Registration No. 333-14887
File No. 811-07857
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
POST-EFFECTIVE AMENDMENT NO. 1 /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 /X/
AMENDMENT NO. 2 /X/
OPPENHEIMER REAL ASSET FUND
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(Exact Name of Registrant as Specified in Charter)
6803 South Tucson Way, Englewood, Colorado 80112
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(Address of Principal Executive Offices)
303-671-3200
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(Registrant's Telephone Number)
ANDREW J. DONOHUE, ESQ.
OppenheimerFunds, Inc.
Two World Trade Center, New York, New York 10048-0203
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
/ / Immediately upon filing pursuant to paragraph (b) /X/ On September 18,
1997, pursuant to paragraph (b) / / 60 days after filing pursuant to
paragraph (a)(1) / / On _______, pursuant to paragraph (a)(1) / / 75 days
after filing pursuant to paragraph (a)(2) / / On _______ pursuant to
paragraph (a)(2) of Rule 485.
Registration of Shares Under the Securities Act of 1933
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The Registrant has registered an indefinite number of shares under the
Securities Act of 1933 pursuant to Rule 24f-2 promulgated under the Investment
Company Act of 1940. A Rule 24f-2 Notice for the Registrant's fiscal year ended
August 31, 1997, will be filed on or before October 30, 1997.
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FORM N-1A
OPPENHEIMER REAL ASSET FUND
Cross Reference Sheet
Part A of
Form N-1A
Item No. Prospectus Heading
1 Front Cover Page
2 Expenses; A Brief Overview of the Fund
3 *
4 Front Cover Page; How the Fund is Managed -
Organization and History; Investment Objective and
Policies
5 Expenses; How the Fund is Managed - Organization and
History; Back Cover
5A *
6 Dividends, Capital Gains and Taxes; Investment
Policies and Policies - Portfolio Turnover; How the
Fund is Managed - Organization and History; The
Transfer Agent
7 How to Exchange Shares; Special Investor Services;
Service Plan for Class A shares; Distribution and
Service Plans for Class B and Class C Shares; How to
Buy Shares; How to Sell Shares; Shareholder Account
Rules and Policies
8 How to Sell Shares; How to Exchange Shares; Special
Investor Services
9 *
Part B of
Form N-1A Heading in Statement of Additional Information or
Item No. Prospectus
10 Cover Page
11 Cover Page
12 *
13 Investment Objective and Policies; Other Investment
Techniques and Strategies; Additional Investment
Restrictions
14 How the Fund is Managed -- Trustees and Officers of
the Fund
15 How the Fund is Managed -- Major Shareholders
16 How the Fund is Managed; Additional Information about
the Fund; Distribution and Service Plans; Back Cover
17 How the Fund is Managed
18 Additional Information about the Fund
19 About Your Account -- How to Buy Shares, How to Sell
Shares, How to Exchange Shares
20 Dividends, Capital Gains and Taxes
21 How the Fund is Managed; Additional Information about
the Fund - The Distributor; Distribution and Service
Plans
22 *
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23 *
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*Not applicable or negative answer.
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OPPENHEIMER
Real Asset Fund
Prospectus dated September 18, 1997
Oppenheimer Real Asset Fund is a mutual fund that seeks to provide total return
as its investment objective. The Fund seeks to achieve its objective by
investing primarily in Hybrid Instruments, futures contracts, options, forward
contracts, swaps, investment grade bonds, money market instruments, and U.S.
Government securities. The Fund may also invest up to 10% of its total assets in
lower-rated debt securities ("junk bonds"). The Fund seeks to outperform
traditional equity and debt securities during adverse economic times.
Investments in Hybrid Instruments, futures contracts and related options,
forward contracts and swaps involve higher volatility and risk of significant
loss of principal than investments in equity or debt securities. See "Risk
Factors-Hybrid Instruments," on page __.
Investors should carefully consider these risks before investing. The Fund
may also use certain derivative instruments in an effort to enhance returns or
reduce the risks of market fluctuations that affect the value of the investments
the Fund holds, or to seek total return.
An investment in the Fund should not be the sole source of investment for a
shareholder. Rather, an investment in the Fund should be considered only as part
of an overall portfolio strategy which includes fixed income and equity
securities. Additionally, the Fund is "non-diversified" which means that it will
limit its investments to a smaller number of issuers than a diversified mutual
fund.
This Prospectus explains what you should know before investing in the Fund.
Please read this Prospectus carefully and keep it for future reference. You can
find more detailed information about the Fund in the September 18, 1997
Statement of Additional Information. For a free copy, call OppenheimerFunds
Services, the Fund's Transfer Agent, at 1-800-525-7048, or write to the Transfer
Agent at the address on the back cover. The Statement of Additional Information
has been filed with the Securities and Exchange Commission and is incorporated
into this Prospectus by reference (which means that it is legally part of this
Prospectus).
[logo] OppenheimerFunds
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, are not insured by the F.D.I.C. or any other agency, and
involve investment risks, including the possible loss of the principal amount
invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
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SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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Contents
A B O U T T H E F U N D
Expenses
A Brief Overview of the Fund
Investment Objective and Philosophy
How the Fund Pursues its Investment Objective
Other Investments
Risk Factors
Investment Restrictions
How the Fund is Managed
Performance of the Fund
A B O U T Y O U R A C C O U N T
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Class Y Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
How to Sell Shares
By Mail
By Telephone
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
A-1 Appendix A: Special Sales Charge Arrangements for
Shareholders of the Fund Who Were Shareholders of the
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Former Quest for Value Funds
B-1 Appendix B: CFTC Exemption For Qualifying Hybrid
Instruments
C-1 Appendix C: CFTC Exemption For Swap Transactions
<PAGE>
A B O U T T H E F U N D
Expenses
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services, and those
expenses are subtracted from the Fund's assets to calculate the Fund's net asset
values per share. All shareholders therefore pay those expenses indirectly.
Shareholders pay other expenses directly, such as sales charges and account
transaction charges. The following tables are provided to help you understand
your direct expenses of investing in the Fund and your share of the Fund's
business operating expenses that you might expect to bear indirectly. The
numbers below are based on the Fund's expenses (unaudited) for the fiscal period
March 31, 1997 (commencement of operations) to August 31, 1997.
o Shareholder Transaction Expenses are charges you pay when you buy or
sell shares of the Fund. Please refer to "About Your Account," starting on page
__, for an explanation of how and when these charges apply.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Class A Class B Class C Class Y
Shares Shares Shares Shares
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Maximum Sales Charge 5.75% None None None
on Purchases (as a % of
offering price)
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Maximum Deferred Sales None(1) 5% in the fi1% if sharesNone
Charge (as a % of the year, declinare redeemed
lower of the original to 1% in thewithin 12
offering price or sixth year amonths of
redemption proceeds) eliminated purchase(2)
thereafter(2)
-------------------------------------------------------------------------------------
Maximum Sales Charge on None None None None
Reinvested Dividends
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Exchange Fee None None None None
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Redemption Fee None None None None
</TABLE>
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1. If you invest $1 million or more ($500,000 or more for purchases by
"Retirement Plans," as defined in "Class A Contingent Deferred Sales Charge" on
page __) in Class A shares, you may have to pay a sales charge of up to 1% if
you sell your shares within 12 calendar months (18 months for shares purchased
prior to May 1, 1997) from the end of the calendar month during which you
purchased those shares. See "How to Buy Shares - Buying Class A Shares," below.
2. See "How to Buy Shares - Buying Class B Shares" and "How to Buy
Shares - Buying Class C Shares" below, for more information on the
contingent deferred sales charges.
o Annual Fund Operating Expenses are paid out of the Fund's assets and
represent the Fund's expenses in operating its business. For example, the Fund
pays management fees to its investment advisor, OppenheimerFunds, Inc. ("OFI" or
the "Advisor") and OFI pays the Subadvisor, Oppenheimer Real Asset Management,
Inc. (which is referred to in this Prospectus as the "Manager"), a fee for
managing the assets of the Fund. The rates of OFI's and Manager's fees are set
forth in "How the Fund is Managed," below. The Fund has other regular expenses
for services, such as transfer agent fees, custodial fees paid to the bank that
holds its portfolio securities, audit fees and legal expenses.
The actual expenses for each class of shares in future years may be more
or less than the numbers in the chart, depending on a number of factors,
including the actual value of the Fund's assets represented by each class of
shares.
Annual Fund Operating Expenses (as a Percentage of Average Net
Assets)
<TABLE>
<CAPTION>
Class A Class B Class C Class Y
Shares Shares Shares Shares
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<S> <C> <C> <C> <C>
Management Fees 1.00% 1.00% 1.00% 1.00%
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12b-1 Distribution Plan Fees 0.25% 1.00% 1.00% None
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Other Expenses 0.49% 0.56% 0.56% 0.57%
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Total Fund Operating Expenses 1.74% 2.56% 2.56% 1.57%
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</TABLE>
The numbers in the table above are based upon the Fund's expenses (unaudited)
for the fiscal period March 31, 1997 (commencement of operations) to August 31,
1997. The amounts are shown as a percentage of the average net assets of each
class of the Fund's shares for that fiscal period. The 12b-1 Distribution Plan
Fees for Class A shares are service plan fees (the maximum fee is 0.25% of
average annual net assets of that class). For Class B and Class
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C shares, the 12b-1 Distribution Plan Fees are the service fee (the maximum fee
is 0.25% of average annual net assets of the respective class) and the
asset-based sales charge of 0.75% of average annual net assets of the respective
class. These plans are described in greater detail in "How to Buy Shares."
o Examples. To try to show the effect of these expenses on an investment
over time, we have created the hypothetical examples shown below. Assume that
you make a $1,000 investment in each class of shares of the Fund, and that the
Fund's annual return is 5%, and that its operating expenses for each class are
the ones shown in the Annual Fund Operating Expenses table above. If you were to
redeem your shares at the end of each period shown below, your investment would
incur the following expenses by the end of 1 and 3 years:
1 year 3 years
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Class A Shares $74 $109
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Class B Shares $76 $110
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Class C Shares $36 $80
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Class Y Shares $16 $50
If you did not redeem your investment, it would incur the following expenses:
1 year 3 years
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Class A Shares $74 $109
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Class B Shares $26 $80
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Class C Shares $26 $80
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Class Y Shares $16 $50
In the first example, expenses include the Class A initial sales charge and the
applicable Class B or Class C contingent deferred sales charge. In the second
example, Class A expenses include the initial sales charge, but Class B and
Class C expenses do not include contingent deferred sales charges. Because of
the asset-based sales charge and the contingent deferred sales charge imposed on
Class B and Class C shares, long-term holders of Class B and Class C shares
could pay the economic equivalent of more than the maximum front-end sales
charge allowed under applicable regulations. For Class B shareholders, the
automatic conversion of Class B shares to Class A shares is designed to minimize
the likelihood that this will occur. Please refer to "How to Buy Shares - Buying
Class B Shares" for more information.
These examples show the effect of expenses on an investment,
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but are not meant to state or predict actual or expected costs or
investment returns of the Fund, all of which may be more or less
than those shown.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below, with references
to the section of this Prospectus where more complete information can be found.
You should carefully read the entire Prospectus before making a decision about
investing in the Fund. Keep the Prospectus for reference after you invest,
particularly for information about your account, such as how to sell or exchange
shares.
o What Is The Fund's Investment Objective? The Fund's
investment objective is to seek total return.
o What Does the Fund Invest In? The Fund seeks to outperform traditional
equity and debt securities during adverse economic conditions. The Fund invests
primarily in Hybrid Instruments, futures contracts, options, forward contracts,
swaps, investment grade bonds, money market instruments, and U.S. Government
securities. A Hybrid Instrument is a derivative instrument whose value is
derived from, or linked to, the value of another source, such as a commodity, a
futures contract, an index or some other economic variable. The Fund may also
invest in domestic and foreign equity securities and real estate investment
trusts ("REITs"), and may invest up to 10% of its total assets in high yield,
lower-rated debt obligations ("junk bonds"). The Hybrid Instruments the Fund
purchases have values based on a commodity, a futures contract, an index, or
another readily measurable economic variable.
o Who Manages the Fund? The Fund's investment advisor is OppenheimerFunds,
Inc. ("OFI" or the "Advisor"). The Fund also has a subadvisor (the "Manager")
which is Oppenheimer Real Asset Management, Inc. The Manager is a wholly owned
subsidiary of OFI. OFI, along with a subsidiary, manages investment company
portfolios having over $70 billion in assets at June 30, 1997. The Manager is
responsible for the day-to-day management of the Fund's investments. The Advisor
and the Manager are paid advisory fees by the Fund, based on the Fund's net
assets. The Fund has two portfolio managers, Russell Read and Mark Anson, who
are employed by the Advisor and the Manager. They are primarily responsible for
the selection of the Fund's investments. The Fund's Board of Trustees oversees
the Manager and the portfolio managers. Please refer to "How the Fund is
Managed," starting on page __ for more information about the Manager and its
fees.
While the Advisor and the Manager have considerable experience
investing in currency-linked, index-linked, equity-linked and
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interest rate-linked Hybrid Instruments, they have limited
experience investing in commodity-linked Hybrid Instruments. See
"Risk Factors - Skill of the Manager."
o How Risky is the Fund? While different types of investments have risks
that differ in type and magnitude, all investments carry risk to some degree.
Changes in overall market movements or interest rates, or factors affecting a
particular industry, commodity, or issuer, can affect the value of the Funds'
investments and the Fund's net asset values per share. Fixed- income investments
are generally subject to credit risk and the risk that values will fluctuate
with changes in interest rates, with lower-rated, fixed-income investments being
subject to a greater risk that the issuer will default in its interest or
principal payment obligations. Hybrid Instruments, futures contracts and related
options, forward contracts and swaps may be quite volatile and suffer a loss of
principal. See "Risk Factors Hybrid Instruments," below. Hedging instruments
involve certain risks, as discussed under "Futures Contracts, Options, and Other
Derivative Instruments."
In the Oppenheimer funds spectrum, the Fund is generally considered to be
a more aggressive fund. The Fund is expected to have a higher risk/return
profile than the other Oppenheimer funds. This is because the Fund invests in
Hybrid Instruments, futures contracts and swaps, which are subject to greater
volatility and have various additional special risks.
The Fund may invest in instruments that involve leverage. For instance,
the Fund may invest in Hybrid Instruments with a leverage factor up to 300%.
Leverage can increase the return received from a Hybrid Instrument, but at the
same time, increase the risk of loss from the Hybrid Instrument. See "Some
Hybrid Instruments Involve Leverage" and "Risk Factors - Volatility of Hybrid
Instruments."
While the Manager may attempt to reduce some risks by investing across
financial and commodity markets, and by carefully researching investments before
they are purchased for the portfolio, and in some cases by using hedging
techniques, the Manager expects the Fund's per share net asset value to be
highly volatile. There is no guarantee of success in achieving the Fund's
objective and your shares may be worth more or less than their original cost
when you redeem them. Please refer to "Risk Factors" starting on page __ for a
more complete discussion of the Fund's investment risks.
The Fund is "non-diversified," which means, under Federal securities laws,
that it is not limited in the amount it may invest in any one security. An
investment in the Fund will therefore entail greater risk than an investment in
a diversified investment company because a higher percentage of investments
among fewer issuers may result in greater exposure to a smaller number of
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<PAGE>
issuers, greater fluctuation in the total market value of the Fund's portfolio,
and economic, political or regulatory developments may have a greater impact on
the value of the Fund's portfolio than would be the case if the portfolio were
diversified among more issuers.
o How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic Investment
Plan under AccountLink. Please refer to "How to Buy Shares" on page __ for more
details.
o Will I Pay a Sales Charge to Buy Shares? The Fund has four classes of
shares. Each class of shares has the same investment portfolio but different
expenses. Class A shares are offered with a front-end sales charge, starting at
5.75%, and reduced for larger purchases. Class B and Class C shares are offered
without a front-end sales charge, but may be subject to a contingent deferred
sales charge if redeemed within 6 years or 12 months of purchase, respectively.
There is also an annual asset-based sales charge on Class B shares and Class C
shares. Class Y shares are offered at net asset value without sales charge only
to certain institutional investors. Please review "How To Buy Shares" starting
on page __ for more details, including a discussion about factors you and your
financial advisor should consider in determining which class of shares may be
appropriate for you.
o How Can I Sell My Shares? Shares can be redeemed by mail or by telephone
call to the Transfer Agent on any business day, or through your dealer. Please
refer to "How to Sell Shares" on page __. The Fund also offers exchange
privileges to other Oppenheimer funds, described in "How to Exchange Shares" on
page __.
Investment Objective and Philosophy
Investment Objective. The Fund seeks to provide total return. The Fund's
investment objective is fundamental and can be changed only with the approval of
shareholders. There can be no assurance that the Fund will meet its investment
objective. The Fund is subject to the investment restrictions described in this
Prospectus and in the Statement of Additional Information, some of which are
fundamental policies.
Investment Philosophy. The investment philosophy for the Fund is to create a
portfolio that the Manager believes should outperform investments in traditional
equity and fixed income securities ("traditional securities") during periods of
adverse economic conditions, when the value of traditional securities tends to
decline. During "bull markets," when the value of traditional securities tends
to increase, the Manager expects the Fund's investments to underperform an
investment in traditional securities. For this reason an investment in the Fund
should not be the sole source of investment for a shareholder. Rather, an
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investment in the Fund should complement an investor's total portfolio and
thereby offer greater potential diversification and return benefits.
During the period 1970 through 1996, the correlation between the quarterly
investment returns of commodities and the quarterly investment returns of
traditional financial assets such as stocks and bonds has generally been
negative. That is, as financial assets increase in value, the value of
commodities tends to decrease in value. This inverse relationship occurred
generally because commodities have historically tended to increase and decrease
in value during different parts of the business cycle than financial assets.
Nevertheless, at various times, commodities prices may move in tandem with the
prices of financial assets and thus negate any potential diversification
benefits. In fact, during 1995 and 1996 commodities prices have generally not
been negatively correlated with financial assets. If this positive correlation
continues, the diversifying benefits of the Fund in an investor's portfolio may
not come to fruition.
For example, a portfolio consisting of traditional securities has tended
to decline during periods of increasing interest rates and inflation. During
such periods, the value of certain commodities, such as oil and metals, has
tended to increase. Conversely, during periods of low inflation and moderate
economic growth, financial assets have tended to increase in value more than
commodities.
The success of the Manager's investment strategy depends, among other
things, upon the Manager's analysis of financial and commodity market conditions
and its ability to predict which investments will outperform traditional
securities. To the extent that the Manager is successful, investors in the Fund
may achieve investment results that outperform a portfolio of traditional
securities during adverse economic conditions. To the extent, however, that the
Manager is not successful, investors in the Fund may achieve investment results
that underperform a portfolio of traditional securities, even during adverse
economic conditions. Also, the Fund should underperform traditional securities
during favorable economic conditions.
While personnel of the Advisor and the Manager have considerable
experience in investing in traditional securities, they have only limited
experience in investing in commodity-linked Hybrid Instruments, commodity
futures and related options, forward contracts and commodity swaps. The
commodities markets and instruments related to the commodities market may be
subject to additional special risks that do not affect traditional securities.
See "Risks - Skill of the Manager," and "Risks - Commodity Futures Contracts."
Investment Policies and Strategies. The Fund's investment policies
and strategies are described in the sections that follow.
o Can the Fund's Investment Objective and Policies Change?
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The Fund has the investment objective, described above, as well as investment
policies it follows to try to achieve its objective. Additionally, the Fund uses
certain investment techniques and strategies in carrying out those policies. The
Fund's investment policies are not "fundamental" unless this Prospectus or the
Statement of Additional Information says that a particular policy is
"fundamental." The Fund's investment objective is a fundamental policy.
Fundamental policies are those that cannot be changed without the approval
of a "majority" of the Fund's outstanding voting shares. The term "majority" is
defined in the Investment Company Act of 1940 (the "1940 Act") to be a
particular percentage of outstanding voting shares (and this term is explained
in the Statement of Additional Information). The Fund's Board of Trustees may
change non-fundamental policies without shareholder approval, although
significant changes will be described in amendments to this Prospectus or the
Statement of Additional Information.
o Non-Diversification. The Fund is classified as a "non-diversified"
investment company under the 1940 Act, and the proportion of the Fund's assets
that may be invested in the securities of a single issuer is not limited by the
"diversification" requirements of the 1940 Act. An investment in the Fund will
therefore entail greater risk than an investment in a diversified investment
company because a higher percentage of investments among fewer issuers may
result in greater exposure to a smaller number of issuers, greater fluctuation
in the total market value of the Fund's portfolio, and economic, political or
regulatory developments may have a greater impact on the value of the Fund's
portfolio than would be the case if the portfolio were diversified among more
issuers. The Fund, however, intends to qualify as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code"). Generally, to qualify as a regulated investment company, the
Fund intends to limit its investments so that at the end of each quarter, (1)
the Fund will invest no more than 25% of its total assets in the securities of a
single issuer, and (2) with respect to at least 50% of its total assets, the
Fund will not (a) invest more than 5% of its total assets in the securities of a
single issuer, and (b) acquire more than 10% of the outstanding voting
securities of a single issuer.
How the Fund Pursues Its Investment Objective.
The Fund will invest at least 65% of its total assets in Hybrid Instruments,
futures contracts, options, forward contracts, swaps, investment grade bonds,
money market instruments, and U.S. Government securities. The Fund may also
invest in domestic and foreign equity securities and real estate investment
trusts ("REITs") and may invest up to 10% of its total assets in high yield,
lower-rated debt securities ("junk bonds").
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The Manager might not use all of these instruments or all of these
investment strategies to the full extent permitted unless it believes doing so
will help the Fund achieve its investment objective.
o Hybrid Instruments.
o Hybrid Instruments are "derivative" instruments.
A Hybrid Instrument is a derivative instrument whose value is derived
from, or linked to, the value of another source, typically a commodity, a
futures contract, an index or some other readily measurable economic variable.
The Hybrid Instruments in which the Fund invests may include, but are not
limited to, debt instruments with principal and/or coupon payments linked to the
value of commodities, commodity futures contracts, or the performance of
commodity indexes, such as the Goldman Sachs Commodity Index (the "GSCI").
Although the Fund will be economically exposed to commodity prices, the
predominant characteristic of each Hybrid Instrument is expected to be that of a
debt obligation. The Fund may invest in Hybrid Instruments where the principal
is protected completely, partially or not at all.
The Hybrid Instruments in which the Fund expects to invest are typically
structured as follows:
o Issuers of Hybrid Instruments. Hybrid Instruments may be issued by
banks, brokerage firms, insurance companies and corporations. Except as
described below, the Fund will not invest 25% or more of its total assets in
Hybrid Instruments and securities issued by companies in any one industry.
