchased. Class A,
Class B, and Class C shares will be subject to an annual shareholder
service fee of up to .25% of average daily net assets. Class A, Class
B, and Class C shares will be subject to an annual distribution fee of
up to .75% of average daily net assets. Applicants represent that the
service and distribution fees will comply with the provisions of rule
2830(d) of the Conduct Rules of the National Association of Securities
Dealers, Inc. (``NASD'') as if the Fund were an open-end investment
company. Applicants also represent that the Fund will disclose in its
prospectus the fees, expenses and other characteristics of each class
of shares offered for sale, as is required for open-end multi-class
funds under Form N-1A.
5. All expenses incurred by the Fund will be allocated among the
various classes of shares based on the net assets of the Fund
attributable to each class, except that the net asset value and
expenses of each class will reflect distribution fees, service fees
(including transfer agency fees), and any other incremental expenses
attributable to that class. Expenses of the Fund allocated to a
particular class of shares
[[Page 44772]]
will be borne on a pro rata basis by each outstanding share of that
class. The Fund may create additional classes of shares in the future
that may have different terms from Class A, Class B, and Class C
shares. Applicants state that the Fund will comply with the provisions
of rule 18f-3 under the Act as if it were an open-end fund.
6. The Fund may waive the EWC for certain categories of
shareholders or transactions to be established from time to time. With
respect to any waiver of, scheduled variation, or elimination of the
EWC, the Fund will comply with rule 22d-1 under the Act as if the Fund
were an open-end investment company.
7. The Fund may offer its shareholders an exchange feature under
which shareholders of the Fund may exchange their shares for shares of
the same class of other funds in the Oppenheimer Funds group of
investment companies. Exchanges of Fund shares will be allowed only
during periodic repurchase intervals. Any exchange option will comply
with rule 11a-3 under the Act as if the Fund were an open-end
investment company subject to that rule. In complying with rule 11a-3,
the Fund will treat the EWC as if it were a contingent deferred sales
charge (``CDSC'').
Applicants' Legal Analysis
Multiple Classes of Shares
1. Section 18(c) of the Act provides, in relevant part, that a
closed-end investment company may not issue or sell any senior security
if, immediately thereafter, the company has outstanding more than one
class of senior security. Applicants state that the creation of
multiple classes of shares of the Fund may be prohibited by section
18(c).
2. Section 18(i) of the Act provides that each share of stock
issued by a registered management company will be a voting stock and
have equal voting rights with every other outstanding voting stock.
Applicants state that multiple classes of shares of the Fund may
violate section 18(i) of the Act because each class would be entitled
to exclusive voting rights with respect to matters solely related to
that class.
3. Section 6(c) of the Act provides that the SEC may exempt any
person, security, or transaction from any provision of the Act, 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 request an exemption under section 6(c) of the Act from
sections 18(c) and 18(i) of the Act to permit the Fund to issue
multiple classes of shares.
4. Applicants submit that the proposed allocation of expenses and
voting rights among multiple classes is equitable and will not
discriminate against any group or class of shareholders. Applicants
submit that the proposed arrangements would permit the Fund to
facilitate the distribution of its securities and provide investors
with a broader choice of shareholder services. Applicants assert that
their proposal does not raise the concerns underlying section 18 of the
Act to any greater degree than open-end investment companies' multiple
class structures that are permitted by rule 18f-3 under the Act.
Applicants state that the Fund will comply with the provisions of rule
18f-3 as if it were an open-end fund.
Early Withdrawal Charges
5. Section 23(c) of the Act provides, in relevant part, that no
registered closed-end fund will purchase any securities 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 other circumstances as the SEC may permit by rules and
regulations or orders for the protection of investors.
6. Rule 23c-3 under the Act permits a registered closed-end fund
(an ``interval fund'') to make repurchase offers of between five and
twenty-five percent of its outstanding shares at net asset value at
periodic intervals pursuant to a fundamental policy of the fund. Rule
23c-3(b)(1) under the Act provides that an interval fund may deduct
from repurchase proceeds only a repurchase fee, not to exceed two
percent of the proceeds, that is reasonably intended to compensate the
fund for expenses directly related to the repurchase.
7. Section 23(c)(3) provides that the SEC may issue an order that
would permit a closed-end investment company to repurchase its shares
in circumstances in which the repurchase is made in a manner or on a
basis which does not unfairly discriminate against any holders of the
class or classes of securities to be purchased. As noted above, section
6(c) provides that the SEC may exempt any person, security, or
transaction from any provision of the Act, if and to the extent that
the exemption is necessary or appropriate in the public interest and
consistent with the protection of investors and the purpose fairly
intended by the policy and provisions of the Act. Applicants request
relief under sections 6(c) and 23(c) from rule 23c-3 to permit them to
impose EWCs on shares submitted for repurchase that have been held for
less than a specified period.
8. Applicants believe that the requested relief meets the standards
of sections 6(c) and 23(c)(3). Rule 6c-10 under the Act permits open-
end funds to impose CDSCs, subject to certain conditions. Applicants
state that EWCs are functionally similar to CDSCs imposed by open-end
funds under rule 6c-10 under the Act. Applicants state that EWCs may be
necessary for the Distributor to recover distribution costs and that
EWCs may discourage investors from moving their money quickly in and
out of the Fund, a practice that applicants submit imposes costs on all
shareholders. Applicants will comply with rule 6c-10 under the Act as
if that rule applied to closed-end funds. The Fund also will disclose
EWCs in accordance with the requirements of Form N-1A concerning CDSCs.
Applicants further state that the Fund will apply the EWC (and any
waivers or scheduled variations of the EWC) uniformly to all
shareholders in a given class and consistent with the requirements of
rule 22d-1 under the Act.
Asset-Based Distribution Fees
9. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
an affiliated person of a registered investment company, acting as
principal, from participating in or effecting any transaction in
connection with any joint enterprise or joint arrangement in which the
investment company participates unless the SEC issues an order
permitting the transaction. In reviewing applications submitted under
section 17(d) and rule 17d-1, the SEC considers whether the
participation of the investment company in a joint enterprise or joint
arrangement is consistent with the provisions, policies, and purposes
of the Act, and to the extent to which the participation is on a basis
different from or less advantageous than that of other participants.
10. Rule 17d-3 under the Act provides an exemption from section
17(d) and rule 17d-1 to permit open-end funds to enter into
distribution arrangements pursuant to rule 12b-1. Applicants also
request an order under section 17(d) and rule 17d-1 to permit the Fund
to impose asset-based distribution fees. Applicants have agreed to
comply with rules 12b-1 and 17d-3 as if those rules applied to closed-
end investment companies.
[[Page 44773]]
Applicants' Condition
Applicants agree that any order granting the requested relief will
be subject to the following condition:
Applicants will comply with the provisions of rules 6c-10, 11a-3,
12b-1, 17d-3, 18f-3, and 22d-1 under the Act and NASD Conduct Rule
2830(d), as amended from time to time, as if those rules applied to
closed-end investment companies.
For the SEC, by the Division of Investment Management, pursuant
to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-21329 Filed 8-16-99; 8:45 am]
BILLING CODE 8010-01-M