However, the Fund will invest 25% or more of its total assets in securities,
Hybrid Instruments and other instruments including futures and forward
contracts, related options, and swaps linked to the energy and natural
resources, agriculture, livestock, industrial metals, and precious metals
industries. In addition, the Fund may invest collectively more than 25% of its
total assets in Hybrid Instruments and securities issued by companies in the
financial services sector (which includes, for instance, the banking, brokerage
and insurance industries).
o Hybrid Instruments will be linked to the commodity markets. Hybrid
Instruments in which the Fund may invest are structured so that part of their
return is derived from, or linked to, an underlying commodity, commodity index,
futures contract, or another readily measurable economic variable. Consequently,
at maturity of the note, the Fund may receive back more or less of its invested
principal, or more or less of its stated coupon payment, depending on the
performance of the underlying commodity, index, futures contract, or economic
variable. For instance, the Fund may invest in Hybrid Instruments linked to the
GSCI which not only increase in value when the GSCI increases in value, but may
also decrease in value if the GSCI declines in value. See "Hybrid Instruments
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without principal protection," below.
o Hybrid Instruments with principal protection. The Fund may invest in
Hybrid Instruments that have principal protection. With full principal
protection, the Fund will receive at maturity of the Hybrid Instrument either
the stated par value of the Hybrid Instrument, or potentially, an amount greater
than the stated par value if the underlying commodity, index, futures contract
or economic variable to which the Hybrid Instrument is linked has increased in
value. Partially protected Hybrid Instruments may suffer some loss of principal
if the underlying commodity, index, futures contract or economic variable to
which the Hybrid Instrument is linked declines in value during the term of the
Hybrid Instrument. However, partially protected Hybrid Instruments have a
specified limit as to the amount of principal that they may lose.
o Hybrid Instruments without principal protection. The Fund may also
invest in Hybrid Instruments that offer no principal protection. At maturity,
there is a risk that the underlying commodity price, futures contract, index or
other economic variable may have declined sufficiently in value such that some
or all of the face value of the Hybrid Instrument might not be returned. Some of
the Hybrid Instruments that the Fund may invest in may have no principal
protection and the Hybrid Instrument could lose all of its value. To limit this
exposure, the Fund does not expect that it will invest more than 25% of its
total assets in Hybrid Instruments where the potential loss to the Hybrid
Instrument under its terms, either at redemption or maturity, exceeds 50% of its
face value (as calculated at the time of investment).
o Some Hybrid Instruments involve economic leverage.
Generally, economic leverage exists when an investor achieves the right to
a return on a capital base that exceeds the return on the investment that the
investor has personally contributed to the entity or instrument achieving a
return. Borrowing money is considered a traditional form of leverage, because
the borrower can use the additional money to increase exposure to a particular
investment. Some Hybrid Instruments in which the Fund may invest involve a
degree of leverage. The Manager, however, believes that the leverage risks
involved in Hybrid Instruments are economic in nature, and do not constitute
leverage in the traditional sense because, among other things, the Fund does not
borrow money to purchase the Hybrid Instruments and the Fund's risk of loss on a
Hybrid Instrument is limited to the amount of the Fund's investment in the
Hybrid Instrument.
For example, a Hybrid Instrument linked to the value of a commodity index
may return income calculated as a multiple of the price movement of the
underlying index. For instance, a Hybrid Instrument with a leverage factor of
1.5 will increase in value by 1.5% for every 1% increase in the underlying
index. Therefore, at maturity, if the underlying index has increased by 10%, the
Hybrid Instrument would pay the full principal value plus 15% of the
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principal value. However, if the Hybrid Instrument is not
principal protected and the underlying index declines by 10%, the
Hybrid Instrument would pay only 85% of its principal at maturity.
Therefore, economically leveraged Hybrid Instruments can increase
the gain or the loss associated with an underlying commodity,
index, futures contract or economic variable. See "Risk Factors -
Volatility of Hybrid Instruments."
The Fund has established certain limitations to ensure that it
is not subject to undue leverage risk. See "Limitations on Hybrid
Instruments - Limitations on leverage," below.
o Limitations on Hybrid Instruments.
Maturity. The Fund does not intend to invest more than 10% of its total
assets, determined at the time of investment, in Hybrid Instruments with a
maturity greater than 19 months.
Principal protection. The Fund does not expect that it will invest more
than 25% of its total assets, in Hybrid Instruments where, under the terms of
the Hybrid Instrument, the risk of loss of principal, upon either redemption or
maturity, exceeds 50% of the principal value of the Hybrid Instrument
(calculated at the time of investment).
Qualifying Hybrid Instruments. The Fund will invest in Hybrid Instruments
that qualify for the exemption from regulation by the Commodity Futures Trading
Commission. See Appendix B of this prospectus for a description of Qualifying
Hybrid Instruments. The Fund shall determine at the time of investment that such
investments are qualifying Hybrid Instruments. Additionally, the Fund may invest
from time to time in non-qualifying Hybrid Instruments to the extent permitted
by applicable law. The Fund may invest up to 100% of its total assets in
Qualifying Hybrid Instruments.
Limitations on leverage. The Fund will seek to limit the amount of
economic leverage with respect to any one Hybrid Instrument in which it invests
as well as the leverage of the Fund's overall portfolio. The Fund will not
engage in a transaction involving a Hybrid Instrument if, at the time of
purchase, (a) that Hybrid Instrument's "leverage ratio" exceeds 300% of the
price increase in the underlying commodity, futures contract, index or other
economic variable; or (b) the Fund's "portfolio leverage ratio" exceeds 150%,
measured at the time of purchase. "Leverage ratio" is defined as the expected
increase in the value of a Hybrid Instrument, assuming a one percent price
increase in the underlying commodity, futures contract, index or other economic
factor. In other words, for a Hybrid Instrument with a leverage factor of 150%,
a 1% gain in the underlying economic variable would be expected to result in a
1.5% gain in value for the Hybrid Instrument. "Portfolio leverage ratio" is
defined as the average (mean) leverage ratio of all instruments in the Fund's
portfolio, weighted by the market values of such instruments or, in the case of
futures contracts, their notional
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values.
|X| Commodity Futures Contracts. The Fund may buy and sell
commodity futures contracts to the fullest extent permissible by
law. The Fund may purchase and sell commodity futures contracts
for a number of purposes described below. See "Futures Contracts,
Options and Other Derivative Instruments."
o Futures Contracts, Options and Other Derivative Instruments. In order to
increase its investment return, to manage its exposure to changing interest
rates, commodity prices, securities prices, currency exchange rates and other
economic variables or, for other investment purposes, the Fund may engage in
several strategies involving various derivative instruments.
The Fund may buy and sell options, futures and forward contracts for a
number of purposes. It may do so to try to manage its exposure to the
possibility that the prices of its portfolio securities and instruments may
decline, or to establish a position in the futures or options market as a
temporary substitute for purchasing individual securities or instruments. It may
do so in an attempt to enhance its income or return by purchasing and selling
call and put options on commodity futures, commodity indices, financial indices
or securities. It may also use certain types of derivative instruments to try to
manage its exposure to changing interest rates.
The Fund expects to engage in futures and options transactions primarily
in five main commodity groups: (1) energy, which includes crude oil, natural
gas, gasoline and heating oil; (2) livestock, which includes cattle and hogs;
(3) agriculture, which includes wheat, corn, soybeans, cotton, coffee, sugar and
cocoa; (4) industrial metals, which includes aluminum, copper, lead, nickel, tin
and zinc; and (5) precious metals, which includes gold, platinum and silver. The
Fund may purchase and sell commodity futures contracts, options on futures
contracts and options and futures on commodity indices with respect to these
five main commodity groups and the individual commodities within each group, as
well as other types of commodities.
The Fund may also transact in other commodity or financial futures if it
believes that doing so may be advantageous to the Fund's shareholders, including
futures contracts and options relating to (1) foreign currencies (these are
Forward Contracts), (2) financial indices, such as U.S. or foreign government
securities indices, corporate debt securities indices or equity securities
indices (these are referred to as Financial Futures), (3) interest rates (these
are referred to as Interest Rate Futures), and (4) commodities (these are
referred to as commodity futures). These types of futures contracts are
described in the Statement of Additional Information.
The Fund may buy and sell exchange-traded and over-the-counter options,
including index options, commodities options, currency
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options, interest rate options, and options on foreign securities, and may
invest in futures contracts and related options with respect to commodities,
foreign currencies, fixed income securities, and foreign stock indices.
When the Fund writes a call option, it gives the purchaser the right, but
not the obligation, to buy a particular security at a set price within a set
time. The Fund receives income from the premium paid by the purchaser. The calls
are "covered," which means that the Fund owns the securities that are subject to
the call. There is no limit on the amount of the Fund's total assets that may be
subject to covered calls.
When the Fund writes a put option, it gives the purchaser the right, but
not the obligation, to require the Fund to buy a particular security at a set
price within a set time. Writing puts requires the segregation of liquid assets
by the Fund to cover the put with no more than 50% of the Fund's total assets
subject to written puts.
o Futures Contracts. When the Fund sells a futures contract it obligates
itself to deliver at a specified date a specified quantity of a commodity at a
specified price. In practice, only a very small percentage of all futures
contracts result in actual delivery of the underlying contract. Generally, the
Fund expects to satisfy or offset its delivery obligations by taking an equal,
but opposite position in the futures markets in the same commodity.
o Forward Currency Contracts. The Fund may invest in Forward Currency
Contracts which are used to buy or sell foreign currency for future delivery at
a fixed price. The Fund may use them to try to "lock in" the U.S. dollar price
of a security denominated in a foreign currency that the Fund has purchased or
sold, or to protect against possible losses from changes in the relative value
of the U.S. dollar and a foreign currency. The Fund may also use "cross
hedging," where the Fund seeks to hedge against changes in currencies other than
the currency in which a security it holds is denominated. The use of Forward
Contracts may reduce the gain that would otherwise result from a change in the
relationship between the U.S. dollar and a foreign currency.
o Derivative instruments can be volatile instruments and may
generally involve special risks. Derivative instruments are
complicated investments and may require special knowledge and
expertise to effectively manage their risks and returns. See "Risk
Factors - Risks of Derivative Instruments."
o Hedging. The Fund may employ futures and forward contracts, options and
other derivative instruments as hedging instruments. The Fund may hedge to
attempt to protect against declines in the market value of its portfolio or to
permit the Fund to retain unrealized gains in the value of its portfolio
investments. For more information on the Fund's hedging activities, see
"Hedging" in the Statement of Additional Information.
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<PAGE>
o Short Sales "Against-the-Box". The Fund may not sell securities short
except in collateralized transactions referred to as short sales
"against-the-box." No more than 15% of the Fund's net assets will be held as
collateral for such short sales at any one time.
o Swaps.
o Swaps are customized agreements. Swaps are customized agreements between
two parties to exchange or swap cash flows or assets at specified intervals in
the future. A swap contract may be best described as a portfolio of forward
contracts, where one party agrees to exchange an asset (e.g. bushels of wheat)
for another asset (cash) at specified dates in the future. A one period swap
contract operates similar to a forward or futures contract because there is an
agreement to swap wheat for cash at only one forward date. The Fund may engage
in swap transactions that have more than one period and therefore, more than one
exchange of assets. The Fund may enter into swap transactions whose terms and
obligations extend beyond one year.
o Swaps are derivative instruments. The Fund expects to commit a portion
of its net assets to total return swaps on commodity prices, futures contracts,
the GSCI, components of the GSCI, other commodity indices, or other readily
measurable economic variables. A total return swap gives the Fund the right to
receive the appreciation in value of an underlying asset in return for paying a
fee to the swap counterparty. The fee paid by the Fund will typically be
determined by multiplying the face value of the swap agreement by an agreed upon
interest rate. If the underlying asset declines in value over the term of the
swap, the Fund would be required to pay to the counterparty the dollar value of
this decline in addition to its fee payments.
o Qualifying Swap Transactions. Similar to Qualifying Hybrid
Instruments, the Fund intends to invest only in Qualifying Swap
Transactions. Qualifying Swap Transactions are exempt from
regulation by the Commodity Futures Trading Commission under the
Commodity Exchange Act. Qualifying Swap Transactions are described
in more detail in Appendix C of this Prospectus.
o U.S. Government Securities. The Fund's investments in U.S.
Government securities may include, but are not limited to, the
following:
o U.S. Government Obligations. These are securities issued or
guaranteed by the U.S. Government or its agencies or
instrumentalities. U.S. Treasury notes, bills and bonds are backed
by the full faith and credit of the U.S. government. Some U.S.
government agency securities are backed by the full faith and
credit of the U.S. government (for example,"Ginnie Maes"). Others
are supported by the right of the agency to borrow an amount from
the U.S. government limited to a specific line of credit (for
example, "Fannie Maes"). Others are supported only by the credit
of the agency that issued the security (for example, "Freddie
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Macs").
o Zero Coupon Securities. These securities, which may be issued by the
U.S. government, or its agencies or instrumentalities, are purchased by the Fund
at a substantial discount from their face value. They are subject to greater
fluctuations in market value as interest rates change than debt securities that
pay interest periodically. For financial and tax purposes, interest accrues on
zero coupon bonds even though cash is not actually received by the Fund.
o Mortgage-Backed Securities and CMOs. The Fund may invest in securities
issued by the U.S. Government or its agencies or instrumentalities that
represent an interest in a pool of mortgage loans. See "U.S. Government
Mortgage-Backed Securities and CMOs," below.
o Investment Grade Bonds. The Fund may invest in investment grade debt
obligations rated in the four highest investment categories by Standard & Poor's
Corporation, Moody's Investor Services, Inc., or by another nationally
recognized statistical rating organization ("NRSRO") or, if unrated, considered
by the Manager to be of similar quality. These investments may include:
o Corporate Bonds. The Fund may invest in debt securities
issued by domestic corporations.
o International Bonds. The Fund may invest in international bonds,
including debt securities denominated in currencies other than the U.S. dollar.
Generally, these securities are issued by foreign corporations and foreign
governments and are traded on foreign markets. Investment in international debt
securities that are denominated in foreign currencies involve certain additional
risks, which are described in the Statement of Additional Information.
o Asset-Backed Securities. Asset-backed securities represent interests in
pools of assets such as receivables from credit card loans and automobile loans
and other trade receivables. Asset- backed securities may be supported by a
credit enhancement, such as a letter of credit, a guarantee or a preference
right. However, the extent of the credit enhancement may be different for
different securities and generally applies to only a fraction of the security's
principal amount. Prepayments on the underlying receivables may reduce the
return on asset-backed securities.
o Participation Interests. Participation interests are
interests in loans made to U.S. or foreign companies or to foreign
governments. These interests are typically acquired from banks or
brokers that have made the loan or are members of the lending
syndicate. No more than 5% of the Fund's net assets may be
invested in participation interests of the same borrower.
The Manager has set certain creditworthiness standards for
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issuers of loan participations, and monitors their creditworthiness. The value
of loan participation interests depends primarily upon the creditworthiness of
the borrower, and its ability to pay interest and principal. Borrowers may have
difficulty making payments. If a borrower fails to make scheduled interest or
principal payments, the Fund could experience a decline in the net asset value
of its shares. Some borrowers may have senior securities outstanding rated as
low as "C" by Moody's or "D" by S&P, but may be deemed acceptable credit risks.
Certain participation interests may be illiquid and are subject to the Fund's
limitations on investments in illiquid securities. See "Illiquid and Restricted
Securities".
o U.S. Government Mortgage-Backed Securities and CMOs. The Fund may invest
in securities that represent an interest in a pool of residential mortgage
loans. These include collateralized mortgage-backed obligations (referred to as
"CMOs") issued by the U.S. Government, or its agencies or instrumentalities
(Ginnie Mae, Fannie Mae, or Freddie Mac). The issuer's obligation to make
interest and principal payments on a mortgage-backed security is secured by the
underlying portfolio of mortgages or mortgage-backed securities. Prepayments on
the underlying mortgages are an important element of mortgage backed securities
and may result in a gain or loss to the Fund and may reduce the return on the
Fund's investments.
The Fund may invest in CMOs that are "stripped"; that is, the security is
divided into two parts, one of which receives some or all of the principal
payments and the other of which receives some or all of the interest. Stripped
securities that receive interest only are subject to increased volatility in
price due to interest rate changes and have the additional risk that if the
principal underlying the CMO is prepaid (which is more likely to happen if
interest rates fall), the Fund will lose the anticipated cash flow from the
interest on the mortgages that were prepaid. Stripped securities that receive
principal payments only are also subject to increased volatility in price due to
interest rate changes and have the additional risk that the security will be
less liquid during demand or supply imbalances. See "Mortgage-backed Securities"
in the Statement of Additional Information for more details.
o Private Label Mortgage-Backed Securities, CMOs and Zero Coupon Bonds.
The Fund may purchase mortgage-backed securities, CMOs and zero coupon bonds
sold by private issuers other than the U.S. Government, its instrumentalities or
its agencies. These private issuers are not backed or guaranteed by the U.S.
Government, and may pose greater credit risk than the U.S. Government, or its
instrumentalities or agencies.
o Money market instruments. The Fund may invest in money market
instruments, including U.S. Government obligations, certificates of deposit,
banker's acceptances, bank deposits, other financial institution obligations,
commercial paper and other short-term commercial obligations. These include time
deposits,
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certificates of deposit and bankers acceptances of a domestic or foreign bank
with total assets of at least U.S. $1 billion. These instruments may also
include instruments that have variable interest rates which, in the opinion of
the Manager, are expected to maintain a value at or close to the face value of
the instrument. The Fund may keep a portion of its assets in cash.
Other Investments.
Under normal market conditions, the Fund may also invest up to 35% of its total
assets in the following securities and instruments:
o High Yield Securities. The Fund may invest in high-risk, high yield,
lower-rated debt securities ("junk bonds"). Junk bonds carry more credit risk
and are rated "BB" or below by S&P or "Ba" or below by Moody's, or have a
similar credit risk rating by another NRSRO or, if unrated, considered by the
Manager to be of comparable quality. High yield securities are considered more
risky than investment grade bonds because there is greater uncertainty regarding
the economic viability of the issuer. The Fund will not invest more than 10% of
its total assets in high yield, lower-rated securities and comparable unrated
securities. The Fund may invest in securities rated as low as "D" by S&P. See
"High Yield Securities - Special Risks."
o Portfolio Turnover. A change in the assets and securities held by the
Fund is known as "portfolio turnover." The Fund will actively trade short-term
instruments whose values are linked to an underlying commodity, futures
contract, index or other economic variable. Consequently, the Fund may have a
high portfolio turnover rate. High portfolio turnover (100% or more) may affect
the ability of the Fund to qualify as a "regulated investment company" under the
Internal Revenue Code for tax deductions for dividends and capital gains paid to
Fund shareholders. Portfolio turnover also affects brokerage costs, dealer
mark-ups and other transaction costs.
The Fund will not generally exceed a turnover rate of three times (300%).
Although the Fund may have a high turnover ratio due to the short term nature of
its investments, the Fund does not expect its brokerage expenses to be
excessive. This is because the Fund will purchase many of its investments
directly from dealers rather than through brokers. Additionally, because of the
short term nature of the Fund's investments, the Fund expects to generate short
term taxable gains which will be included in its gross income.
o Board-Approved Instruments. The Fund may invest in other instruments
(including new instruments that may be developed in the future) that the Fund's
Board of Trustees determines are consistent with the Fund's investment objective
and investment policies.
Other Investment Techniques and Strategies. The Fund may also use
the investment techniques and strategies described below. These
techniques and strategies involve certain additional risks. The
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Statement of Additional Information contains more information about these
techniques and strategies, including limitations on their use that may help to
reduce some of the risks.
o Special Risks - Borrowing. As a fundamental policy the Fund may borrow
money in an amount up to 33.33% of its total assets from banks. Such borrowing
may be used to fund shareholder redemptions or for other purposes. The Fund will
borrow only if it can do so without putting up assets as security for a loan.
Borrowing may subject the Fund to greater risks and costs than funds that do not
borrow. These risks may include the possible reduction of income and increased
fluctuation in the Fund's net asset value per share, since the Fund pays
interest on its borrowings.
o When-Issued and Delayed Delivery Transactions. The Fund may purchase
securities on a "when-issued" basis, and may purchase or sell such securities on
a "delayed delivery" basis. These terms refer to securities whose terms and
indenture are available and for which a market exists, but which are not
available for immediate delivery. The Fund does not intend to make such
purchases for speculative purposes. During the period between the purchase and
settlement, no payment is made for the security and no interest accrues to the
buyer from the investment. There may be a risk of loss if the value of the
security changes prior to the settlement date and there is the risk that the
other party may not perform. The Fund may "roll" these transactions by selling
the when-issued security before settlement date and simultaneously purchasing
another substantially similar when-issued security.
o Repurchase Agreements. The Fund may enter into repurchase agreements.
They are primarily used by counterparties for liquidity. In a repurchase
transaction, the Fund buys a security and simultaneously sells it to the seller
for delivery at a future date. Repurchase agreements must be fully
collateralized. However, if the seller fails to pay the resale price on the
delivery date, the Fund may incur costs in disposing of the collateral and may
experience losses if there is any delay in its ability to do so. If the default
on the part of the seller is due to insolvency and the seller initiates
bankruptcy proceedings, the ability of the Fund to liquidate the collateral may
be delayed or limited.
o Reverse Repurchase Agreements. The Fund may also enter into reverse
repurchase agreements where the Fund sells securities to a buyer and
simultaneously agrees to buy back the securities from the buyer at a future
date. Reverse repurchase agreements are a form of borrowing by the Fund.
o Forward roll transactions. The Fund may enter into "forward roll"
transactions with banks or other buyers that provide for future delivery to the
Fund of the mortgage-backed securities in which the Fund may invest. The Fund
would be required to place liquid securities in a segregated account with its
custodian bank in an amount equal to its purchase payment obligation under the
roll.
When the Fund engages in forward roll transactions, it relies
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on the buyer or seller as the case may be, to consummate the transaction.
Failure of the buyer or seller to do so may result in the Fund losing the
opportunity to obtain a price and yield considered to be advantageous.
o Illiquid and Restricted Securities. Under the policies and procedures
established by the Fund's Board of Trustees, the Advisor determines the
liquidity of certain of the Fund's investments. Investments may be illiquid
because of the absence of an active trading market, making it difficult to value
them or dispose of them promptly at an acceptable price. A restricted security
is one that has a contractual restriction on its resale or which cannot be sold
publicly until it is registered under the Securities Act of 1933. The Fund will
not invest more than 15% of its net assets in illiquid or restricted securities.
The Fund's percentage limitation on these investments does not apply to certain
restricted securities that are eligible for resale to qualified institutional
purchasers, such as securities purchased under Rule 144A of the Securities Act
of 1933. The Advisor monitors holdings of illiquid securities on an ongoing
basis and at times the Fund may be required to sell some holdings to maintain
adequate liquidity.
o Loans of Portfolio Securities. To attempt to generate income, the Fund
may lend its portfolio securities to brokers, dealers and other financial
institutions. The Fund must receive collateral for a loan. These loans are
limited to not more than one-third of the Fund's net assets and are subject to
other conditions described in the Statement of Additional Information. The Fund
presently does not intend to lend its portfolio securities, but if it does, the
value of securities loaned is not expected to exceed one-third of the value of
its total assets in the coming year.
Risk Factors
o Hybrid Instruments.
The Hybrid Instruments in which the Fund invests can involve substantial
risks, including risk of loss of a significant portion of principal.
o Risk of loss of interest. To the extent that payment of interest is
linked to the value of a particular commodity, futures contract, index or other
economic variable, the Fund, as the holder of a Hybrid Instrument, may not
receive all or a portion of interest on its investment.
o Risk of loss of principal. To the extent that the amount of
the principal to be repaid upon maturity is linked to the value of
a particular commodity, futures contract, index or other economic
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variable, the Fund, as holder of the Hybrid Instrument, may not receive all or a
portion of the principal. The Fund does not expect that it will invest more than
25% of its total assets in Hybrid Instruments where under the terms of the
Hybrid Instrument, the risk of loss of principal, upon either redemption or
maturity, exceeds 50% of the principal value of the Hybrid Instrument,
calculated at the time of investment. At any particular time, the risk
associated with any particular instrument in the Fund's portfolio may be
significantly higher than 50% risk of loss, particularly when a Hybrid
Instrument has appreciated significantly since its acquisition by the Fund.
o Lack of secondary market. The Hybrid Instruments that the Fund expects
to invest in may be created specifically for investment by the Fund. Therefore,
a liquid secondary market may not exist for these Hybrid Instruments, which may
adversely affect the ability of the Fund to sell them or to accurately value
them. See "Illiquid and Restricted Securities," above. However, to the extent
the Hybrid Instruments in which the Manager invests are linked to a readily
measurable commodity, futures contract, index, or economic variable, the
valuation of these instruments should be clearly priced to all financial market
participants which may increase their liquidity.
o Skill of the Manager. The success of the Fund in selecting Hybrid
Investments for its portfolio depends on the skill of the Manager in predicting
the movement of interest rates, the value of particular commodities and other
economic variables. There is no assurance that the Manager will accurately
predict these movements.
Additionally, OFI and the Manager have limited experience investing in
commodity-linked Hybrid Instruments. However, OFI, the parent company of the
Manager, does have considerable experience investing in currency-linked,
equity-linked and interest rate-linked Hybrid Instruments. To the extent there
are similarities among these instruments, the experience of OFI and the Manager
may be useful in selecting Hybrid Instruments for the Fund.
o Volatility of Hybrid Instruments. The value of the Hybrid Instruments in
which the Fund invests may fluctuate significantly because the values of the
underlying commodities, futures contracts, indexes or other economic variables
to which they are linked are themselves extremely volatile. Additionally,
economic leverage will increase the volatility of Hybrid Instruments as they may
increase or decrease in value more quickly than the underlying commodity, index,
futures contract, or economic variable.
o Counterparty risk. Hybrid Instruments are privately issued notes with
stated maturities. These securities may be issued by banks, broker-dealers or
corporations. Therefore, the Fund must accept the credit risk of the issuer's
performance at the maturity of the instrument. The Fund will attempt to limit
this risk, as best as possible, by transacting whenever possible with
counterparties who have an investment grade credit rating. Additionally, the
Fund may transact with counterparties who have a lower than investment grade
credit rating but have a Letter of
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Credit from a major money center bank or some other form of credit enhancement.
o Commodity Futures Contracts.
o Storage Costs. Similar to the financial futures markets, there are
hedgers and speculators in the commodity futures markets. However, unlike
financial instruments, there are costs of physical storage associated with
purchasing the underlying commodity. For instance, a large manufacturer of baked
goods that wishes to hedge against a rise in the price of wheat has two choices:
(i) it can purchase the wheat today in the cash market and store the commodity
at a cost until it needs the wheat for its manufacturing process, or (ii) it can
buy commodity futures contracts. The price of the commodity futures contract
will reflect the storage costs of purchasing the physical commodity. These
storage costs include the time value of money invested in the physical commodity
plus the actual costs of storing the commodity less any benefits from ownership
of the physical commodity that are not obtained by the holder of a futures
contract (this is sometimes referred to as the "convenience yield"). To the
extent that these storage costs change for an underlying commodity while the
Fund is long futures contracts on that commodity, the value of the futures
contract may change commensurately.
o Reinvestment Risk. In the commodity futures markets, if producers of the
underlying commodity wish to hedge the price risk of selling the commodity, they
will sell futures contracts today to lock in the price of the commodity at
delivery tomorrow. In order to induce speculators to take the corresponding long
side of the same futures contract, the commodity producer must be willing to
sell the futures contract at a price which is below the expected future spot
price. Conversely, if the predominate hedgers in the futures market are the
purchasers of the underlying commodity who purchase futures contracts to hedge
against a rise in prices, then speculators will only take the short side of the
futures contract if the futures price is greater than the expected future spot
price of the commodity.
The changing nature of the hedgers and speculators in the commodity
markets can determine whether futures prices are above or below the expected
future spot price. This can have significant implications for the Fund when it
is time to reinvest the proceeds from a maturing futures contract into a new
futures contract. If the nature of hedgers and speculators in futures markets
has shifted such that commodity purchasers are the predominate hedgers in the
market, the Fund might reinvest at higher futures prices or choose other related
commodity investments.
o Additional Economic Factors. The values of commodities which underlie
commodity futures contracts are subject to additional variables which may be
less significant to the values of traditional securities such as stocks and
bonds. Variables such as drought, floods, weather, livestock disease, embargoes
and tariffs may have a larger impact on commodity prices and commodity-linked
instruments, including futures contracts, Hybrid Instruments,
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commodity options and commodity swaps, than on traditional securities. These
additional variables may create additional investment risks which subject the
Fund's investments to greater volatility than investments in traditional
securities.
o Leverage. There is much greater leverage in futures trading than in
stocks. As a registered investment company, the Fund must pay in full for all
securities it purchases. In other words, the Fund is not allowed to purchase
securities on margin. However, the Fund is allowed to purchase futures contracts
on margin where the initial margin requirements are typically between 3 and 6
percent of the face value of the contract. That is, the Fund is only required to
pay up front between 3 to 6 percent of the face value of the futures contract.
Therefore, the Fund has a higher degree of leverage in its futures contract
purchases than in its stock purchases. As a result there may be differences in
the volatility of rates of return between securities purchases and futures
contract purchases, with the returns from futures contracts being more volatile.
o Swap Transactions. Swap transactions are privately negotiated
off-exchange agreements between the Fund and a counterparty. There is no central
market for swap transactions and therefore they are less liquid investments than
exchange-traded instruments. Furthermore, if the Fund were to sell the swap to a
third party, it would still remain primarily liable for the obligations under
the swap contract. Additionally, the Fund will bear the credit risk of a
counterparty's performance under the swap agreement. See "Swaps" in the
Statement of Additional Information.
o Risks of Derivative Instruments. Some of the strategies the Fund may
pursue, such as selling futures contracts, buying puts and writing calls, may
hedge, to some degree, against price fluctuations. Other strategies, such as
buying futures contracts, writing puts, buying calls and entering into swap
agreements, tend to increase market exposure and price fluctuation. In some
cases, the Fund may buy a call option, a futures contract or a Hybrid Instrument
for the purpose of increasing its exposure in a particular market segment, which
may be considered speculative. With respect to futures contracts or related
options that are entered into for purposes that may be considered speculative,
the aggregate initial margin for futures contracts and premiums for options (or,
in the case of non-qualifying Hybrid Instruments, the portion attributable to
the options premium) will not exceed 5% of the Fund's net assets, after taking
into account realized profits and unrealized losses on such futures contracts.
Through its investment in Hybrid Instruments and other derivative instruments,
the Fund expects to achieve an economic exposure to the commodity markets equal
to no more than 150% of its total assets.
The use of derivative instruments requires special skills and knowledge
and investment techniques that are different from what is required for normal
portfolio management. If the Manager uses a derivative instrument at the wrong
time or judges market conditions incorrectly, the strategies may result in a
significant loss to the Fund and reduce the Fund's return. The Fund could also
experience losses if the prices of its hedging instruments, futures and
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options positions were not properly correlated with its other investments or if
it could not close out a position because of an illiquid market for the future
or option or derivative instrument.
There are also special risks in particular strategies. For example, if a
covered call written by the Fund is exercised on an investment that has
increased in value above the call price, the Fund will be required to sell the
investment at the call price and will not be able to realize any profit on the
investment above the call price. In writing a put, there is a risk that the Fund
may be required to buy the underlying security at a disadvantageous price if the
market value is below the put price. These risks and the strategies the Fund may
use are described in greater detail in the Statement of Additional Information.
o Risks of Debt Securities. In addition to credit risks, described below,
debt securities are subject to changes in their value due to changes in
prevailing interest rates. When prevailing interest rates rise, the values of
already-issued debt securities generally decline. The magnitude of these
fluctuations will often be greater for longer-term debt securities than
shorter-term debt securities. Changes in the value of debt securities held by
the Fund mean that the Fund's share prices can go up or down when interest rates
change because of the effect of the change on the value of the Fund's portfolio
of debt securities. Credit risk relates to the ability or the perceived ability
of the issuer to meet interest or principal payments on a security as they
become due. Generally, higher yielding, lower-grade bonds, described below, are
subject to credit risks to a greater extent than lower yielding,
investment-grade bonds.
o High Yield Securities - Special Risks. High yield, lower- grade debt
securities, whether rated or unrated, often are speculative investments.
Lower-grade debt securities have special risks that may make them riskier
investments than investment grade securities. They may be subject to greater
market fluctuations and risk of loss of income and principal than lower
yielding, investment-grade debt securities. There may be less of a market for
them and therefore they may be harder to sell at an acceptable price. There is a
relatively greater possibility that the issuer's earnings may be insufficient to
allow it to make the payments of interest due on the outstanding obligation. The
issuer's low credit worthiness may also increase the potential for its
insolvency.
These risks mean that the Fund may not achieve the expected return from
its investment in lower-grade debt securities, and that the Fund's net asset
value per share may be adversely affected by declines in value of these
securities. The Fund is not obligated to dispose of securities when issuers are
in default or if the rating of the security is reduced. Convertible securities
may entail additional risks but may be less subject to some of these risks than
other debt securities, to the extent they can be converted into stock, which may
be more liquid and less affected by these other risk factors.
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o Foreign Investment Risks. Investments in foreign securities involve the
possibility of expropriation, nationalization or confiscatory taxation, taxation
of income earned in foreign nations (including, for example, withholding taxes
on interest and dividends) or other taxes imposed with respect to investments in
foreign nations, foreign exchange controls (which may include suspension of the
ability to transfer currency from a given country and repatriation of
investments), default in foreign government securities, and political or social
instability or diplomatic developments that could adversely affect investments.
In addition, there is often less publicly available information about foreign
issuers than those in the U.S. Foreign companies are often not subject to
uniform accounting, auditing and financial reporting standards. The Fund may
encounter difficulties in pursuing legal remedies or in obtaining judgments in
foreign courts.
Brokerage commissions, fees for custodial services and other costs
relating to investments in other countries are generally greater than in the
U.S. Foreign markets have different clearance and settlement procedures from
those in the U.S., and certain markets have experienced times when settlements
did not keep pace with the volume of securities transactions.
Investment Restrictions
The investment objective and certain investment restrictions of the Fund are
matters of fundamental policy for purposes of the Investment Company Act of 1940
(the "1940 Act") and therefore cannot be changed without the approval of a
"majority" of the outstanding voting securities of the Fund. This means the
lesser of: (I) 67% of the shares of the Fund present at a shareholders' meeting
if the holders of more than 50% of the shares of the Fund then outstanding are
present in person or by proxy; or (ii) more than 50% of the outstanding voting
securities of the Fund. The following investment restrictions apply only at the
time of purchase by the Fund.
As a matter of fundamental policy, the Fund:
(1) will not purchase the securities, Hybrid Instruments and other
instruments of any issuer (other than securities issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities, or repurchase agreements secured thereby)
if, as a result, 25% or more of the Fund's total assets would
be invested in the securities of companies whose principal
business activities are in the same industry, provided that
the Fund will invest 25% or more of its total assets in
securities, Hybrid Instruments and other instruments,
including futures and forward contracts, related options and
swaps, linked to the energy and natural resources,
agriculture, livestock, industrial metals, and precious metals
industries. The individual components of an index will be
considered as separate industries;
(2) will not make loans, except that, to the extent appropriate
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under its investment program, the Fund may (a) purchase bonds, debentures,
other debt securities and Hybrid Instruments, including short-term
obligations; (b) enter into repurchase transactions; and (C) lend
portfolio securities provided that the value of such loaned securities
does not exceed one-third of the Fund's total assets;
(3) will not issue any senior security (as defined in the 1940
Act), except that (a) the Fund may enter into commitments to
purchase securities in accordance with the Fund's investment
program, including reverse repurchase agreements, delayed
delivery and when-issued securities, which may be considered
the issuance of senior securities, (b) the Fund may engage in
transactions that may result in the issuance of a senior
security to the extent permitted under the 1940 Act and
applicable regulations, interpretations of the 1940 Act or an
exemptive order;(C)the Fund may engage in short sales of
securities to the extent permitted in its investment program
and other restrictions; (d) the purchase or sale of Hybrid
Instruments, futures contracts and related options shall not
be considered to involve the issuance of senior securities;
and (e) the Fund may borrow money as authorized by the 1940
Act;
(4) will not borrow money, except that (a) the Fund may enter into
commitments to purchase securities and instruments in
accordance with its investment program, including delayed-
delivery and when-issued securities and reverse repurchase
agreements, provided that the total amount of any borrowing
does not exceed 33 1/3% of the Fund's total assets; (b) the
Fund may borrow money in an amount not to exceed 33 1/3% of
the value of its total assets at the time when the loan is
made. Borrowings representing more than 33 1/3% of the Fund's
total assets must be repaid before the Fund may make
additional investments;
(5) will not purchase or sell physical commodities unless acquired
as a result of ownership of securities or other instruments
(but this shall not prevent the Fund from purchasing or
selling Hybrid Instruments, options and futures contracts with
respect to individual commodities or indices, or from
investing in securities or other instruments backed by
physical commodities or indices); or
(6) will not purchase or sell real estate unless acquired as a
result of direct ownership of securities or other instruments
(but this shall not prevent the Fund from investing in
securities or other instruments backed by real estate or
securities of companies engaged in the real estate business,
including REITs). Investments by a Fund in securities backed
by mortgages on real estate or in securities of companies
engaged in such activities are not hereby precluded.
How the Fund is Managed
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Organization and History. The Fund was organized in July, 1996 as a
Massachusetts business trust. The Fund is an open-end, non-diversified
management investment company, with an unlimited number of authorized shares of
beneficial interest.
The Fund is governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under Massachusetts law. The Trustees
meet periodically throughout the year to oversee the Fund's activities, review
its performance, and review the actions of the Manager. "Trustees and Officers
of the Fund" in the Statement of Additional Information names the Trustees and
officers of the Fund and provides more information about them. Although the Fund
will not normally hold annual meetings of its shareholders, it may hold
shareholder meetings from time to time on important matters, and shareholders
have the right to call a meeting to remove a Trustee or to take other action
described in the Fund's Declaration of Trust.
The Board of Trustees has the power, without shareholder approval, to
divide unissued shares of the Fund into two or more classes. The Board has done
so, and the Fund currently has four classes of shares, Class A, Class B, Class C
and Class Y. All classes invest in the same investment portfolio. Only certain
institutional investors may elect to purchase Class Y shares. Each class has its
own dividends and distributions and pays certain expenses which may be different
for the different classes. Each class may have a different net asset value. Each
share has one vote at shareholder meetings, with fractional shares voting
proportionally. Shareholders of the Fund vote in the aggregate, on certain
matters such as the election of Trustees. Each class votes on matters which
affect that class and does not vote on matters which do not affect that class.
Shares are freely transferrable.
The Manager and Its Affiliates. The Fund is managed by OppenheimerFunds, Inc.
("OFI" or the "Advisor") and Oppenheimer Real Asset Management, Inc. (the
"Manager"), which is the subadvisor for the Fund and is responsible for
selecting the Fund's investments and handles its day-to-day business. OFI and
the Manager are registered investment advisors with the Securities and Exchange
Commission and the Manager is a registered Commodity Trading Advisor with the
Commodity Futures Trading Commission ("CFTC"). The Manager is a wholly owned
subsidiary of OFI. OFI and the Manager carry out their duties, subject to the
policies established by the Board of Trustees, under an Investment Advisory
Agreement and Sub-Advisory Agreement which state OFI's and Manager's
responsibilities. The Investment Advisory Agreement and the Sub-Advisory
Agreement set forth the fees paid by the Fund to OFI and the Manager and
describes the expenses that the Fund is responsible to pay to conduct its
business.
OFI has operated as an investment advisor since 1959. OFI (including
subsidiaries) currently manage investment companies, including other Oppenheimer
funds, with assets of more than $70 billion as of June 30, 1997, and with more
than 3 million shareholder accounts. The Manager is owned by OFI, which in turn
is a wholly owned subsidiary of Oppenheimer Acquisition Corp., a
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holding company that is owned in part by senior officers of OFI and controlled
by Massachusetts Mutual Life Insurance Company.
o Portfolio Managers. The Portfolio Managers of the Fund are
Russell Read and Mark Anson. Mr. Read and Mr. Anson are a Senior
Vice President and a Vice President, respectively, of the Advisor
and both are Vice Presidents of the Manager. They are the persons
principally responsible for the day-to-day management of the Fund's
portfolio. Mr. Read joined OFI in October, 1993 as Director of
Quantitative Research. Prior to that, Mr. Read was an investment
manager for The Prudential and Associate Economist for the First
National Bank of Chicago. Mr. Read received his Ph.D. in Political
Economy from Stanford University and his M.B.A. in
Finance/International Business and B.A. in Statistics from the
University of Chicago. Mr. Anson joined OFI in January, 1996 as a
Vice President and Assistant Counsel. Prior to that, Mr. Anson was
employed as a Registered Options Principal on the Equity
Derivatives desk at Salomon Brothers Inc. and as an attorney at
Chapman and Cutler. Mr. Anson earned his Ph.M. and Ph.D. in
Finance from the Graduate School of Business at Columbia University
and his J.D. from Northwestern University School of Law. Mr. Anson
has also earned a C.P.A. certificate.
o Fees and Expenses. Under the Investment Advisory Agreement, the Fund
pays OFI the following annual fees, which decline on additional assets as the
Fund grows: 1.0% of the first $200 million of average net assets, 0.90% of the
next $200 million, 0.85% of the next $200 million, 0.80% of the next $200
million, and 0.75% of net assets in excess of $800 million. Under the
Sub-Advisory Agreement, the Manager receives from OFI the following portions of
the annual fees: 0.50% of the first $200 million of average net assets, 0.45% of
the next $200 million, 0.425% of the next $200 million, 0.40% of the next $200
million, and 0.375% of the net assets in excess of $800 million.
The Fund pays expenses related to its daily operations, such as custodian
fees, Trustees' fees, transfer agency fees, legal fees and auditing costs. Those
expenses are paid out of the Fund's assets and are not paid directly by
shareholders. However, those expenses reduce the net asset value of shares, and
therefore are indirectly borne by shareholders through their investment. More
information about the Investment Advisory Agreement and the other expenses paid
by the Fund is contained in the Statement of Additional Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of Additional
Information. That section discusses how brokers and dealers are selected for the
Fund's portfolio transactions. When deciding which brokers to use, OFI and the
Manager are permitted by the Investment Advisory Agreement and the Sub-Advisory
Agreement to consider whether brokers have sold shares of the Fund or any other
funds for which the Manager or OFI serve as investment advisor.
o The Distributor. The Fund's shares are sold through dealers,
brokers and other financial institutions that have a sales
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agreement with OppenheimerFunds Distributor, Inc., a subsidiary of OFI that acts
as the Fund's Distributor. The Distributor also distributes the shares of the
other Oppenheimer funds and is sub- distributor for funds managed by a
subsidiary of OFI.
o The Transfer Agent. The Fund's Transfer Agent is OppenheimerFunds
Services, a division of OFI, which acts as the shareholder servicing agent for
the Fund on an "at cost" basis. It also acts as the shareholder servicing agent
for the other Oppenheimer funds. Shareholders should direct inquiries about
their accounts to the Transfer Agent at the address and toll-free number shown
below in this Prospectus and on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the terms "total return"
and "average annual total return" to illustrate its performance. The performance
of each class of shares is shown separately, because the performance of each
class of shares will usually be different as a result of the different kinds of
expenses each class bears. These returns measure the performance of a
hypothetical account in the Fund over various periods, and do not show the
performance of each shareholder's account (which will vary if dividends are
received in cash or shares are sold or purchased). The Fund's performance data
may help you see how well your Fund has done over time and to compare it to
other funds or market indices.
It is important to understand that the Fund's total returns represent past
performance and should not be considered to be predictions of future returns or
performance. More detailed information about how total returns are calculated is
contained in the Statement of Additional Information, which also contains
information about other ways to measure and compare the Fund's performance. The
Fund's investment performance will vary over time, depending on market
conditions, the composition of the portfolio, expenses, and which class of
shares you purchase.
o Total Returns. There are different types of total returns used to
measure the Fund's performance. Total return is the change in value of a
hypothetical investment in the Fund over a given period, assuming that all
dividends and capital gains distributions are reinvested in additional shares.
The cumulative total return measures the change in value over the entire period
(for example, ten years). An average annual total return shows the average rate
of return for each year in a period that would produce the cumulative total
return over the entire period. However, average annual total returns do not show
the Fund's actual year-by-year performance.
When total returns are quoted for Class A shares, normally the current
maximum initial sales charge has been deducted. When total returns are shown for
Class B or Class C shares, normally the contingent deferred sales charge that
applies to the period for which total return is shown has been deducted. Total
returns may also be quoted at net asset value, without considering the effect
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of the contingent deferred sales charge, and those returns would be less if
sales charges were deducted.
The performance benchmark for the Fund is the Goldman Sachs Commodity
Index ("GSCI"). The GSCI is comprised of the near term futures prices for 22
commodities within five major commodity sectors: energy, agriculture, livestock,
industrial metals and precious metals.
A B O U T Y O U R A C C O U N T
How to Buy Shares
Classes of Shares. The Fund offers investors four different classes of shares:
Class A, Class B, Class C and Class Y. The fourth class, Class Y, is offered
only to certain institutional investors. The different classes of shares
represent investments in the same portfolio of securities but are subject to
different expenses and will likely have different share prices.
o Class A Shares. If you buy Class A shares, you may pay an initial sales
charge on investments up to $1 million (up to $500,000 for purchases by
"Retirement Plans," as defined in "Class A Contingent Deferred Sales Charge" on
page __). If you purchase Class A shares as part of an investment of at least $1
million ($500,000 for Retirement Plans) in shares of one or more Oppenheimer
funds, you will not pay an initial sales charge, but if you sell any of those
shares within 12 months of buying them (18 months if the shares were purchased
prior to May 1, 1997), you may pay a contingent deferred sales charge.
o Class B Shares. If you buy Class B shares, you pay no sales charge at
the time of purchase, but if you sell your shares within six years of buying
them, you will normally pay a contingent deferred sales charge. That sales
charge varies depending on how long you own your shares, as described in "Buying
Class B Shares," below.
o Class C Shares. If you buy Class C shares, you pay no sales charge at
the time of purchase, but if you sell your shares within 12 months of buying
them, you will normally pay a contingent deferred sales charge of 1%, as
described in "Buying Class C Shares," below.
o Class Y Shares. Class Y Shares are sold at net asset value per share
without the imposition of a sales charge at the time of purchase to separate
accounts of insurance companies and other institutional investors ("Class Y
Sponsors") having an agreement ("Class Y Agreements") with OFI or the
Distributor. The intent of Class Y Agreements is to allow tax-qualified
institutional investors to invest directly (through separate accounts of the
Class Y Sponsor) in Class Y shares of the Fund and to allow institutional
investors to invest directly in Class Y shares of the Fund. Individual investors
are not permitted to invest directly in Class Y shares. As of the date of this
Prospectus, Massachusetts
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Mutual Life Insurance Company (an affiliate of OFI and the Distributor) is the
sole Class Y Sponsor for outstanding Class Y shares of the Fund. While Class Y
shares are not subject to a contingent deferred sales charge, asset-based sales
charge or service fee, a Class Y Sponsor may impose charges on separate accounts
investing in Class Y shares.
None of the instructions described elsewhere in this Prospectus or the
Statement of Additional Information for the purchase, redemption, reinvestment,
exchange or transfer of shares of the Fund or the reinvestment of dividends
apply to its Class Y shares. Clients of Class Y Sponsors must request their
Sponsor to effect all transactions in Class Y shares on their behalf.
Which Class of Shares Should You Choose? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is
better suited to your needs depends on a number of factors which you should
discuss with your financial advisor. The Fund's operating costs that apply to a
class of shares and the effect of the different types of sales charges on your
investment will vary your investment results over time. The most important
factors to consider are how much you plan to invest and how long you plan to
hold your investment. If your goals and objectives change over time and you plan
to purchase additional shares, you should re-evaluate those factors to see if
you should consider another class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We assumed you are an
individual investor, and therefore ineligible to purchase Class Y shares. We
used the maximum sales charge rates that apply to each class, considering the
effect of the annual asset-based sales charge on Class B and Class C shares
(which, like all expenses, will affect your investment return). For the sake of
comparison, we have assumed that there is a 10% rate of appreciation in the
investment each year. Of course, the actual performance of your investment
cannot be predicted and will vary, based on the Fund's actual investment returns
and the operating expenses borne by each class of shares, and which class of
shares you invest in.
The factors discussed below are not intended to be investment advice or
recommendations, because each investor's financial considerations are different.
The discussion below of the factors to consider in purchasing a particular class
of shares assumes that you will purchase only one class of shares and not a
combination of shares of different classes.
o How Long Do You Expect to Hold Your Investment? While future financial
needs cannot be predicted with certainty, knowing how long you expect to hold
your investment will assist you in selecting the appropriate class of shares.
Because of the effect of class-based expenses, your choice will also depend on
how much you plan to invest. For example, the reduced sales charges
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available for larger purchases of Class A shares may, over time, offset the
effect of paying an initial sales charge on your investment (which reduces the
amount of your investment dollars used to buy shares for your account), compared
to the effect over time of higher class-based expenses on Class B or Class C
shares for which no initial sales charge is paid.
Investing for the Short Term. If you have a short-term investment horizon
(that is, you plan to hold your shares for not more than six years), you should
probably consider purchasing Class A or Class C shares rather than Class B
shares, because of the effect of the Class B contingent deferred sales charge if
you redeem in less than 7 years, as well as the effect of the Class B
asset-based sales charge on the investment return for that class in the
short-term. Class C shares might be the appropriate choice (especially for
investments of less than $100,000), because there is no initial sales charge on
Class C shares, and the contingent deferred sales charge does not apply to
amounts you sell after holding them one year.
However, if you plan to invest more than $100,000 for the shorter term,
then the more you invest and the more your investment horizon increases toward
six years, Class C shares might not be as advantageous as Class A shares. That
is because the annual asset-based sales charge on Class C shares will have a
greater impact on your account over the longer term than the reduced front-end
sales charge available for larger purchases of Class A shares. For example,
Class A shares might be more advantageous than Class C (as well as Class B
shares) for investments of more than $100,000 expected to be held for 5 or 6
years (or more). For investments over $250,000 expected to be held 4 to 6 years
(or more), Class A shares may become more advantageous than Class C (and Class
B). If investing $500,000 or more, Class A may be more advantageous as your
investment horizon approaches 3 years or more.
For investors who invest $1 million or more, in most cases Class A shares
will be the most advantageous choice, no matter how long you intend to hold your
shares. For that reason, the Distributor normally will not accept purchase
orders of $500,000 or more of Class B shares or $1 million or more of Class C
shares, from a single investor.
Investing for the Longer Term. If you are investing for the longer term,
for example, for retirement, and do not expect to need access to your money for
seven years or more, Class B shares may be an appropriate consideration, if you
plan to invest less than $100,000. If you plan to invest more than $100,000 over
the long term, Class A shares will likely be more advantageous than Class B
shares or Class C shares, as discussed above, because of the effect of the
expected lower expenses for Class A shares and the reduced initial sales charges
available for larger investments in Class A shares under the Fund's Right of
Accumulation.
Of course, these examples are based on approximations of the effect of
current sales charges and expenses on a hypothetical investment over time, using
the assumed annual performance return stated above, and therefore you should
analyze your options
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carefully.
o Are There Differences in Account Features That Matter to You? Because
some account features may not be available to Class B or Class C shareholders,
or other features (such as Automatic Withdrawal Plans) might not be advisable
(because of the effect of the contingent deferred sales charge) for Class B or
Class C shareholders, you should carefully review how you plan to use your
investment account before deciding which class of shares to buy. Additionally,
dividends payable to Class B and Class C shareholders will be reduced by the
additional expenses borne by those classes that are not borne by Class A, such
as the Class B and Class C asset-based sales charges described below and in the
Statement of Additional Information. Share certificates are not available for
Class B or Class C shares, and if you are considering using your shares as
collateral for a loan, that may be a factor to consider.
o How Does It Affect Payments to My Broker? A salesperson, such as a
broker, or any other person who is entitled to receive compensation for selling
Fund shares may receive different compensation for selling one class of shares
than for selling another class. It is important that investors understand that
the purpose of the Class B and Class C contingent deferred sales charges and
asset-based sales charges are the same as the purpose of the front-end sales
charge on sales of Class A shares: that is, to compensate the Distributor for
commissions it pays to dealers and financial institutions for selling shares.
The Distributor may pay additional periodic compensation from its own resources
to securities dealers or financial institutions based upon the value of shares
of the Fund owned by the dealer or financial institution for its own account or
for its customers.
How Much Must You Invest? You can open a Fund account with a minimum initial
investment of $1,000 and make additional investments at any time with as little
as $25. There are reduced minimum investments under special investment plans.
o With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7) custodial
plans and military allotment plans, you can make initial and subsequent
investments of as little as $25. Subsequent purchases of at least $25 can be
made by telephone through AccountLink.
o Under pension, profit-sharing and 401(k) plans and Individual Retirement
Accounts (IRAs), you can make an initial investment of as little as $250 (if
your IRA is established under an Asset Builder Plan, the $25 minimum applies),
and subsequent investments may be as little as $25.
o There is no minimum investment requirement if you are buying shares by
reinvesting dividends from the Fund or other Oppenheimer funds (a list of them
appears in the Statement of Additional Information, or you can ask your dealer
or call the Transfer Agent), or by reinvesting distributions from unit
investment trusts that have made arrangements with the Distributor.
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o How Are Shares Purchased? You can buy shares several ways -- through any
dealer, broker or financial institution that has a sales agreement with the
Distributor, directly through the Distributor, or automatically from your bank
account through an Asset Builder Plan under the OppenheimerFunds AccountLink
service. The Distributor may appoint servicing agents as the Distributor's agent
to accept purchase (and redemption) orders. When you buy shares, be sure to
specify Class A, Class B or Class C shares. If you do not choose, your
investment will be made in Class A shares.
o Buying Shares Through Your Dealer. Your dealer will place
your order with the Distributor on your behalf.
o Buying Shares Through the Distributor. Complete an OppenheimerFunds New
Account Application and return it with a check payable to "OppenheimerFunds
Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. If you
don't list a dealer on the application, the Distributor will act as your agent
in buying the shares. However, it is recommended that you discuss your
investment first with a financial advisor, to be sure that it is appropriate for
you.
o Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or other
financial institution that is an Automated Clearing House (ACH) member. You can
then transmit funds electronically to purchase shares, or to have the Transfer
Agent send redemption proceeds or to transmit dividends and distributions to
your bank account.
Shares are purchased for your account on AccountLink on the regular
business day the Distributor is instructed by you to initiate the ACH transfer
to buy shares. You can provide those instructions automatically, under an Asset
Builder Plan, described below, or by telephone instructions using
OppenheimerFunds PhoneLink, also described below. You should request AccountLink
privileges on the application or dealer settlement instructions used to
establish your account. See "AccountLink" below for more details.
o Asset Builder Plans. You may purchase shares of the Fund (and up to four
other Oppenheimer funds) automatically each month from your account at a bank or
other financial institution under an Asset Builder Plan with AccountLink.
Details are in the Statement of Additional Information.
o At What Price Are Shares Sold? Shares are sold at the public offering
price based on the net asset value (and any initial sales charge that applies)
that is next determined after the Distributor receives the purchase order in
Denver, Colorado. In most cases, to enable you to receive that day's offering
price, the Distributor or its designated agent must receive your order by the
time of day The New York Stock Exchange closes, which is normally 4:00 P.M., New
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York time, but may be earlier on some days (all references to time in this
Prospectus mean "New York time"). The net asset value of each class of shares is
determined as of that time on each day The New York Stock Exchange is open
(which is a "regular business day").
If you buy shares through a dealer, the dealer must receive your order by
the close of The New York Stock Exchange on a regular business day and transmit
it to the Distributor so that it is received before the Distributor's close of
business that day, which is normally 5:00 P.M. The Distributor may reject any
purchase order for the Fund's shares, in its sole discretion.
Special Sales Charge Arrangements for Certain Persons. Appendix A to this
Prospectus sets forth conditions for the waiver of, or exemption from, sales
charges or the special sales charge rates that apply to purchases of shares of
the Fund (including purchases by exchange) by a person who was a shareholder of
one of the former Quest For Value Funds (as described in that Appendix).
Buying Class A Shares. Class A shares are sold at their offering price, which is
normally net asset value plus an initial sales charge. However, in some cases,
described below, purchases are not subject to an initial sales charge, and the
offering price will be the net asset value. In some cases, reduced sales charges
may be available, as described below. Out of the amount you invest, the Fund
receives the net asset value to invest for your account. The sales charge varies
depending on the amount of your purchase. A portion of the sales charge may be
retained by the Distributor and allocated to your dealer as commission. The
current sales charge rates and commissions paid to dealers and brokers are as
follows:
<TABLE>
<CAPTION>
Front-End Sales Front-End Sales
Charge as a Charge as a Commissions as
Percentage of Percentage of Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $25,000 5.75% 6.10% 4.75%
- ------------------------------------------------------------------------------
$25,000 or more but
less than $50,000 5.50% 5.82% 4.75%
- ------------------------------------------------------------------------------
$50,000 or more but
less than $100,000 4.75% 4.99% 4.00%
- ------------------------------------------------------------------------------
$100,000 or more but
less than $250,000 3.75% 3.90% 3.00%
- ------------------------------------------------------------------------------
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
- ------------------------------------------------------------------------------
$500,000 or more but
less than $1 million 2.00% 2.04% 1.60%
</TABLE>
-38-
<PAGE>
The Distributor reserves the right to reallow the entire commission to dealers.
If that occurs, the dealer may be considered an "underwriter" under Federal
securities laws.
o Class A Contingent Deferred Sales Charge. There is no
initial sales charge on purchases of Class A shares of any one or
more of the Oppenheimer funds in the following cases:
o Purchases aggregating $1 million or more;
o Purchases by a retirement plan qualified under section 401(a) if the
retirement plan has total plan assets of $500,000 or more;
o Purchases by a retirement plan qualified under section 401(a) or 401(k)
of the Internal Revenue Code, by a non-qualified deferred compensation plan (not
including Section 457 plans), employee benefit plan, group retirement plan (see
"How to Buy Shares - Retirement Plans" in the Statement of Additional
Information for further details), an employee's 403(b)(7) custodial plan
account, SEP IRA, SARSEP, or SIMPLE plan (all of these plans are collectively
referred to as "Retirement Plans"); that: (1) buys shares costing $500,000 or
more, or (2) has, at the time of purchase, 100 or more eligible participants, or
(3) certifies that it projects to have annual plan purchases of $200,000 or
more; or
o Purchases by an OppenheimerFunds Rollover IRA if the purchases are made
(1) through a broker, dealer, bank or registered investment advisor that has
made special arrangements with the Distributor for these purchases, or (2) by a
direct rollover of a distribution from a qualified retirement plan if the
administrator of that plan has made special arrangements with the Distributor
for those purchases.
The Distributor pays dealers of record commissions on those purchases in
an amount equal to (i) 1.0% for non-Retirement Plan accounts, and (ii) for
Retirement Plan accounts, 1.0% of the first $2.5 million, plus 0.50% of the next
$2.5 million, plus 0.25% of purchases over $5 million calculated on a calendar
year basis. That commission will be paid only on those purchases that were not
previously subject to a front-end sales charge and dealer commission. No sales
commission will be paid to the dealer, broker or financial institution on sales
of Class A shares purchased with the redemption proceeds of shares of a mutual
fund offered as an investment option under a special arrangement with the
Distributor if the purchase occurs more than 30 days after the addition of the
Oppenheimer funds as an investment option to the Retirement Plan.
If you redeem any of those shares purchased prior to May 1, 1997, within
18 months of the end of the calendar month of their purchase, a contingent
deferred sales charge (called the "Class A contingent deferred sales charge")
may be deducted from the redemption proceeds. A Class A contingent deferred
sales charge may be deducted from the redemption proceeds of any of those shares
purchased on or after May 1, 1997 that are redeemed within 12
-39-
<PAGE>
months of the end of the calendar month of their purchase. That sales charge may
be equal to 1.0% of the lesser of (1) the aggregate net asset value of the
redeemed shares (not including shares purchased by reinvestment of dividends or
capital gains distributions) or (2) the original offering price (which is the
original net asset value) of the redeemed shares. However, the Class A
contingent deferred sales charge will not exceed the aggregate amount of the
commissions the Distributor paid to your dealer on all Class A shares of all
Oppenheimer funds you purchased subject to the Class A contingent deferred sales
charge.
In determining whether a contingent deferred sales charge is payable, the
Fund will first redeem shares that are not subject to the sales charge,
including shares purchased by reinvestment of dividends and capital gains, and
then will redeem other shares in the order that you purchased them. The Class A
contingent deferred sales charge is waived in certain cases described in
"Waivers of Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges of
shares under the Fund's Exchange Privilege (described below). However, if the
shares acquired by exchange are redeemed within 12 calendar months (18 months
for shares purchased prior to May 1, 1997) of the end of the calendar month of
the purchase of the exchanged shares, the contingent deferred sales charge will
apply.
o Special Arrangements With Dealers. The Distributor may advance up to 13
months' commissions to dealers that have established special arrangements with
the Distributor for Asset Builder Plans for their clients.
o Reduced Sales Charges for Class A Share Purchases. You may
be eligible to buy Class A shares at reduced sales charge rates in
one or more of the following ways:
o Right of Accumulation. To qualify for the lower sales charge rates that
apply to larger purchases of Class A shares, you and your spouse can add
together Class A and Class B shares you purchase for your individual accounts,
or jointly, or for trust or custodial accounts on behalf of your children who
are minors. A fiduciary can count all shares purchased for a trust, estate or
other fiduciary account (including one or more employee benefit plans of the
same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class A and Class
B shares of the Fund and other Oppenheimer funds to reduce the sales charge rate
that applies to current purchases of Class A shares. You can also include Class
A and Class B shares of Oppenheimer funds you previously purchased subject to an
initial or contingent deferred sales charge to reduce the sales charge rate for
current purchases of Class A shares, provided that you still hold your
investment in one of the Oppenheimer funds. The Distributor will add the value
at current offering price, of the shares you previously purchased and currently
own to the value of
-40-
<PAGE>
current purchases to determine the sales charge rate that applies. The
Oppenheimer funds are listed in "Reduced Sales Charges" in the Statement of
Additional Information, or a list can be obtained from the Distributor. The
reduced sales charge will apply only to current purchases and must be requested
when you buy your shares.
o Letter of Intent. Under a Letter of Intent, if you purchase Class A
shares or Class A shares and Class B shares of the Fund and other Oppenheimer
funds during a 13-month period, you can reduce the sales charge rate that
applies to your purchases of Class A shares. The total amount of your intended
purchases of both Class A and Class B shares will determine the reduced sales
charge rate for the Class A shares purchased during that period. This can
include purchases made up to 90 days before the date of the Letter. More
information is contained in the Application and in "Reduced Sales Charges" in
the Statement of Additional Information.
o Waivers of Class A Sales Charges. The Class A sales charges are not
imposed in the circumstances described below. There is an explanation of this
policy in "Reduced Sales Charges" in the Statement of Additional Information.
Waivers of Initial and Contingent Deferred Sales Charges for Certain
Purchasers. Class A shares purchased by the following investors are not subject
to any Class A sales charges:
o the Manager or its affiliates;
o present or former officers, directors, trustees and employees (and their
"immediate families" as defined in "Reduced Sales Charges" in the Statement of
Additional Information) of the Fund, the Manager and its affiliates, and
retirement plans established by them for their employees;
o registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the Distributor for
that purpose;
o dealers or brokers that have a sales agreement with the Distributor, if
they purchase shares for their own accounts or for retirement plans for their
employees;
o employees and registered representatives (and their spouses) of dealers
or brokers described above or financial institutions that have entered into
sales arrangements with such dealers or brokers (and are identified to the
Distributor) or with the Distributor; the purchaser must certify to the
Distributor at the time of purchase that the purchase is for the purchaser's own
account (or for the benefit of such employee's spouse or minor children);
o dealers, brokers, banks or registered investment advisors that have
entered into an agreement with the Distributor providing specifically for the
use of shares of the Fund in particular investment products or employee benefit
plans made available to
-41-
<PAGE>
their clients (those clients may be charged the transaction fee by their dealer,
broker, bank or advisor for the purchase or sale of fund shares);
o (1) investment advisors and financial planners who charge an advisory,
consulting or other fee for their services and buy shares for their own accounts
or the accounts of their clients, and (2) retirement plans and deferred
compensation plans and trusts used to fund those plans (including, for example,
plans qualified or created under sections 401(a), 403(b) or 457 of the Internal
Revenue Code), and "rabbi trusts" that buy shares for their own accounts, in
each case if those purchases are made through a broker or agent or other
financial intermediary that has made special arrangements with the Distributor
for those purchases; (3) clients of such investment advisors or financial
planners who buy shares for their own accounts may also purchase shares without
sales charge but only if their accounts are linked to a master account of their
investment advisor or financial planner on the books and records of the broker,
agent or financial intermediary with which the Distributor has made such special
arrangements (each of these investors may be charged a fee by the broker, agent
or financial intermediary for purchasing shares);
o employee benefit plans purchasing shares through a shareholder servicing
agent which the Distributor has appointed as its agent to accept those purchase
orders;
o directors, trustees, officers or full-time employees of OpCap Advisors
or its affiliates, their relatives or any trust, pension, profit sharing or
other benefit plan which beneficially owns shares for those persons;
o accounts for which Oppenheimer Capital is the investment advisor (the
Distributor must be advised of this arrangement) and persons who are directors
or trustees of the company or trust which is the beneficial owner of such
accounts;
o any unit investment trust that has entered into an
appropriate agreement with the Distributor;
o a TRAC-2000 401(k) plan (sponsored by the former Quest for Value
Advisors) whose Class B or Class C shares of a Former Quest for Value Fund were
exchanged for Class A shares of that Fund due to the termination of the Class B
and Class C TRAC-2000 program on November 24, 1995; or
o qualified retirement plans that had agreed with the former Quest for
Value Advisors to purchase shares of any of the Former Quest for Value Funds at
net asset value, with such shares to be held through DCXchange, a sub-transfer
agency mutual fund clearinghouse, provided that such arrangements are
consummated and share purchases commence by December 31, 1996.
Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions. Class A shares issued or purchased in the following transactions
are not subject to Class A sales charges:
-42-
<PAGE>
o shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party;
o shares purchased by the reinvestment of loan repayments by a participant
in a retirement plan for which the Manager or its affiliates acts as sponsor;
o shares purchased by the reinvestment of dividends or other distributions
reinvested from the Fund or other Oppenheimer funds (other than Oppenheimer Cash
Reserves) or unit investment trusts for which reinvestment arrangements have
been made with the Distributor; or
o shares purchased and paid for with the proceeds of shares redeemed in
the past 12 months from a mutual fund (other than a fund managed by the Manager
or any of its subsidiaries) on which an initial sales charge or contingent
deferred sales charge was paid (this waiver also applies to shares purchased by
exchange of shares of Oppenheimer Money Market Fund, Inc. that were purchased
and paid for in this manner); this waiver must be requested when the purchase
order is placed for your shares of the Fund, and the Distributor may require
evidence of your qualification for this waiver; or
o shares purchased with the proceeds of maturing principal of units of any
Qualified Unit Investment Liquid Trust Series.
Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions. The Class A contingent deferred sales charge is also waived if
shares that would otherwise be subject to the contingent deferred sales charge
are redeemed in the following cases:
o to make Automatic Withdrawal Plan payments that are limited annually to
no more than 12% of the original account value;
o involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (see "Shareholder Account Rules and Policies,"
below);
o if, at the time of purchase of shares (prior to May 1, 1997) the dealer
agreed in writing to accept the dealer's portion of the sales commission in
installments of 1/18th of the commission per month (and no further commission
will be payable if the shares are redeemed within 18 months of purchase);
o if, at the time of purchase of shares (on or after May 1, 1997) the
dealer agrees in writing to accept the dealer's portion of the sales commission
in installments of 1/12th of the commission per month (and no further commission
will be payable if the shares are redeemed within 12 months of purchase);
o for distributions from a TRAC-2000 401(k) plan sponsored by
the Distributor due to the termination of the TRAC-2000 program;
-43-
<PAGE>
o for distributions from Retirement Plans, deferred compensation plans or
other employee benefit plans for any of the following purposes: (1) following
the death or disability (as defined in the Internal Revenue Code) of the
participant or beneficiary (the death or disability must occur after the
participant's account was established); (2) to return excess contributions; (3)
to return contributions made due to a mistake of fact; (4) hardship withdrawals,
as defined in the plan; (5) under a Qualified Domestic Relations Order, as
defined in the Internal Revenue Code; (6) to meet the minimum distribution
requirements of the Internal Revenue Code; (7) to establish "substantially equal
periodic payments" as described in Section 72(t) of the Internal Revenue Code;
(8) for retirement distributions or loans to participants or beneficiaries; (9)
separation from service; (10) participant-directed redemptions to purchase
shares of a mutual fund (other than a fund managed by the Manager or its
subsidiary) offered as an investment option in a Retirement Plan in which
Oppenheimer funds are also offered as investment options under a special
arrangement with the Distributor, or (11) plan termination or "in-service
distributions", if the redemption proceeds are rolled over directly to an
OppenheimerFunds IRA;
o for distributions from Retirement Plans having 500 or more eligible
participants, except distributions due to termination of all of the Oppenheimer
funds as an investment option under the Plan; or
o for distributions from 401(k) plans sponsored by broker-dealers that
have entered into a special agreement with the Distributor allowing this waiver.
o Service Plan for Class A Shares. The Fund has adopted a Service Plan for
Class A shares to reimburse the Distributor for a portion of its costs incurred
in connection with the personal service and maintenance of shareholder accounts
that hold Class A shares. Reimbursement is made quarterly at an annual rate that
may not exceed 0.25% of the average annual net assets of Class A shares of the
Fund. The Distributor uses all of those fees to compensate dealers, brokers,
banks and other financial institutions quarterly for providing personal service
and maintenance of accounts of their customers that hold Class A shares and to
reimburse itself (if the Fund's Board of Trustees authorizes such
reimbursements, which it has not yet done) for its other expenditures under the
Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining accounts in
the Fund, making the Fund's investment plans available and providing other
services at the request of the Fund or the Distributor. Payments are made by the
Distributor quarterly at an annual rate not to exceed 0.25% of the average
annual net assets of Class A shares held in accounts of the service providers or
their customers. The payments under the Plan increase the annual expenses of
Class A shares. For more details, please refer to "Distribution and Service
Plans" in the Statement of Additional Information.
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<PAGE>
Buying Class B Shares. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed within
6 years of their purchase, a contingent deferred sales charge will be deducted
from the redemption proceeds. That sales charge will not apply to shares
purchased by the reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge will be based on the lesser of the net asset
value of the redeemed shares at the time of redemption or the original offering
price (which is the original net asset value). The contingent deferred sales
charge is not imposed on the amount of your account value represented by the
increase in net asset value over the initial purchase price. The Class B
contingent deferred sales charge is paid to the Distributor to reimburse its
expenses of providing distribution-related services to the Fund in connection
with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares acquired
by reinvestment of dividends and capital gains distributions, (2) shares held
for over 6 years, and (3) shares held the longest during the 6-year period. The
contingent deferred sales charge is not imposed in the circumstances described
in "Waivers of Class B and Class C Sales Charges," below.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
<TABLE>
<CAPTION>
Contingent Deferred Sales Charge
Years Since Beginning of Month in On Redemptions in That Year
which Purchase Order Was Accepted (As % of Amount Subject to Charge)
- -----------------------------------------------------------------------
<S> <C>
0-1 5.0%
1-2 4.0%
2-3 3.0%
3-4 3.0%
4-5 2.0%
5-6 1.0%
6 and following None
</TABLE>
In the table, a "year" is a 12-month period. All purchases are considered to
have been made on the first regular business day of the month in which the
purchase was made.
o Automatic Conversion of Class B Shares. 72 months after you purchase
Class B shares, those shares will automatically convert to Class A shares. This
conversion feature relieves Class B shareholders of the asset-based sales charge
that applies to Class B shares under the Class B Distribution and Service Plan,
described below. The conversion is based on the relative net asset value of the
two classes, and no sales load or other charge is imposed. When Class B shares
convert, any other Class B shares that were acquired
-45-
<PAGE>
by the reinvestment of dividends and distributions on the converted shares will
also convert to Class A shares. The conversion feature is subject to the
continued availability of a tax ruling described in "Alternative Sales
Arrangements - Class A, Class B and Class C Shares" in the Statement of
Additional Information.
Buying Class C Shares. Class C shares are sold at net asset value per share
without an initial sales charge. However, if Class C shares are redeemed within
12 months of their purchase, a contingent deferred sales charge of 1.0% will be
deducted from the redemption proceeds. That sales charge will not apply to
shares purchased by the reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge will be based on the lesser
of the net asset value of the redeemed shares at the time of redemption or the
original offering price (which is the original net asset value). The contingent
deferred sales charge is not imposed on the amount of your account value
represented by the increase in net asset value over the initial purchase price.
The Class C contingent deferred sales charge is paid to the Distributor to
reimburse its expenses of providing distribution-related services to the Fund in
connection with the sale of Class C shares.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares acquired
by reinvestment of dividends and capital gains distributions, (2) shares held
for over 12 months, and (3) shares held the longest during the 12-month period.
o Distribution and Service Plans for Class B and Class C Shares. The Fund
has adopted Distribution and Service Plans for Class B shares and Class C shares
to compensate the Distributor for its costs in distributing Class B and Class C
shares and servicing accounts. Under the Plans, the Fund pays the Distributor an
annual "asset-based sales charge" of 0.75% per year on Class B shares that are
outstanding for six years or less and on Class C shares. The Distributor also
receives a service fee of 0.25% per year under each Plan. Under each Plan, both
fees are computed on the average of the net asset value of shares in the
respective class, determined as of the close of each regular business day during
the period. The asset-based sales charge and service fees increase Class B and
Class C expenses by up to 1.00% of the net assets per year of the respective
class per year.
The Distributor uses the service fees to compensate dealers for providing
personal services for accounts that hold Class B or Class C shares. Those
services are similar to those provided under the Class A Service Plan, described
above. The Distributor pays the 0.25% service fees to dealers in advance for the
first year after Class B or Class C shares have been sold by the dealer and
retains the service fee paid by the Fund in that year. After the shares have
been held for a year, the Distributor pays the service fees to dealers on a
quarterly basis.
The asset-based sales charge allows investors to buy Class B
or Class C shares without a front-end sales charge while allowing
the Distributor to compensate dealers that sell those shares. The
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<PAGE>
Fund pays the asset-based sales charges to the Distributor for its services
rendered in distributing Class B and Class C shares. Those payments are at a
fixed rate that is not related to the Distributor's expenses. The services
rendered by the Distributor include paying and financing the payment of sales
commissions, service fees and other costs of distributing and selling Class B
and Class C shares.
The Distributor currently pays sales commissions of 3.75% of the purchase
price of Class B shares to dealers from its own resources at the time of sale.
Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sale of Class B shares is therefore
4.00% of the purchase price. The Distributor retains the Class B asset-based
sales charge. If a dealer has a special agreement with the Distributor, the
Distributor will pay the Class B service fee and the asset-based sales charge to
the dealer quarterly in lieu of paying the sales commission and service fee in
advance at the time of purchase.
The Distributor currently pays sales commissions of 0.75% of the purchase
price of Class C shares to dealers from its own resources at the time of sale.
Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sale of Class C shares is therefore
1.00% of the purchase price. The Distributor plans to pay the asset-based sales
charge as an ongoing commission to the dealer on Class C shares that have been
outstanding for a year or more. If a dealer has a special arrangement with the
Distributor, the Distributor will pay the Class C service fee and the
asset-based sales charge to the dealer quarterly in lieu of paying the sales
commission and service fee in advance at the time of purchase.
The Distributor's actual expenses in selling Class B and Class C shares
may be more than the payments it receives from contingent deferred sales charges
collected on redeemed shares and from the Fund under the Distribution and
Service Plans for Class B and C shares. If the Fund terminates either of its
Plans, the Board of Trustees may allow the Fund to continue payments of the
asset-based sales charge to the Distributor for distributing shares before the
Plan was terminated.
o Waivers of Class B and Class C Sales Charges. The Class B and Class C
contingent deferred sales charges will not be applied to shares purchased in
certain types of transactions nor will it apply to Class B and Class C shares
redeemed in certain circumstances as described below. The reasons for this
policy are described in "Reduced Sales Charges" in the Statement of Additional
Information.
Waivers for Redemptions of Shares in Certain Cases. The Class B and Class
C contingent deferred sales charges will be waived for redemptions of shares in
the following cases, if the Transfer Agent is notified that these conditions
apply to the redemption:
o distributions to participants or beneficiaries from
Retirement Plans, if the distributions are made (a) under an
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<PAGE>
Automatic Withdrawal Plan after the participant reaches age 59-1/2, as long as
the payments are no more than 10% of the account value annually (measured from
the date the Transfer Agent receives the request), or (b) following the death or
disability (as defined in the Internal Revenue Code) of the participant or
beneficiary (the death or disability must have occurred after the account was
established);
o redemptions from accounts other than Retirement Plans following the
death or disability of the last surviving shareholder, including a trustee of a
"grantor" trust or revocable living trust for which the trustee is also the sole
beneficiary (the death or disability must have occurred after the account was
established, and for disability you must provide evidence of a determination of
disability by the Social Security Administration);
o returns of excess contributions to Retirement Plans;
o distributions from Retirement Plans to make "substantially equal
periodic payments" as permitted in Section 72(t) of the Internal Revenue Code
that do not exceed 10% of the account value annually, measured from the date the
Transfer Agent receives the request;
o shares redeemed involuntarily, as described in "Shareholder
Account Rules and Policies," below;
o distributions from OppenheimerFunds prototype 401(k) plans and from
certain Massachusetts Mutual Life Insurance Company prototype 401(k) plans (1)
for hardship withdrawals; (2) under a Qualified Domestic Relations Order, as
defined in the Internal Revenue Code; (3) to meet minimum distribution
requirements as defined in the Internal Revenue Code; (4) to make "substantially
equal periodic payments" as described in Section 72(t) of the Internal Revenue
Code; (5) for separation from service; or (6) for loans to participants or
beneficiaries; or
o distributions from 401(k) plans sponsored by broker-dealers that have
entered into a special agreement with the Distributor allowing this waiver.
Waivers for Shares Sold or Issued in Certain Transactions. The contingent
deferred sales charge is also waived on Class B and Class C shares sold or
issued in the following cases:
o shares sold to the Manager or its affiliates;
o shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or the
Distributor for that purpose; or
o shares issued in plans of reorganization to which the Fund
is a party.
Special Investor Services
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<PAGE>
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send money
electronically between those accounts to perform a number of types of account
transactions. These include purchases of shares by telephone (either through a
service representative or by PhoneLink, described below), automatic investments
under Asset Builder Plans, and sending dividends and distributions or Automatic
Withdrawal Plan payments directly to your bank account. Please call the Transfer
Agent for more information.
AccountLink privileges should be requested on your dealer's settlement
instructions if you buy your shares through your dealer. After your account is
established, you can request AccountLink privileges by sending
signature-guaranteed instructions to the Transfer Agent. AccountLink privileges
will apply to each shareholder listed in the registration on your account as
well as to your dealer representative of record unless and until the Transfer
Agent receives written instructions terminating or changing those privileges.
After you establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the Transfer
Agent signed by all shareholders who own the account.
o Using AccountLink to Buy Shares. Purchases may be made by telephone only
after your account has been established. To purchase shares in amounts up to
$250,000 through a telephone representative, call the Distributor at
1-800-852-8457. The purchase payment will be debited from your bank account.
o PhoneLink. PhoneLink is the OppenheimerFunds automated telephone system
that enables shareholders to perform a number of account transactions
automatically using a touch-tone phone. PhoneLink may be used on
already-established Fund accounts after you obtain a Personal Identification
Number (PIN), by calling the special PhoneLink number: 1-800-533-3310.
o Purchasing Shares. You may purchase shares in amounts up to $100,000 by
phone, by calling 1-800-533-3310. You must have established AccountLink
privileges to link your bank account with the Fund, to pay for these purchases.
o Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your Fund
account to another Oppenheimer funds account you have already established by
calling the special PhoneLink number. Please refer to "How to Exchange Shares,"
below, for details.
o Selling Shares. You can redeem shares by telephone automatically by
calling the PhoneLink number and the Fund will send the proceeds directly to
your AccountLink bank account. Please refer to "How to Sell Shares," below, for
details.
Shareholder Transactions by Fax. Beginning May 30, 1997, requests
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<PAGE>
for certain account transactions may be sent to the Transfer Agent by fax
(telecopier). Please call 1-800-525-7048 for information about which
transactions are included. Transaction requests submitted by fax are subject to
the same rules and restrictions as written and telephone requests described in
this Prospectus.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that enable
you to sell shares automatically or exchange them to another Oppenheimer funds
account on a regular basis:
o Automatic Withdrawal Plans. If your Fund account is worth $5,000 or
more, you can establish an Automatic Withdrawal Plan to receive payments of at
least $50 on a monthly, quarterly, semi-annual or annual basis. The checks may
be sent to you or sent automatically to your bank account on AccountLink. You
may even set up certain types of withdrawals of up to $1,500 per month by
telephone. You should consult the Statement of Additional Information for more
details.
o Automatic Exchange Plans. You can authorize the Transfer Agent to
exchange automatically an amount you establish in advance for shares of up to
five other Oppenheimer funds on a monthly, quarterly, semi-annual or annual
basis under an Automatic Exchange Plan. The minimum purchase for each
Oppenheimer funds account is $25. These exchanges are subject to the terms of
the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A or Class B
shares of the Fund, you have up to 6 months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other Oppenheimer funds
without paying a sales charge. This privilege applies to Class A shares that you
purchased subject to an initial sales charge and to Class A or Class B shares on
which you paid a contingent deferred sales charge when you redeemed them. This
privilege does not apply to Class C shares. You must be sure to ask the
Distributor for this privilege when you send your payment. Please consult the
Statement of Additional Information for more details.
Retirement Plans. Fund shares are available as an investment for your retirement
plans. If you participate in a plan sponsored by your employer, the plan trustee
or administrator must make the purchase of shares for your retirement plan
account. The Distributor offers a number of different retirement plans that can
be used by individuals and employers:
o Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses
o 403(b)(7) Custodial Plans for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable organizations
o SEP-IRAs (Simplified Employee Pension Plans) for small business owners
or people with income from self-employment, including SAR/SEP-IRAs
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<PAGE>
o Pension and Profit-Sharing Plans for self-employed persons
and other employers
o 401(k) Prototype Retirement Plans for businesses
Please call the Distributor for the OppenheimerFunds plan documents, which
contain important information and applications.
How to Sell Shares
You can arrange to take money out of your account by selling (redeeming) some or
all of your shares on any regular business day. Your shares will be sold at the
next net asset value calculated after your order is received and accepted by the
Transfer Agent. The Fund offers you a number of ways to sell your shares in
writing or by telephone. You can also set up Automatic Withdrawal Plans to
redeem shares on a regular basis, as described above. If you have questions
about any of these procedures, and especially if you are redeeming shares in a
special situation, such as due to the death of the owner or from a retirement
plan, please call the Transfer Agent first, at 1-800-525-7048, for assistance.
o Retirement Accounts. To sell shares in an Oppenheimer funds retirement
account in your name, call the Transfer Agent for a distribution request form.
There are special income tax withholding requirements for distributions from
retirement plans and you must submit a withholding form with your request to
avoid delay. If your retirement plan account is held for you by your employer,
you must arrange for the distribution request to be sent by the plan
administrator or trustee. There are additional details in the Statement of
Additional Information.
o Certain Requests Require a Signature Guarantee. To protect you and the
Fund from fraud, certain redemption requests must be in writing and must include
a signature guarantee in the following situations (there may be other situations
also requiring a signature guarantee):
o You wish to redeem more than $50,000 worth of shares and
receive a check
o The redemption check is not payable to all shareholders
listed on the account statement
o The redemption check is not sent to the address of record on
your account statement
o Shares are being transferred to a Fund account with a
different owner or name
o Shares are redeemed by someone other than the owners (such
as an Executor)
o Where Can I Have My Signature Guaranteed? The Transfer
Agent will accept a guarantee of your signature by a number of
financial institutions, including: a U.S. bank, trust company,
credit union or savings association, or by a foreign bank that has
a U.S. correspondent bank, or by a U.S. registered dealer or broker
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<PAGE>
in securities, municipal securities or government securities, or by a U.S.
national securities exchange, a registered securities association or a clearing
agency. If you are signing as a fiduciary or on behalf of a corporation,
partnership or other business, you must also include your title in the
signature.
Selling Shares by Mail. Write a "letter of instructions" that
includes:
o Your name
o The Fund's name
o Your Fund account number (from your account statement) o The dollar
amount or number of shares to be redeemed o Any special payment
instructions o Any share certificates for the shares you are selling o The
signatures of all registered owners exactly as the
account is registered, and
o Any special requirements or documents requested by the Transfer Agent to
assure proper authorization of the person asking to sell shares.
<TABLE>
<S> <C>
Use the following address for requests Send courier or Express Mail
by mail: requests to:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Avenue,
Denver, Colorado 80217 Building D
Denver, Colorado 80231
</TABLE>
Selling Shares by Telephone. You and your dealer representative of record may
also sell your shares by telephone. To receive the redemption price on a regular
business day, your call must be received by the Transfer Agent by the close of
The New York Stock Exchange that day, which is normally 4:00 P.M., but may be
earlier on some days. You may not redeem shares held in an OppenheimerFunds
retirement plan or under a share certificate by telephone.
o To redeem shares through a service representative, call
1-800-852-8457
o To redeem shares automatically on PhoneLink, call 1-800-533-
3310
Whichever method you use, you may have a check sent to the address on the
account statement, or, if you have linked your Fund account to your bank account
on AccountLink, you may have the proceeds wired to that bank account.
o Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed by
telephone in any 7-day period. The check must be payable to all owners of record
of the shares and must be sent to the address on the account statement. This
service is not available within 30 days of changing the address on an account.
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<PAGE>
o Telephone Redemptions Through AccountLink. There are no dollar limits on
telephone redemption proceeds sent to a bank account designated when you
establish AccountLink. Normally the ACH transfer to your bank is initiated on
the business day after the redemption. You do not receive dividends on the
proceeds of the shares you redeemed while they are waiting to be transferred.
Selling Shares Through Your Dealer. The Distributor has made arrangements to
repurchase Fund shares from dealers and brokers on behalf of their customers.
Brokers or dealers may charge for that service. Please call your dealer or
broker for more information about this procedure. Please refer to "Special
Arrangements for Repurchase of Shares from Dealers and Brokers" in the Statement
of Additional Information for more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain Oppenheimer funds at
net asset value per share at the time of exchange, without sales charge. To
exchange shares, you must meet several conditions:
o Shares of the fund selected for exchange must be available for sale in
your state of residence.
o The prospectuses of this Fund and the fund whose shares you want to buy
must offer the exchange privilege.
o You must hold the shares you buy when you establish your account for at
least 7 days before you can exchange them; after the account is open 7 days, you
can exchange shares every regular business day.
o You must meet the minimum purchase requirements for the fund you
purchase by exchange.
o Before exchanging into a fund, you should obtain and read
its prospectus.
Shares of a particular class of the Fund may be exchanged only for shares
of the same class in the other Oppenheimer funds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At present,
Oppenheimer Money Market Fund, Inc. offers only one class of shares, which are
considered to be "Class A" shares for this purpose. In some cases, sales charges
may be imposed on exchange transactions. See "How to Exchange Shares" in the
Statement of Additional Information for more details.
Exchanges may be requested in writing or by telephone:
o Written Exchange Requests. Submit an OppenheimerFunds
Exchange Request form, signed by all owners of the account. Send
it to the Transfer Agent at the addresses listed in "How to Sell
Shares."
o Telephone Exchange Requests. Telephone exchange requests may
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<PAGE>
be made either by calling a service representative at 1-800-852- 8457 or by
using PhoneLink for automated exchanges, by calling 1- 800-533-3310. Telephone
exchanges may be made only between accounts that are registered with the same
name(s) and address. Shares held under certificates may not be exchanged by
telephone.
You can find a list of Oppenheimer funds currently available
for exchanges in the Statement of Additional Information or obtain
one by calling a service representative at 1-800-525-7048. That
list can change from time to time.
There are certain exchange policies you should be aware of:
o Shares are normally redeemed from one fund and purchased from the other
fund in the exchange transaction on the same regular business day on which the
Transfer Agent receives an exchange request that is in proper form by the close
of The New York Stock Exchange that day, which is normally 4:00 P.M., but may be
earlier on some days. However, either fund may delay the purchase of shares of
the fund you are exchanging into up to seven days if it determines it would be
disadvantaged by a same-day transfer of the proceeds to buy shares. For example,
the receipt of multiple exchange requests from a dealer in a "market-timing"
strategy might require the sale of portfolio securities at a time or price
disadvantageous to the Fund.
o Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request that
will disadvantage it, or to refuse multiple exchange requests submitted by a
shareholder or dealer.
o The Fund may amend, suspend or terminate the exchange privilege at any
time. Although the Fund will attempt to provide you notice whenever it is
reasonably able to do so, it may impose these changes at any time.
o For tax purposes, exchanges of shares involve a redemption of the shares
of the fund you own and a purchase of the shares of the other fund, which may
result in a capital gain or loss. For more information about taxes affecting
exchanges, please refer to "How to Exchange Shares" in the Statement of
Additional Information.
o If the Transfer Agent cannot exchange all the shares you request because
of a restriction cited above, only the shares eligible for exchange will be
exchanged.
Shareholder Account Rules and Policies
o Net Asset Value Per Share is determined for each class of shares as of
the close of The New York Stock Exchange, which is normally 4:00 P.M. but may be
earlier on some days, on each day the Exchange is open by dividing the value of
the Fund's net assets attributable to a class by the number of shares of that
class that are outstanding. The Fund's Board of Trustees has established
procedures to value the Fund's securities to determine net asset
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<PAGE>
value. In general, securities values are based on market value. There are
special procedures for valuing illiquid and restricted securities and
obligations for which market values cannot be readily obtained. These procedures
are described more completely in the Statement of Additional Information.
o The offering of shares may be suspended during any period in which the
determination of net asset value is suspended, and the offering may be suspended
by the Board of Trustees at any time the Board believes it is in the Fund's best
interest to do so.
o Telephone Transaction Privileges for purchases, redemptions or exchanges
may be modified, suspended or terminated by the Fund at any time. If an account
has more than one owner, the Fund and the Transfer Agent may rely on the
instructions of any one owner. Telephone privileges apply to each owner of the
account and the dealer representative of record for the account unless and until
the Transfer Agent receives cancellation instructions from an owner of the
account.
o The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not use
reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither the Transfer Agent nor the Fund will be
liable for losses or expenses arising out of telephone instructions reasonably
believed to be genuine. If you are unable to reach the Transfer Agent during
periods of unusual market activity, you may not be able to complete a telephone
transaction and should consider placing your order by mail.
o Redemption or transfer requests will not be honored until the Transfer
Agent receives all required documents in proper form. From time to time, the
Transfer Agent in its discretion may waive certain of the requirements for
redemptions stated in this Prospectus.
o Dealers that can perform account transactions for their clients by
participating in NETWORKING through the National Securities Clearing Corporation
are responsible for obtaining their clients' permission to perform those
transactions and are responsible to their clients who are shareholders of the
Fund if the dealer performs any transaction erroneously or improperly.
o The redemption price for shares will vary from day to day because the
value of the securities in the Fund's portfolio fluctuates, and the redemption
price, which is the net asset value per share, will normally be different for
Class A, Class B, Class C and Class Y shares. Therefore, the redemption value of
your shares may be more or less than their original cost.
o Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the
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<PAGE>
shareholder under the redemption procedures described above) within 7 days after
the Transfer Agent receives redemption instructions in proper form, except under
unusual circumstances determined by the Securities and Exchange Commission
delaying or suspending such payments. For accounts registered in the name of a
broker/dealer, payment will be forwarded within 3 business days. The Transfer
Agent may delay forwarding a check or processing a payment via AccountLink for
recently purchased shares, but only until the purchase payment has cleared. That
delay may be as much as 10 days from the date the shares were purchased. That
delay may be avoided if you purchase shares by certified check or arrange with
your bank to provide telephone or written assurance to the Transfer Agent that
your purchase payment has cleared.
o Involuntary redemptions of small accounts may be made by the Fund if the
account value has fallen below $200 for reasons other than the fact that the
market value of shares has dropped, and in some cases involuntary redemptions
may be made to repay the Distributor for losses from the cancellation of share
purchase orders.
o Under unusual circumstances, shares of the Fund may be redeemed "in
kind," which means that the redemption proceeds will be paid with securities
from the Fund's portfolio. Please refer to "How to Sell Shares" in the Statement
of Additional Information for more details.
o "Backup Withholding" of Federal income tax may be applied at the rate of
31% from taxable dividends, distributions and redemption proceeds (including
exchanges) if you fail to furnish the Fund a certified Social Security or
Employer Identification Number when you sign your application, or if you violate
Internal Revenue Service regulations on tax reporting of income.
o The Fund does not charge a redemption fee, but if your dealer or broker
handles your redemption, they may charge a fee. That fee can be avoided by
redeeming your Fund shares directly through the Transfer Agent. Under the
circumstances described in "How to Buy Shares," you may be subject to a
contingent deferred sales charge when redeeming certain Class A, Class B and
Class C shares.
o To avoid sending duplicate copies of materials to households, the Fund
will mail only one copy of each annual and semi-annual report to shareholders
having the same last name and address on the Fund's records. However, each
shareholder may call the Transfer Agent at 1-800-525-7048 to ask that copies of
those materials be sent personally to that shareholder.
Dividends, Capital Gains and Taxes
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<PAGE>
Dividends. The Fund declares dividends separately for Class A, Class B, Class C
and Class Y shares from net investment income, if any, on an annual basis and
normally pays such dividends to shareholders in December, but the Board of
Trustees can change that date. It is expected that distributions paid with
respect to Class A and Class Y shares will generally be higher than for Class B
or Class C shares because expenses allocable to Class B and Class C shares will
generally be higher. There is no fixed dividend rate and there can be no
assurance as to the payment of any dividends because the Fund seeks total return
as its primary objective rather than income.
Capital Gains. The Fund may make distributions annually in December out of any
net short-term or long-term capital gains, and may make supplemental
distributions of capital gains following the end of its tax year (which ends
March 31st). Short-term capital gains are treated as dividends for tax purposes.
Long-term capital gains will be separately identified in the tax information the
Fund sends you after the end of the calendar year (see "Taxes" below). There can
be no assurance that the Fund will pay any capital gains distributions in a
particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. For
OppenheimerFunds retirement accounts, all distributions are
reinvested. For other accounts, you have four options:
o Reinvest all distributions in the Fund. You can elect to reinvest all
dividends and long-term capital gains distributions in additional shares of the
Fund.
o Reinvest long-term capital gains only. You can elect to reinvest
long-term capital gains in the Fund while receiving dividends by check or sent
to your bank account on AccountLink.
o Receive all distributions in cash. You can elect to receive a check for
all dividends and long-term capital gains distributions or have them sent to
your bank on AccountLink.
o Reinvest your distributions in another Oppenheimer Funds account. You
can reinvest all distributions in another Oppenheimer fund account you have
established.
Taxes. The Fund intends to meet the requirements of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), so as to qualify as a regulated
investment company ("RIC"). To that end, the Fund has obtained an opinion of
counsel concerning the treatment of Hybrid Instruments for purposes of those
requirements. As a RIC, the Fund itself is not subject to the Federal income tax
on any of its income, provided that it satisfies certain income, diversification
and distribution requirements, which the Fund intends to do.
Notwithstanding the foregoing, the Fund retains the right not to qualify
as a RIC for income tax purposes. Moreover, counsel's opinion, which is not
binding on the Internal Revenue Service (the "IRS"), is based, among other
things, on an analysis of the relevant law as applied to the type of securities
in which the Fund will invest. Should the Fund choose not to qualify as a RIC,
or
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<PAGE>
should the IRS challenge counsel's conclusions, on whatever ground, and should
its challenge be upheld, resulting in a disqualification of the Fund as a RIC,
then the Fund will be subject to the Federal income tax on its net income at
regular corporate rates (without a deduction for distributions to shareholders).
When distributed, such income would then be taxable to shareholders as an
ordinary dividend.
Under the rules applicable to a regulated investment company,
distributions by the Fund of its net investment income and the excess, if any,
of its net short-term capital gain over its net long-term capital loss are
taxable to shareholders as ordinary income. Distributions by the Fund of the
excess, if any, of its net long-term capital gain over its net short-term
capital loss are designated as capital gain dividends and are taxable to
shareholders as long-term capital gains, regardless of the length of time you
have held your shares.
Distributions to shareholders will be treated in the same manner for
Federal income tax purposes whether they elect to receive them in cash or
reinvest them in additional shares. In general, shareholders take distributions
into account in the year in which they are made. However, they are required to
treat certain distributions made during January as having been paid by the Fund
and received by them on December 31 of the preceding year. A statement setting
forth the Federal income tax status of all distributions made (or deemed made)
during the year to shareholders will be sent to you promptly after the end of
each year.
If a shareholder is a nonresident alien or other foreign shareholder,
ordinary income dividends paid to such shareholder generally will be subject to
United States withholding tax at the rate of 30% (or a lower rate under an
applicable treaty). Non-U.S. shareholders are urged to consult their own tax
advisors concerning the application of the United States withholding tax to
them.
Under the back-up withholding rules of the Code, shareholders may be
subject to 31% withholding of Federal income tax on ordinary income dividends,
capital gain dividends and redemption payments (including exchanges) made by the
Fund. In order to avoid this back-up withholding, shareholders must provide the
Fund with a correct taxpayer identification number (which for an individual is
usually his/her Social Security number) or certify that they are corporations or
otherwise exempt from or not subject to back-up withholding.
o "Buying a Dividend". When a fund goes ex-dividend, its share price is
reduced by the amount of the distribution. If you buy shares on or just before
the ex-dividend date, or just before the Fund declares a capital gains
distribution, you will pay the full price for the shares and then receive a
portion of the price back as a taxable dividend or capital gain.
o Taxes on Transactions. Share redemptions, including
redemptions for exchanges, are subject to capital gains tax.
Generally speaking, a capital gain or loss is the difference
between the price you paid for the shares and the price you
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received when you sold them.
o Returns of Capital. In certain cases distributions made by the Fund may
be considered a non-taxable return of capital to shareholders. If that occurs,
it will be identified in notices to shareholders. A non-taxable return of
capital may reduce your tax basis in your Fund shares.
This information is only a summary of certain Federal tax information
about your investment. More information is contained in the Statement of
Additional Information. In addition you should consult with your tax advisor
about the effect of an investment in the Fund on your particular tax situation.
<PAGE>
A P P E N D I X A
Special Sales Charge Arrangements for Shareholders of the Fund Who
Were Shareholders of the Former Quest for Value Funds
The initial and contingent deferred sales charge rates and waivers for Class A,
Class B and Class C shares of the Fund described elsewhere in this Prospectus
are modified as described below for those shareholders of (i) Oppenheimer Quest
Value Fund, Inc., Oppenheimer Quest Growth & Income Fund, Oppenheimer Quest
Opportunity Value Fund, Oppenheimer Quest Small Cap Value Fund and Oppenheimer
Quest Global Value Fund, Inc. on November 24, 1995, when OppenheimerFunds, Inc.
became the investment advisor to those funds, and (ii) Quest for Value U.S.
Government Income Fund, Quest for Value Investment Quality Income Fund, Quest
for Value Global Income Fund, Quest for Value New York Tax-Exempt Fund, Quest
for Value National Tax-Exempt Fund and Quest for Value California Tax- Exempt
Fund when those funds merged into various Oppenheimer funds on November 24,
1995. The funds listed above are referred to in this Prospectus as the "Former
Quest for Value Funds." The waivers of initial and contingent deferred sales
charges described in this Appendix apply to shares of the Fund (i) acquired by
such shareholder pursuant to an exchange of shares of one of the Oppenheimer
funds that was one of the Former Quest for Value Funds or (ii) purchased by such
shareholder by exchange of shares of other Oppenheimer funds that were acquired
pursuant to the merger of any of the Former Quest for Value Funds into an
Oppenheimer fund on November 24, 1995.
Class A Sales Charges
o Reduced Class A Initial Sales Charge Rates for Certain
Former Quest Shareholders
o Purchases by Groups, Associations and Certain Qualified
Retirement Plans. The following table sets forth the initial sales
A-1
<PAGE>
charge rates for Class A shares purchased by a "Qualified Retirement Plan"
through a single broker, dealer or financial institution, or by members of
"Associations" formed for any purpose other than the purchase of securities if
that Qualified Retirement Plan or that Association purchased shares of any of
the Former Quest for Value Funds or received a proposal to purchase such shares
from OCC Distributors prior to November 24, 1995. For this purpose only, a
"Qualified Retirement Plan" includes any 401(k) plan, 403(b) plan, and SEP/IRA
or IRA plan for employees of a single employer.
<TABLE>
<CAPTION>
Front-End Sales Front-End Sales
Number of Charge as a Charge as a Commission as
Eligible Employees Percentage of Percentage of Percentage of
or Members Offering Price Amount Invested Offering Price
- -----------------------------------------------------------------------
<S> <C> <C> <C>
9 or fewer 2.50% 2.56% 2.00%
- -----------------------------------------------------------------------
At least 10 but not
more than 49 2.00% 2.04% 1.60%
</TABLE>
For purchases by Qualified Retirement plans and Associations having 50 or more
eligible employees or members, there is no initial sales charge on purchases of
Class A shares, but those shares are subject to the Class A contingent deferred
sales charge described beginning on page __ of this Prospectus.
Purchases made under this arrangement qualify for the lower of the sales
charge rate in the table based on the number of eligible employees in a
Qualified Retirement Plan or members of an Association or the sales charge rate
that applies under the Rights of Accumulation described above in the Prospectus.
In addition, purchases by 401(k) plans that are Qualified Retirement Plans
qualify for the waiver of the Class A initial sales charge if they qualified to
purchase shares of any of the Former Quest For Value Funds by virtue of
projected contributions or investments of $1 million or more each year.
Individuals who qualify under this arrangement for reduced sales charge rates as
members of Associations, or as eligible employees in Qualified Retirement Plans
also may purchase shares for their individual or custodial accounts at these
reduced sales charge rates, upon request to the Fund's Distributor.
o Special Class A Contingent Deferred Sales Charge Rates. Class A shares
of the Fund purchased by exchange of shares of other Oppenheimer funds that were
acquired as a result of the merger of Former Quest for Value Funds into those
Oppenheimer funds, and which shares were subject to a Class A contingent
deferred sales charge prior to November 24, 1995, will be subject to a
contingent deferred sales charge at the following rates: if they are redeemed
within 18 months of the end of the calendar month in which they were purchased,
at a rate equal to 1.0% if the redemption occurs
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<PAGE>
within 12 months of their initial purchase and at a rate of 0.50 of 1.0% if the
redemption occurs in the subsequent six months. Class A shares of any of the
Former Quest for Value Funds purchased without an initial sales charge on or
before November 22, 1995 will continue to be subject to the applicable
contingent deferred sales charge in effect as of that date as set forth in the
then-current prospectus for such fund.
o Waiver of Class A Sales Charges for Certain Shareholders. Class A shares
of the Fund purchased by the following investors are not subject to any Class A
initial or contingent deferred sales charges:
o Shareholders of the Fund who were shareholders of the AMA Family of
Funds on February 28, 1991 and who acquired shares of any of the Former Quest
for Value Funds by merger of a portfolio of the AMA Family of Funds.
o Shareholders of the Fund who acquired shares of any Former Quest for
Value Fund by merger of any of the portfolios of the Unified Funds.
o Waiver of Class A Contingent Deferred Sales Charge in Certain
Transactions. The Class A contingent deferred sales charge will not apply to
redemptions of Class A shares of the Fund purchased by the following investors
who were shareholders of any Former Quest for Value Fund:
o Investors who purchased Class A shares from a dealer that is or was not
permitted to receive a sales load or redemption fee imposed on a shareholder
with whom that dealer has a fiduciary relationship under the Employee Retirement
Income Security Act of 1974 and regulations adopted under that law.
o Participants in Qualified Retirement Plans that purchased shares of any
of the Former Quest For Value Funds pursuant to a special "strategic alliance"
with the distributor of those funds. The Fund's Distributor will pay a
commission to the dealer for purchases of Fund shares as described above in
"Class A Contingent Deferred Sales Charge."
Class A, Class B and Class C Contingent Deferred Sales Charge
Waivers
o Waivers for Redemptions of Shares Purchased Prior to March 6, 1995. In
the following cases, the contingent deferred sales charge will be waived for
redemptions of Class A, Class B or Class C shares of the Fund acquired by merger
of a Former Quest for Value Fund into the Fund or by exchange from an
Oppenheimer fund that was a Former Quest for Value Fund merged, if those shares
were purchased prior to March 6, 1995: in connection with (i) distributions to
participants or beneficiaries of plans qualified under Section 401(a) of the
Internal Revenue Code or from custodial accounts under Section 403(b)(7) of the
Code, Individual
A-3
<PAGE>
Retirement Accounts, deferred compensation plans under Section 457 of the Code,
and other employee benefit plans, and returns of excess contributions made to
each type of plan, (ii) withdrawals under an automatic withdrawal plan holding
only either Class B or Class C shares if the annual withdrawal does not exceed
10% of the initial value of the account, and (iii) liquidation of a
shareholder's account if the aggregate net asset value of shares held in the
account is less than the required minimum value of such accounts.
o Waivers for Redemptions of Shares Purchased on or After March 6, 1995
but Prior to November 24, 1995. In the following cases, the contingent deferred
sales charge will be waived for redemptions of Class A, Class B or Class C
shares of the Fund acquired by merger of a Former Quest for Value Fund into the
Fund or by exchange from an Oppenheimer fund that was a Former Quest For Value
Fund or into which such fund merged, if those shares were purchased on or after
March 6, 1995, but prior to November 24, 1995: (1) distributions to participants
or beneficiaries from Individual Retirement Accounts under Section 408(a) of the
Internal Revenue Code or retirement plans under Section 401(a), 401(k), 403(b)
and 457 of the Code, if those distributions are made either (a) to an individual
participant as a result of separation from service or (b) following the death or
disability (as defined in the Code) of the participant or beneficiary; (2)
returns of excess contributions to such retirement plans; (3) redemptions other
than from retirement plans following the death or disability of the
shareholder(s) (as evidenced by a determination of total disability by the U.S.
Social Security Administration); (4) withdrawals under an automatic withdrawal
plan (but only for Class B or Class C shares) where the annual withdrawals do
not exceed 10% of the initial value of the account; and (5) liquidation of a
shareholder's account if the aggregate net asset value of shares held in the
account is less than the required minimum account value. A shareholder's account
will be credited with the amount of any contingent deferred sales charge paid on
the redemption of any Class A, Class B or Class C shares of the Fund described
in this section if within 90 days after that redemption, the proceeds are
invested in the same Class of shares in this Fund or another Oppenheimer fund.
Special Dealer Arrangements
Dealers who sold Class B shares of a Former Quest for Value Fund to Quest for
Value prototype 401(k) plans that were maintained on the TRAC-2000 recordkeeping
system and that were transferred to an OppenheimerFunds prototype 401(k) plan
shall be eligible for an additional one-time payment by the Distributor of 1% of
the value of the plan assets transferred, but that payment may not exceed $5,000
as to any one plan.
Dealers who sold Class C shares of a Former Quest for Value Fund to Quest
for Value prototype 401(k) plans that were maintained on the TRAC-2000
recordkeeping system and (i) the shares held by
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<PAGE>
those plans were exchanged for Class A shares, or (ii) the plan assets were
transferred to an OppenheimerFunds prototype 401(k) plan, shall be eligible for
an additional one-time payment by the Distributor of 1% of the value of the plan
assets transferred, but that payment may not exceed $5,000.
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<PAGE>
A P P E N D I X B
CFTC EXEMPTION FOR QUALIFYING HYBRID INSTRUMENTS
Section 34.3 Hybrid Instrument Exemption
(a) A hybrid instrument is exempt from all provisions of the Commodity Exchange
Act (the "Act") and any person or class of persons offering, entering into,
rendering advice or rendering other services with respect to such exempt hybrid
instrument is exempt for such activity from all provisions of the Act (except in
each case Section 2(a)(1)(B)), provided the following terms and conditions are
met:
(1) The instrument is:
(i) An equity or debt security within the meaning of
Section 2(l) of the Securities Act of 1933; or
(ii) A demand deposit, time deposit or transaction
account within the meaning of 12 CFR 204.2(b)(1),
(c)(1) and (e), respectively, offered by an insured
depository institution as defined in Section 3 of
the Federal Deposit Insurance Act; an insured
credit union as defined in Section 101 of the
Federal Credit Union Act; or a Federal or State
branch or agency of a foreign bank as defined in
Section 1 of the International Banking Act;
(2) The sum of the commodity-dependent values of the
commodity-dependent components is less than the commodity-
independent value of the commodity-independent component;
(3) Provided that:
(i) An issuer must receive full payment of the hybrid instrument's
purchase price, and a purchaser or holder of a hybrid
instrument may not be required to make additional
out-of-pocket payments to the issuer during the life of the
instrument or at maturity; and
(ii) The instrument is not marketed as a futures contract or a
commodity option, or, except to the extent necessary to
describe the functioning of the instrument or to comply with
applicable disclosure requirements, as having the
characteristics of a futures contract or a commodity option;
and
(iii) The instrument does not provide for settlement in the form of
a delivery instrument that is specified as such in the rules
of a designated contract market;
(4) The instrument is initially issued or sold subject to applicable
federal or state securities or banking laws to persons permitted
thereunder to purchase or enter into the hybrid instrument.
B-1
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A P P E N D I X C
CFTC EXEMPTION FOR SWAP TRANSACTIONS
Section 35.2 Exemption
A swap agreement is exempt from all provisions of the Act and any person or
class of persons offering, entering into, rendering advice, or rendering other
services with respect to such agreement, is exempt for such activity from all
provisions of the Act (except in each case the provisions of Sections
2(a)(1)(B), 4b, and 4o of the Act and Section 32.9 of this chapter as adopted
under Section 4c(b) of the Act, and the provisions of Sections 6c and 9(a)(2) of
the Act to the extent these provisions prohibit manipulation of the market price
of any commodity in interstate commerce or for future delivery on or subject to
the rules of any contract market), provided the following terms and conditions
are met:
(a) the swap agreement is entered into solely between eligible swap
participants at the time such persons enter into the swap agreement;
(b) the swap agreement is not part of a fungible class of
agreements that are standardized as to their material economic
terms;
(c) the creditworthiness of any party having an actual or potential
obligation under the swap agreement would be a material consideration in
entering into or determining the terms of the swap agreement, including pricing,
cost, or credit enhancement terms of the swap agreement; and
(d) the swap agreement is not entered into and traded on or through a
multilateral transaction execution facility; provided, however, that subsections
(b) and (d) of Rule 35.2 shall not be deemed to preclude arrangements or
facilities between parties to swap agreements, that provide for netting of
payment obligations resulting from such swap agreements nor shall these
subsections be deemed to preclude arrangements or facilities among parties to
swap agreements, that provide for netting of payments resulting from such swap
agreements; provided further, that any person may apply to the Commission for
exemption from any of the provisions of the Act (except 2(a)(1)(B)) for other
arrangements or facilities, on such terms and conditions as the Commission deems
appropriate, including but not limited thereto, the applicability of other
regulatory regimes.
C-1
<PAGE>
Oppenheimer Real Asset Fund
6803 South Tucson Way
Englewood, Colorado 80112
1-800-525-7048
Investment Advisor
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street, Suite 3600
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
Special Counsel
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022
No dealer, broker, salesperson or any other person has been authorized to give
any information or to make any representations other than those contained in
this Prospectus or the Statement of Additional Information and, if given or
made, such information and representations must not be relied upon as having
been authorized by the Fund, OppenheimerFunds, Inc., Oppenheimer Real Asset
Management, Inc., OppenheimerFunds Distributor, Inc. or any affiliate thereof.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any of the securities offered hereby in any state to any person to
whom it is unlawful to make such an offer in such state.
__________________ Printed on Recycled Paper
<PAGE>
<PAGE>
Oppenheimer Real Asset Fund
6803 South Tuscon Way, Englewood, Colorado 80112
1-800-525-7048
Statement of Additional Information dated September 18, 1997
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated September 18, 1997. It should be read
together with the Prospectus, which may be obtained by writing to the Fund's
Transfer Agent, OppenheimerFunds Services, at P.O. Box 5270, Denver, Colorado
80217 or by calling the Transfer Agent at the toll-free number shown above.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Page
About the Fund
Investment Objective and Policies.........................................2
Investment Policies and Strategies........................................2
Other Investment Techniques and Strategies.............................15
Other Investment Restrictions..........................................29
How the Fund is Managed..................................................30
Organization and History............................................30
Trustees and Officers of the Fund...................................31
The Manager and Its Affiliates......................................36
Brokerage Policies of the Fund...........................................38
Performance of the Fund..................................................40
Distribution and Service Plans...........................................43
About Your Account
How To Buy Shares........................................................45
How To Sell Shares.......................................................53
How To Exchange Shares...................................................58
Dividends, Capital Gains and Taxes.......................................60
Additional Information About the Fund....................................62
Financial Information About the Fund
Independent Auditors' Report.............................................63
Financial Statements.....................................................64
Appendix A: Corporate Industry Classifications..........................A-1
</TABLE>
<PAGE>
ABOUT THE FUND
Investment Objective and Policies
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<PAGE>
Investment Policies and Strategies. The investment objective and policies
of the Fund are discussed in the Prospectus. Set forth below is supplemental
information about those policies and the types of securities in which the Fund
may invest, as well as the strategies the Fund may use to try to achieve its
investment objective. Certain capitalized terms used in this Statement of
Additional Information have the same meanings as those terms have in the
Prospectus.
The objective of the Fund is total return. Current income is not a
consideration in the selection of portfolio securities for the Fund, whether for
appreciation, defensive, or liquidity purposes. The fact that a security has a
low yield or no yield will not be an adverse factor in selecting securities to
try to achieve the Funds' investment objective, unless the Manager believes that
lack of current income might adversely affect appreciation possibilities.
The Fund intends to invest in a portfolio of debt instruments and
commodity-linked instruments, including hybrid instruments, options, futures and
forward contracts, swaps and other securities designed to outperform investments
in traditional equity and debt securities when the value of these traditional
securities is declining due to adverse economic conditions. As an example,
during periods of rising inflation, debt securities tend to decline in value due
to the general increase in interest rates. Conversely, during these same periods
of rising inflation, the prices of certain commodites such as oil and metals
tend to increase.
The reverse may be true during "bull markets," when the value of
traditional securities such as stocks and bonds is increasing. Under such
favorable economic conditions, the Fund's investments are expected to
underperform an investment in traditional securities. Therefore, the returns on
the Fund's investments are expected to exhibit low or negative correlation with
stocks and bonds. As such, investors should not view the Fund as a stand alone
investment, but rather, as part of a diversified portfolio including stocks and
bonds.
The Fund intends to spread its investments among instruments linked to at
least five commodity markets under normal market conditions: energy,
agriculture, livestock, precious metals, and industrial metals. The percentage
of the Fund's assets linked to particular commodity markets will vary from time
to time based on the Manager's assessment of the appreciation possibilities of
particular markets as well as rates of inflation, interest rates, current spot
market prices and other noneconomic and political factors that may affect
specific markets. In addition, the Fund may invest in mortage-backed securities,
collateralized mortgages, obligations, other debt securities, equities, real
estate investment trusts, money market instruments, and government securities.
In selecting securities for the Fund's portfolio, Oppenheimer
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<PAGE>
Real Asset Management, Inc. (the "Manager") evaluates the merits of the
securities primarily through the exercise of its own investment analysis. For
instance, for Hybrid Instruments this may include the evaluation of the
underlying commodity, futures contract, index or other economic variable that is
linked to the instrument, the issuer of the instrument, and whether the
principal of the instrument is protected.
o Hybrid Instrument. A primary vehicle for gaining exposure to the
commodities markets is through Hybrid Instruments. These are either equity or
debt securities with one or more commodity- dependent components that have
payment features similar to a commodity futures contract, a commodity option
contract, or a combination of both. Therefore, these instruments are "commodity-
linked" and are considered Hybrid Instruments because they have both
commodity-like and security-like characteristics. Hybrid Instruments are
derivative instruments because at least part of their value is derived from the
value of an underlying commodity, futures contract, index or other readily
measurable economic variable.
o Qualifying Hybrid Instruments. The Fund may invest in Hybrid Instruments
that qualify under Part 34 of the rules under the Commodity Futures Trading
Commission (the "CFTC") for an exemption from all provisions of the Commodity
Exchange Act (the "Act"). See Appendix B in the Prospectus, "CFTC Exemption for
Qualifying Hybrid Instruments."
o Principal Protection. Hybrid Instruments may be principal protected,
partially protected, or offer no principal protection. A principal protected
Hybrid Instrument means that the issuer will pay, at a minimum, the par value of
the note at maturity. Therefore, if the commodity value to which the Hybrid
Instrument is linked declines over the life of the note, the Fund will receive
at maturity the face or stated value of the note.
With a principal protected Hybrid Instrument, the Fund will receive at
maturity the greater of the par value of the note or the increase in value of
the underlying commodity or index. This protection is, in effect, an option
whose value is subject to the volatility and price level of the underlying
commodity. This optionality can be added to a hybrid structure, but only for a
cost higher than that of a partially protected (or no protection) Hybrid
Instrument. The Manager's decision on whether to use principal protection
depends on the cost of the protection. Principal protection will be a tactical
decision of the Manager if it represents good value.
With a partially protected or no principal protection Hybrid Instrument,
the Fund may receive at maturity an amount less than the note's par value if the
commodity, index or other economic variable value to which the note is linked
declines over the term of the note. The Manager, at its discretion, may invest
in a partially protected principal structured note or a note without principal
protection. In deciding to purchase a note without principal protection, the
Manager may consider, among other things, the expected performance of the
underlying commodity futures contract, index or other economic variable over the
term of the note, the cost of the note, and any other economic factors which the
Manager believes is relevant.
o Counterparty Risk. A significant risk of Hybrid Instruments is
counterparty risk. Unlike exchange traded futures and options, which are
standard contracts, hybrid instruments are
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<PAGE>
customized securities, tailor-made by a specific issuer. With a listed futures
or options contract, an investor's counterparty is the exchange clearinghouse.
Exchange clearinghouses are capitalized by the exchange members and typically
have high investment grade ratings (AAA or AA rated by Standard & Poor's).
Therefore, the risk is small that an exchange clearinghouse might be unable to
meet its obligations at maturity.
However, with a Hybrid Instrument, the Fund will take on the counterparty
credit risk of the issuer. That is, at maturity of the Hybrid Instrument, there
is a risk that the issuer may be unable to perform its obligations under the
structured note. Issuers of Hybrid Instruments are typically large money center
banks, broker-dealers, other financial institutions and large corporations. To
minimize this risk the Fund will transact, to the extent possible, with issuers
who have an investment grade credit rating from a nationally recognized
statistical rating organization ("NRSRO").
o Commodity Futures Contracts. The Fund intends to invest a portion of its
assets in commodity futures contracts.
o Comparison to forward contracts. Futures contracts and forward contracts
achieve the same economic effect: both are an agreement to purchase a specified
amount of a specified commodity at a specified future date for a price agreed
upon today. However, there are significant differences in the operation of the
two contracts. Forward contracts are individually negotiated transactions and
are not exchange traded. Therefore, with a forward contract, the Fund would make
a commitment to carry out the purchase or sale of the underlying commodity at
expiration.
For instance, suppose the Fund buys a forward contract to purchase a
certain amount of gold at a set price per ounce for delivery in three months'
time. If, two months later, the Fund wished to liquidate this position, it would
contract for the sale of the gold at a new price per ounce for delivery in one
months' time. At expiration of both forward contracts, the Fund would be
required to buy the gold at the set price under the first forward contract and
sell it at the agreed upon price under the second forward contract. Even though
the Fund has effectively offset its gold position with the purchase and sale of
the two forward contracts, it must still honor the original commitment at
maturity of the two contracts. By contrast, futures exchanges have central
clearinghouses which keep track of all positions. To offset a long position in a
futures contract, the Fund simply needs sell a similar contract on the exchange.
The exchange clearinghouse will record both the original futures contract
purchase and the offsetting sale, and there is no further commitment on the part
of the Fund. Only a very small percentage of commodity futures contracts result
in actual delivery of the underlying commodity. Additionally, any gain or loss
on the purchase and sale of the futures contracts is recognized immediately upon
the offset, while with a forward contract, profit or loss is recognized upon
maturity of the forward contracts.
o Price limits. The commodity futures exchanges impose on each commodity
futures contract a maximum permissible price movement for each trading session.
If the maximum permissible price movement is achieved on any trading day, no
further trades may be executed above (or below, if the price has moved downward)
that limit. To the extent that the Fund wishes to execute a trade outside the
daily permissible price movement, it would be prevented from doing so by
exchange rules, and must wait for the another trading session to execute its
transaction.
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<PAGE>
o Price volatility. Despite the daily price limits on the futures
exchanges, the price volatility of commodity futures contracts has been
historically greater than that for traditional securities such as stocks and
bonds. To the extent that the Fund invests in commodity futures contracts, the
assets of the Fund, and hence the Net Asset Value of Fund shares, may be subject
to greater volatility.
o Mark-to-market of futures positions. The futures clearinghouse marks
every futures contract to market at the end of each trading day, to ensure that
the outstanding futures obligations are limited by the maximum daily permissible
price movement. This process of marking-to-market is designed to prevent losses
from accumulating in any futures account. Therefore, if the Fund's futures
positions have declined in value, the Fund may be required to post additional
margin to cover this decline. Alternatively, if the Fund's futures positions
have increased in value, this increase will be credited to the Fund's account.
o Characteristics of the commodity futures markets. Commodity futures
contracts are an agreement between two parties for one party to buy an asset
from the other party at a later date at a price and quantity agreed upon today.
Commodity futures contracts are traded on futures exchanges. These futures
exchanges offer a central marketplace in which to transact futures contracts, a
clearing corporation to process trades, a standardization of expiration dates
and contract sizes, and the availability of a secondary market. Futures markets
also specify the terms and conditions of delivery as well as the maximum
permissible price movement during a trading session. Additionally, the commodity
futures exchanges have position limit rules which limit the amount of futures
contracts that any one party may hold in a particular commodity at any point in
time. These position limit rules are designed to prevent any one participant
from controlling a significant portion of the market.
o Clearing corporation. In the futures markets, the exchange clearing
corporation takes the other side in all transactions, either buying or selling
directly to the market participants. The clearinghouse acts as the counterparty
to all exchange trade futures contracts. That is, the Fund's obligation is to
the clearinghouse, and the Fund will look to the clearinghouse to satisfy the
Fund's rights under the futures contract.
o Delivery of the underlying commodity. Unlike stocks or bonds where the
buyer acquires ownership in the security, buyers of futures contracts are not
entitled to ownership of the underlying commodity until and unless they decide
to accept delivery at expiration of the contract. In practice, delivery of the
underlying commodity to satisfy a futures contract rarely occurs because most
futures traders use the liquidity of the central marketplace to sell their
futures contract before expiration.
o Forward Currency Contracts. The Fund may invest in Forward Currency
Contracts which are used to buy or sell foreign currency for future delivery at
a fixed price. The Fund uses them to try to "lock in" the U.S. dollar price of a
security denominated in a foreign currency that the Fund has purchased or sold,
or to protect against possible losses from changes in the relative value of the
U.S. dollar and a foreign currency. The Fund may also use "cross hedging," where
the Fund seeks to hedge against changes in currencies other than the currency in
which a security it holds is denominated. The use of Forward Contracts may
reduce the gain that would otherwise result from a change in the relationship
between the U.S. dollar and a foreign currency.
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<PAGE>
|X| Options. The Fund may purchase and sell call and put options on
commodity futures contracts, commodity indices, financial indices, currencies,
financial futures, swaps and securities. A call option gives the buyer the
right, but not the obligation, to purchase an underlying asset at a specified
(strike) price. A put option gives the buyer the right, but not the obligation,
to sell an underlying asset at a specified price. Options may be exchange traded
or traded over the counter (off the exchange markets) directly with dealers.
|_| Over the counter options. The Fund may trade over the counter options.
Over the counter options are not traded on an exchange and are traded directly
with dealers. To the extent an over the counter option is a tailored investment
for the Fund, it may be less liquid than an exchange traded option. Further,
similar to hybrid instruments, over the counter options contain counterparty
risk. The Fund will take on the credit risk that the seller of an over the
counter option will perform its obligations under the option agreement if the
Fund exercises the option. To minimize this risk, the Fund intends to transact,
to the extent practicable, with issuers that have an investment grade credit
rating. The Fund may trade over the counter options on commodity indices,
securities, financial indices, interest rates, currencies and swaps.
|_| Exchange traded options. The Fund may trade listed options on
commodity futures contracts. Options on commodity futures contracts are exchange
traded on the same exchange where the futures contract is listed. The Fund may
purchase and sell options on commodity futures listed on U.S. and foreign
futures exchanges. Options purchased on foreign listed futures contracts may be
exposed to the risk of foreign currency fluctuations versus the U.S. dollar. The
Fund may also trade exchange listed options on securities, commodity indices,
financial indices, interest rates and currencies.
|_| Options on swaps. The Fund may trade options on swap contracts or
"swap options." Call swap options provide the holder of the option with the
right to enter a swap contract with a specified (strike) swap formula, while put
swap options provide the holder with the right to sell or terminate a swap
contract. Swap options are not exchange traded and the Fund will bear the credit
risk of the option seller. Additionally, should the Fund exercise a call swap
option with the option seller, the credit risk of the counterparty is extended
to include the term of the swap agreement.
o Swaps. The Fund may invest in total return swaps to gain exposure to the
commodity markets. In a total return commodity swap the Fund will receive the
price appreciation of a commodity index, a portion of the index, or a single
commodity in exchange for paying an agreed-upon fee. If the commodity swap is
for one period, the Fund will pay a fixed fee, established at the outset of the
swap. However, if the term of the commodity swap is more than one period, with
interim swap payments, the Fund will pay an adjustable or floating fee. With a
"floating" rate, the fee is pegged to a base rate such as the London Interbank
Offered Rate ("LIBOR"), and is adjusted each period. Therefore, if interest
rates increase over the term of the swap contract, the Fund may be required to
pay a higher fee at each swap reset date.
o Counterparty Risk. Swap contracts are private transactions which are
customized to meet the specific investment requirements of the Fund. However,
the Fund will be exposed to the performance risk of its counterparty. If, at
maturity of the swap or any interim payment date, the counterparty is unable to
perform its obligations under the swap contract, the Fund may not receive the
payments due it under the swap agreement. To minimize this risk the Fund will
transact, to the extent possible, with counterparties who have an investment
grade rating from an NRSRO.
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<PAGE>
o Contractual Liability. Swaps are privately negotiated transactions
between the Fund and a counterparty. All of the rights and obligations of the
Fund must be detailed in the swap contract which binds the Fund and its
counterparty. Because a swap transaction is a privately negotiated contract, the
Fund remains liable for all obligations under the contract until the swap
contract matures or is purchased by the swap counterparty. Therefore, even if
the Fund were to sell the swap contract to a third party, the Fund would remain
primarily liable for the obligations under the swap transaction. The only way
for the Fund to eliminate its primary obligations under the swap agreement is to
sell the swap contract back to the original counterparty. Additionally, the Fund
must identify liquid assets to its custodian to the extent of the Fund's
obligations to pay the counterparty under the swap agreement.
o Price Risk. Total return commodity swaps expose the Fund to the price
risk of the underlying commodity, index, futures contract or economic variable.
If the price of the underlying commodity or index increases in value during the
term of the swap, the Fund will receive the price appreciation. However, if the
price of the commodity or index declines in value during the term of the swap,
the Fund will be required to pay to its counterparty the amount of the price
depreciation. The amount of the price depreciation paid by the Fund to its
counterparty would be in addition to the financing fee paid by the Fund to the
same counterparty.
o Lack of Liquidity. Although the swap market is well-developed for
primary participants, there is only a limited secondary market. Swaps are not
traded or listed on an exchange and over the counter trading of existing swap
contracts is limited. Therefore, if the Fund wishes to sell its swap contract to
a third party, it may not be able to do so at a favorable price.
o Regulatory Risk. Qualifying swap transactions are exempt from regulation
by the CFTC. Additionally, swap contracts have never been determined to be
securities by the Securities and Exchange Commission ("SEC"). Consequently, swap
contracts are not regulated by either the CFTC or the SEC, and swap participants
may not be afforded the protection of the Commodity Exchange Act or the
Securities Laws.
To reduce this risk, the Manager will only transact with counterparties
who use standard International Swap and Dealers Association, Inc. ("ISDA")
contract documentation. ISDA establishes industry standards for the
documentation of swap agreements. Virtually all swap participants use ISDA
documentation because it has an established set of definitions, contract terms,
and counterparty obligations.
ISDA documentation also establishes a master netting agreement which
provides that all swaps transacted between the Fund and a counterparty under the
master agreement shall be regarded as parts of an integral agreement. If, on any
date, amounts are payable in the same currency in respect of one or more swap
transactions, the net amount payable on that date in that currency shall be
paid. In addition, the master netting agreement may provide that if one party
defaults generally or on one swap, the counterparty may terminate the remaining
swaps with that party. Under such agreements, if there is a default resulting in
a loss to one party, the measure of that party's damages is calculated by
reference to the average cost of a replacement swap with respect to each swap
(i.e., the mark-to-market value at the time of the termination of each swap).
The gains and losses on all swaps are then netted, and the result is the
counterparty's gain or loss on termination. The termination of all swaps and the
netting of gains and losses on termination is generally referred to
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as "aggregation."
o Debt Securities. The Fund may invest in the following types of debt and
fixed income securities.
o U.S. Treasury Obligations. These include Treasury Bills (which have
maturities of one year or less when issued), Treasury Notes (which have
maturities of one to ten years when issued) and Treasury Bonds (which have
maturities generally greater than ten years when issued). U.S. Treasury
obligations are backed by the full faith and credit of the United States.
o U.S. Government and Agency Obligations. U.S. government securities are
debt obligations issued by or guaranteed by the United States government or any
of its agencies or instrumentalities. Some of these obligations, including U.S.
Treasury notes and bonds, and mortgage-backed securities (referred to as "Ginnie
Maes") guaranteed by the Government National Mortgage Association, are supported
by the full faith and credit of the United States, which means that the
government pledges to use its taxing power to repay the debt. Other U.S.
government securities issued or guaranteed by Federal agencies or
government-sponsored enterprises are not supported by the full faith and credit
of the United States. They may include obligations supported by the ability of
the issuer to borrow from the U.S. Treasury. However, the Treasury is not under
a legal obligation to make a loan. Examples of these are obligations of Federal
Home Loan Mortgage Corporation (these securities are often called "Freddie
Macs"). Other obligations are supported by the credit of the instrumentality,
such as Federal National Mortgage Association bonds (these securities are often
called "Fannie Maes").
o GNMA Certificates. Certificates of Government National Mortgage
Association ("GNMA") are mortgage-backed securities of GNMA that evidence an
undivided interest in a pool or pools of mortgages ("GNMA Certificates"). The
GNMA Certificates that the Fund may purchase are of the "modified pass-through"
type, which entitle the holder to receive timely payment of all interest and
principal payments due on the mortgage pool, net of fees paid to the "issuer"
and GNMA, regardless of whether the mortgagor actually makes the payments.
The National Housing Act authorizes GNMA to guarantee the timely payment
of principal and interest on securities backed by a pool of mortgages insured by
the Federal Housing Administration ("FHA") or guaranteed by the Veterans
Administration ("VA"). The GNMA guarantee is backed by the full faith and credit
of the U.S. Government. GNMA is also empowered to borrow without limitation from
the U.S. Treasury if necessary to make any payments required under its
guarantee.
The average life of a GNMA Certificate is likely to be substantially
shorter than the original maturity of the mortgages underlying the securities.
Prepayments of principal by mortgagors and mortgage foreclosures will usually
result in the return of the greater part of principal investment long before the
maturity of the mortgages in the pool. Foreclosures impose no risk to principal
investment because of the GNMA guarantee, except to the extent that the Fund has
purchased the certificates at a premium in the secondary market.
o FNMA Securities. The Federal National Mortgage Association ("FNMA") was
established to create a secondary market in mortgages insured by the FHA. FNMA
issues guaranteed mortgage pass-through certificates ("FNMA Certificates"). FNMA
Certificates resemble
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GNMA Certificates in that each FNMA Certificate represents a pro rata share of
all interest and principal payments made and owed on the underlying pool. FNMA
guarantees timely payment of interest and principal on FNMA Certificates. The
FNMA guarantee is not backed by the full faith and credit of the U.S.
Government.
o FHLMC Securities. The Federal Home Loan Mortgage Corporation ("FHLMC")
was created to promote development of a nationwide secondary market for
conventional residential mortgages. FHLMC issues two types of mortgage
pass-through certificates ("FHLMC Certificates"): mortgage participation
certificates ("PCs") and guaranteed mortgage certificates ("GMCs"). PCs resemble
GNMA Certificates in that each PC represents a pro rata share of all interest
and principal payments made and owed on the underlying pool. FHLMC guarantees
timely monthly payment of interest on PCs and the ultimate payment of principal.
The FHLMC guarantee is not backed by the full faith and credit of the U.S.
Government.
GMCs also represent a pro rata interest in a pool of mortgages. However,
these instruments pay interest semi-annually and return principal once a year in
guaranteed minimum payments. The expected average life of these securities is
approximately ten years. The FHLMC guarantee is not backed by the full faith and
credit of the U.S. Government.
o Mortgage-Backed Securities and CMO's. These securities represent
participation interests in pools of residential mortgage loans. Mortgage-backed
securities include collateralized mortgage-backed obligations (referred to as
"CMOs") issued by the U.S. government, its agencies or instrumentalities, or by
private issuers. Mortgage-backed securities and CMOs securities differ from
conventional debt securities which generally provide for periodic payment of
interest in fixed or determinable amounts (usually semi-annually) with principal
payments at maturity or specified call dates.
o Mortgage-Backed Securities. The yield on mortgage-backed securities is
based on the average expected life of the underlying pool of mortgage loans. The
actual life of any particular pool will be shortened by any unscheduled or early
payments of principal and interest. Principal prepayments generally result from
the sale of the underlying property or the refinancing or foreclosure of
underlying mortgages. The occurrence of prepayments is affected by a wide range
of economic, demographic and social factors and, accordingly, it is not possible
to predict accurately the average life of a particular pool. Yield on such pools
is usually computed by using the historical record of prepayments for that pool,
or, in the case of newly-issued mortgages, the prepayment history of similar
pools. The actual prepayment experience of a pool of mortgage loans may cause
the yield realized by the Fund to differ from the yield calculated on the basis
of the expected average life of the pool.
Prepayments tend to increase during periods of falling interest rates,
while during periods of rising interest rates prepayments will most likely
decline. When prevailing interest rates rise, the value of a pass-through
security may decrease, as do the values of other debt securities, but, when
prevailing interest rates decline, the value of a pass-through security is not
likely to rise to the extent that the value of other debt securities rise,
because of the prepayment feature of pass-through securities. The Fund's
reinvestment of scheduled principal payments and unscheduled prepayments it
receives may occur at times when available investments offer higher or lower
rates than the original investment, thus affecting the yield of the Fund.
Monthly interest payments received by the Fund have a compounding effect which
may increase the yield to the Fund more than debt
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obligations that pay interest semi-annually. Because of those factors,
mortgage-backed securities may be less effective than Treasury bonds of similar
maturity at maintaining yields during periods of declining interest rates. The
Fund may purchase mortgage-backed securities at par or at a premium or at a
discount. Accelerated prepayments adversely affect yields for pass-through
securities purchased at a premium (i.e., at a price in excess of their principal
amount) and may involve additional risk of loss of principal because the premium
may not have been fully amortized at the time the obligation is repaid. The
opposite is true for pass-through securities purchased at a discount.
The Fund may invest in "stripped" mortgage-backed securities, in which the
principal and interest portions of the security are separated and sold. Stripped
mortgage-backed securities usually have at least two classes each of which
receives different proportions of interest and principal distributions on the
underlying pool of mortgage assets. One common variety of stripped
mortgage-backed security has one class that receives some of the interest and
most of the principal, while the other class receives most of the interest and
remainder of the principal. In some cases, one class will receive all of the
interest (the "interest-only" or "I/O" class), while the other class will
receive all of the principal (the "principal-only" or "P/O" class).
The yield to maturity on the class that receives only interest is
extremely sensitive to the rate of payment of the principal on the underlying
mortgages. Principal prepayments increase that sensitivity. Stripped securities
that pay "interest only" are therefore subject to greater price volatility when
interest rates change, and they have the additional risk that if the underlying
mortgages are prepaid, the Fund will lose the anticipated cash flow from the
interest on the prepaid mortgages. That risk is increased when general interest
rates fall, and in times of rapidly falling interest rates, the Fund might
receive back less than its investment.
The value of "principal only" securities generally increases as interest
rates decline and prepayment rates rise. The price of these securities is
typically more volatile than that of coupon- bearing bonds of the same maturity.
o Mortgage-Backed Security Rolls. The Fund may enter into "forward roll"
transactions with respect to mortgage-backed securities issued by GNMA, FNMA or
FHLMC. In a forward roll transaction, the Fund will sell a mortgage security to
a bank or other permitted entity and simultaneously agree to repurchase a
similar security from the institution at a later date at an agreed upon price.
The mortgage securities that are repurchased will bear the same interest rate as
those sold, but generally will be collateralized by different pools of mortgages
with different prepayment histories than those sold. Risks of mortgage-backed
security rolls include: (i) the risk of prepayment prior to maturity, (ii) the
possibility that the proceeds of the sale may have to be invested in money
market instruments (typically repurchase agreements) maturing not later than the
expiration of the roll, and (iii) the possibility that the market value of the
securities sold by the Fund may decline below the price at which the Fund is
obligated to purchase the securities. Upon entering into a mortgage-backed
security roll, the Fund will be required to place liquid securities in a
segregated account with its Custodian in an amount equal to its obligation under
the roll.
o CMOs. CMOs are fully-collateralized bonds that are the general
obligations of the issuer thereof. Such bonds generally are secured by an
assignment to a trustee (under the indenture pursuant to which the bonds are
issued) of collateral consisting of a pool of mortgages. Payments with respect
to the underlying mortgages generally are made to the trustee under the
indenture.
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Payments of principal and interest on the underlying mortgages are not passed
through to the holders of the CMOs as such (i.e., the character of payments of
principal and interest is not passed through, and therefore payments to holders
of CMOs attributable to interest paid and principal repaid on the underlying
mortgages do not necessarily constitute income and return of capital,
respectively, to such holders), but such payments are dedicated to payment of
interest on and repayment of principal of the CMOs. See "GNMA Certificates,"
"FNMA Securities," and "FHLMC Securities," above. CMOs often are issued in two
or more classes with different characteristics such as varying maturities and
stated rates of interest. Because interest and principal payments on the
underlying mortgages are not passed through to holders of CMOs, CMOs of varying
maturities may be secured by the same pool of mortgages, the payments on which
are used to pay interest on each class and to retire successive maturities
(known as "tranches") in sequence. Unlike other mortgage-backed securities
(discussed above), CMOs are designed to be retired as the underlying mortgages
are repaid. In the event of prepayment on such mortgages, the class of CMO first
to mature generally will be paid down. Therefore, although in most cases the
issuer of CMOs will not supply additional collateral in the event of such
prepayment, there will be sufficient collateral to secure CMOs that remain
outstanding. The value of certain classes or "tranches" may be more volatile
than the value of the pool as a whole, and losses may be more severe than on
other classes.
Mortgage-backed securities and CMOs may be less effective than debt
obligations of similar maturity at maintaining yields during periods of
declining interest rates. As new types of mortgage-related securities are
developed and offered to investors, the Manager will, subject to the direction
of the Board of Trustees and consistent with the Fund's investment objectives
and policies, consider making investments in such new types of mortgage-related
securities.
o Private Label Mortgages. The Fund may also invest in private label
mortgages which are real asset-linked mortgages issued by entities other than
United States government agencies. Private label mortgages are offered in
tranches with debt layers ranging in credit quality from AAA to, potentially, B.
These mortgages typically offer superior yields over U.S. Treasury securities.
o Commercial Paper. The Fund may invest in commercial paper investments
including the following:
o Variable Amount Master Demand Notes. Master demand notes are
corporate obligations which permit the investment of fluctuating amounts by the
Fund at varying rates of interest pursuant to direct arrangements between the
Fund, as lender, and the borrower. They permit daily changes in the amounts
borrowed. The Fund has the right to increase the amount under the note at any
time up to the full amount provided by the note agreement, or to decrease the
amount, and the borrower may prepay up to the full amount of the note without
penalty. These notes may or may not be backed by bank letters of credit. Because
these notes are direct lending arrangements between the lender and borrower, it
is not generally contemplated that they will be traded. There is no secondary
market for these notes, although they are redeemable (and thus immediately
repayable by the borrower) at principal amount, plus accrued interest, at any
time. Accordingly, the Fund's right to redeem such notes is dependent upon the
ability of the borrower to pay principal and interest on demand. The Fund has no
limitations on the type of issuer from whom these notes will be purchased;
however, in connection with such purchases and on an ongoing basis, the Manager
will consider the earning power, cash flow and other liquidity ratios of the
issuer, and its ability to pay principal and interest on demand, including a
situation in which all holders of such notes made demand simultaneously.
Investments in master demand notes are subject to the limitation on
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investments by the Fund in illiquid securities, described in the Prospectus.
o Floating Rate/Variable Rate Notes. Some of the notes the Fund may
purchase may have variable or floating interest rates. Variable rates are
adjustable at stated periodic intervals; floating rates are automatically
adjusted according to a specified market rate for such investments, such
as the percentage of the prime rate of a bank, or the 91-day U.S. Treasury
Bill rate. Such obligations may be secured by bank letters of credit or
other credit support arrangements.
o Asset-Backed Securities. Asset-backed securities are typically based on
account receivables or consumer loans. The value of an asset-backed security is
affected by changes in the market's perception of the asset backing the
security, the creditworthiness of the servicing agent for the loan pool, the
originator of the loans, or the financial institution providing any credit
enhancement, and is also affected if any credit enhancement has been exhausted.
The risks of investing in asset-backed securities are ultimately dependent upon
payment of consumer loans by the individual borrowers. As a purchaser of an
asset-backed security, the Fund would generally have no recourse to the entity
that originated the loans in the event of default by a borrower. The underlying
loans are subject to prepayments, which may shorten the weighted average life of
asset- backed securities and may lower their return, in the same manner as
described in the Prospectus and in "Mortgage-Backed Securities and CMOs", above,
for prepayments of a pool of mortgage loans underlying mortgage-backed
securities.
o Zero Coupon Securities. The Fund may invest in zero coupon securities
issued by the U.S. Treasury or by private issuers such as domestic or foreign
corporations. Zero coupon U.S. Treasury securities include: (1) U.S. Treasury
bills without interest coupons, (2) U.S. Treasury notes and bonds that have been
stripped of their unmatured interest coupons and (3) receipts or certificates
representing interests in such stripped debt obligations or coupons. These
securities usually trade at a deep discount from their face or par value and
will be subject to greater fluctuations in market value in response to changing
interest rates than debt obligations of comparable maturities that make current
payments of interest. However, the lack of periodic interest payments means that
the interest rate is "locked in" and the investor avoids the risk of having to
reinvest periodic interest payments in securities having lower rates. An
additional risk of private-issuer zero coupon securities is the credit risk that
the issuer will be unable to make payment at maturity of the obligation.
Because the Fund accrues taxable income from zero coupon securities
without receiving cash, the Fund may be required to sell portfolio securities in
order to pay dividends or redemption proceeds for its shares, which require the
payment of cash. This will depend on several factors: the proportion of
shareholders who elect to receive dividends in cash rather than reinvesting
dividends in additional shares of the Fund, and the amount of cash income the
Fund receives from other investments and the sale of shares. In either case,
cash distributed or held by the Fund that is not reinvested by investors in
additional Fund shares will hinder the Fund from seeking current income.
o Bank Obligations and Instruments Secured Thereby. The bank obligations
the Fund may invest in include time deposits, certificates of deposit, and
bankers' acceptances if they are: (i) obligations of a domestic bank with total
assets of at least $1 billion or (ii) obligations of a foreign bank with total
assets of at least U.S. $1 billion. The Fund may also invest in instruments
secured by such obligations (e.g., debt which is guaranteed by the bank). For
purposes of this section, the term "bank" includes commercial banks, savings
banks, and savings and loan associations which
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<PAGE>
may or may not be members of the Federal Deposit Insurance Corporation.
Time deposits are non-negotiable deposits in a bank for a specified period
of time at a stated interest rate, whether or not subject to withdrawal
penalties. However, time deposits that are subject to withdrawal penalties,
other than those maturing in seven days or less, are subject to the limitation
on investments by the Fund in illiquid investments, set forth in the Prospectus
under "Illiquid and Restricted Securities."
Banker's acceptances are marketable short-term credit instruments used to
finance the import, export, transfer or storage of goods. They are deemed
"accepted" when a bank guarantees their payment at maturity.
o High Yield Securities - Special Risks. As stated in the Prospectus, the
corporate debt securities in which the Fund will principally invest are
lower-rated debt securities, commonly known as "junk bonds." The Fund may invest
in securities rated as low as "C" by Moody's or "D" by S&P. The Manager will not
rely solely on the ratings assigned by rating services and may invest, without
limitation, in unrated securities which offer, in the opinion of the Manager,
comparable yields and risks as those rated securities in which the Fund may
invest.
Risks of high yield securities may include: (i) limited liquidity and
secondary market support, (ii) substantial market price volatility resulting
from changes in prevailing interest rates, (iii) subordination to the prior
claims of banks and other senior lenders, (iv) the operation of mandatory
sinking fund or call/redemption provisions during periods of declining interest
rates that could cause the Fund to reinvest premature redemption proceeds only
in lower yielding portfolio securities, (v) the possibility that earnings of the
issuer may be insufficient to meet its debt service, and (vi) the issuer's low
creditworthiness and potential for insolvency during periods of rising interest
rates and economic downturn. As a result of the limited liquidity of high yield
securities, their prices have at times experienced significant and rapid decline
when a substantial number of holders decided to sell. A decline is also likely
in the high yield bond market during an economic downturn. An economic downturn
or an increase in interest rates could severely disrupt the market for high
yield bonds and adversely affect the value of outstanding bonds and the ability
of the issuers to repay principal and interest. In addition, there have been
several Congressional attempts to limit the use of tax and other advantages of
high yield bonds which, if enacted, could adversely affect the value of these
securities and the Fund's net asset value. For example, federally insured
savings and loan associations have been required to divest their investments in
high yield bonds.
o Risks of Debt Securities. With the exception of U.S. Government
securities, the debt securities that the Fund may invest in will have one or
more types of investment risk: credit risk, interest rate risk, foreign exchange
rate risk or political risk.
o Credit Risk. Credit risk relates to the ability of the issuer to meet
interest or principal payments or both as they become due. Generally, higher
yielding bonds are subject to credit risk to a greater extent than higher
quality bonds.
o Interest Rate Risk. Interest rate risk refers to the fluctuations in
value of fixed-income securities resulting solely from the inverse relationship
between the market value of outstanding
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<PAGE>
fixed-income securities and changes in interest rates. An increase in interest
rates will generally reduce the market value of fixed-income investments, and a
decline in interest rates will tend to increase their value. In addition, debt
securities with longer maturities, which tend to produce higher yields, are
subject to potentially greater capital appreciation and depreciation than
obligations with shorter maturities. Fluctuations in the market value of
fixed-income securities subsequent to their acquisition will not affect the
interest payable on those securities, and thus the cash income from such
securities, but will be reflected in the valuations of those securities used to
compute the Fund's net asset values.
o Foreign Exchange Rate Risk. Foreign exchange rate risk is the risk that a
foreign currency will depreciate relative to the U.S. dollar. When the Fund
invests in a debt security which is denominated in a foreign currency, the value
of the investment will decline if the foreign currency devalues relative to the
U.S. dollar. Therefore, a strong U.S. dollar may, in fact, be detrimental to the
Fund's investment in foreign securities.
o Political Risk. Political risk relates to the willingness of a foreign
government or corporation to pay its interest and principal obligations as they
become due. For most industrialized nations such as the United States, Great
Britain, France, Italy, Germany, Canada or Japan, the political risk is small.
However, political risk may be larger for emerging market countries which have a
nascent economy or government.
o Foreign Securities. The Fund may invest in securities (which may be
denominated in U.S. dollars or non-U.S. currencies) issued or guaranteed by
foreign corporations, certain supranational entities (described below) and
foreign governments or their agencies or instrumentalities, and in securities
issued by U.S. corporations denominated in non-U.S. currencies. The types of
foreign debt obligations and other securities in which the Fund may invest are
the same types of debt securities identified above. Foreign securities are
subject, however, to additional risks not associated with domestic securities,
as discussed below. These additional risks may be more pronounced as to
investments in securities issued by emerging market countries or by companies
located in emerging market countries.
Investing in foreign securities involves considerations and possible risks
not typically associated with investing in securities in the U.S. The values of
foreign securities will be affected by changes in currency rates or exchange
control regulations or currency blockage, application of foreign tax laws,
including withholding taxes, changes in governmental administration or economic
or monetary policy (in the U.S. or abroad) or changed circumstances in dealings
between nations. Costs will be incurred in connection with conversions between
various currencies. Foreign brokerage commissions are generally higher than
commissions in the U.S., and foreign securities markets may be less liquid, more
volatile and less subject to governmental regulation than in the U.S.
Investments in foreign countries could be affected by other factors not
generally thought to be present in the U.S., including expropriation or
nationalization, confiscatory taxation and potential difficulties in enforcing
contractual obligations, and could be subject to extended settlement periods.
Because the Fund may purchase securities denominated in foreign
currencies, a change in the value of any such currency against the U.S. dollar
will result in a change in the U.S. dollar value of the Fund's assets and its
income available for distribution. In addition, although a portion of the Fund's
investment income may be received or realized in foreign currencies, the Fund
will be
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<PAGE>
required to compute and distribute its income in U.S. dollars, and absorb the
cost of currency fluctuations. The Fund may engage in foreign currency exchange
transactions for hedging purposes to protect against changes in future exchange
rates. See "Other Investment Techniques and Strategies - Hedging," below.
The values of foreign investments and the investment income derived from
them may also be affected unfavorably by changes in currency exchange control
regulations. Although the Fund will invest only in securities denominated in
foreign currencies that at the time of investment do not have significant
government-imposed restrictions on conversion into U.S. dollars, there can be no
assurance against subsequent imposition of currency controls. In addition, the
values of foreign securities will fluctuate in response to a variety of factors,
including changes in U.S. and foreign interest rates.
o Portfolio Turnover. To the extent that increased portfolio turnover
results in gains from sales of securities held less than three months, the
Fund's ability to qualify as a "regulated investment company" under the Internal
Revenue Code of 1986, as amended (the "Internal Revenue Code") may be affected.
Although changes in the value of the Fund's portfolio securities subsequent to
their acquisition are reflected in the net asset value of the Fund's shares,
such changes will not affect the income received by the Fund from such
securities. The dividends paid by the Fund will increase or decrease in relation
to the income received by the Fund from its investments, which will in any case
be reduced by the Fund's expenses before being distributed to the Fund's
shareholders.
Other Investment Techniques and Strategies
o Borrowing. From time to time, the Fund may borrow from banks on an
unsecured basis. Such borrowing may be used to fund shareholder redemptions or
for other purposes. Any such borrowing will be made only from banks, and
pursuant to the requirements of the Investment Company Act, will be made only to
the extent that the value of that Fund's total assets, less its liabilities
other than borrowings, is equal to at least 300% of all borrowings including the
proposed borrowing. If the value of the Fund's assets so computed should fail to
meet the 300% asset coverage requirement, the Fund is required within three days
to reduce its bank debt to the extent necessary to meet such requirement and may
have to sell a portion of its investments at a time when independent investment
judgment would not dictate such sale. Since substantially all of the Fund's
assets fluctuate in value, but borrowing obligations are fixed, when the Fund
has outstanding borrowings, its net asset value per share correspondingly will
tend to increase and decrease more when portfolio assets fluctuate in value than
otherwise would be the case. While borrowings from banks may represent up to 33
1/3% of the Fund's total assets, the Fund does not intend to make any investment
purchases while its borrowings exceed 5% of its total assets.
o When-Issued and Delayed Delivery Transactions. The Fund may purchase
securities on a "when-issued" basis, and may purchase or sell such securities on
a "delayed delivery" basis. Although the Fund will enter into such transactions
for the purpose of acquiring securities for its portfolio or for delivery
pursuant to options contracts it has entered into, the Fund may dispose of a
commitment prior to settlement. "When-issued" or "delayed delivery" refers to
securities whose terms and indenture are available and for which a market
exists, but which are not available for immediate delivery, or to securities to
be delivered at a later date. When such transactions are negotiated, the price
(which is generally expressed in yield terms) is fixed at the time the
commitment is made, but delivery and payment for the securities take place at a
later date. The Fund
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does not intend to make such purchases for speculative purposes. The commitment
to purchase a security for which payment will be made on a future date may be
deemed a separate security and involve risk of loss if the value of the security
declines prior to the settlement date. During the period between commitment by
the Fund and settlement, no payment is made for the securities purchased by the
purchaser, and no interest accrues to the purchaser from the transaction. Such
securities are subject to market fluctuation; the value at delivery may be less
than the purchase price. The Fund will maintain a segregated account with its
Custodian, consisting of marketable securities at least equal to the value of
purchase commitments until payment is made.
The Fund will engage in when-issued transactions in order to secure what
is considered to be an advantageous price and yield at the time of entering into
the obligation. When the Fund engages in when-issued or delayed delivery
transactions, it relies on the buyer or seller, as the case may be, to
consummate the transaction. Failure of the buyer or seller to do so may result
in the Fund losing the opportunity to obtain a price and yield considered to be
advantageous. At the time the Fund makes a commitment to purchase or sell a
security on a when-issued or forward commitment basis, it records the
transaction and reflects the value of the security purchased, or if a sale, the
proceeds to be received, in determining its net asset value. If the Fund chooses
to (i) dispose of the right to acquire a when-issued security prior to its
acquisition or (ii) dispose of its right to deliver or receive against a forward
commitment, it may incur a gain or loss.
The Fund may "roll" these transactions by selling the when-issued security
before the settlement date and purchasing another substantially similar
security. For accounting purposes, the Fund records a "rolled" transaction as a
purchase and sale of securities.
When-issued transactions and forward commitments allow the Fund a
technique to use against anticipated changes in interest rates and prices. For
instance, in periods of rising interest rates and falling prices, the Fund might
sell securities in its portfolio on a forward commitment basis to attempt to
limit its exposure to anticipated falling prices. In periods of falling interest
rates and rising prices, the Fund might sell portfolio securities and purchase
the same or similar securities on a when-issued or forward commitment basis,
thereby obtaining the benefit of currently higher cash yields.
o Participation Interests. The Fund may acquire participation interests in
U.S. dollar-denominated loans that are made to U.S. or foreign companies (the
"borrower"). They may be interests in, or assignments of, the loan, and are
acquired from banks or brokers that have made the loan or are members of the
lending syndicate. The Manager has set certain creditworthiness standards for
issuers of loan participations, and monitors their creditworthiness. Some
borrowers may have senior securities rated as low as "C" by Moody's or "D" by
S&P, but may be deemed acceptable credit risks. Participation interests are
considered investments in illiquid securities (see "Illiquid and Restricted
Securities," above). Their value primarily depends upon the creditworthiness of
the borrower, and its ability to pay interest and principal. Borrowers may have
difficulty making payments. If a borrower fails to make scheduled interest or
principal payments, the Fund could experience a reduction in its income and a
decline in the net asset value of its shares.
The Fund may invest in participation interests, subject to the limitation,
described in "Illiquid and Restricted Securities" in the Prospectus on
investments by the Fund in illiquid investments. Participation interests provide
the Fund an undivided interest in a loan made by the issuing financial
institution in the proportion that the Fund's participation interest bears to
the total principal amount
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of the loan. No more than 5% of the Fund's net assets can be invested in
participation interests of the same borrower. The issuing financial institution
may have no obligation to the Fund other than to pay the Fund the proportionate
amount of the principal and interest payments it receives. Participation
interests are primarily dependent upon the creditworthiness of the borrowing
corporation, which is obligated to make payments of principal and interest on
the loan, and there is a risk that such borrowers may have difficulty making
payments. In the event the borrower fails to pay scheduled interest or principal
payments, the Fund could experience a reduction in its income and might
experience a decline in the value of that participation interest and in the net
asset value of its shares. In the event of a failure by the financial
institution to perform its obligation in connection with the participation
agreement, the Fund might incur certain costs and delays in realizing payment or
may suffer a loss of principal and/or interest.
o Repurchase Agreements. In a repurchase transaction, the Fund acquires a
security from, and simultaneously resells it to, an approved vendor (a U.S.
commercial bank, the U.S. branch of a foreign bank or a broker-dealer which has
been designated a primary dealer in U.S. government securities, which must meet
the credit requirements set by the Fund's Board of Trustees from time to time),
for delivery on an agreed-upon future date. The resale price exceeds the
purchase price by an amount that reflects an agreed-upon interest rate effective
for the period during which the repurchase agreement is in effect. The majority
of these transactions run from day to day, and delivery pursuant to resale
typically will occur within one to five days of the purchase. Repurchase
agreements are considered "loans" under the Investment Company Act,
collateralized by the underlying security. The Fund's repurchase agreements
require that at all times while the repurchase agreement is in effect, the
collateral's value must equal or exceed the repurchase price to fully
collateralize the repayment obligation. Additionally, the Manager will impose
creditworthiness requirements to confirm that the vendor is financially sound
and will continuously monitor the collateral's value.
o Reverse Repurchase Agreements. In a reverse repurchase agreement, the
Fund sells a security for cash and simultaneously agrees to repurchase the
security at a later date at an agreed upon price. Anologous to "Repurchase
Agreements" discussed above, reverse repurchase agreements are a form of
borrowing. Therefore, the Fund's investment in reverse repurchase agreements
shall be subject to the same borrowing limits discussed under "Borrowing."
o Illiquid and Restricted Securities. To enable the Fund to sell
restricted securities not registered under the Securities Act of 1933, the Fund
may have to cause those securities to be registered. The expenses of
registration of restricted securities may be negotiated by the Fund with the
issuer at the time such securities are purchased by the Fund, if such
registration is required before such securities may be sold publicly. When
registration must be arranged because the Fund wishes to sell the security, a
considerable period may elapse between the time the decision is made to sell the
securities and the time the Fund would be permitted to sell them. The Fund would
bear the risks of any downward price fluctuation during that period. The Fund
expects to acquire Hybrid Instruments having regulatory or contractual
restrictions on their resale, which might limit the Fund's ability to dispose of
such securities and might lower the amount realizable upon the sale of such
securities.
The Fund has percentage limitations that apply to purchases of restricted and
illiquid
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securities, as stated in the Prospectus. Those percentage restrictions do not
limit purchases of restricted securities that are eligible for sale to qualified
institutional purchasers pursuant to Rule 144A under the Securities Act of 1933,
provided that those securities have been determined to be liquid by the Board of
Trustees of the Fund or by the Manager under Board-approved guidelines. Those
guidelines take into account the trading activity for such securities and the
availability of reliable pricing information, among other factors. If there is a
lack of trading interest in a particular Rule 144A security, the Fund's holding
of that security may be deemed to be illiquid.
o Loans of Portfolio Securities. The Fund may lend its portfolio
securities subject to the restrictions stated in the Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral must, on each business day, at least equal the market value of the
loaned securities and must consist of cash, bank letters of credit, U.S.
government securities, or other cash equivalents in which the Fund is permitted
to invest. To be acceptable as collateral, letters of credit must obligate a
bank to pay amounts demanded by the Fund if the demand meets the terms of the
letter. Such terms and the issuing bank must be satisfactory to the Fund. In a
portfolio securities lending transaction, the Fund receives from the borrower an
amount equal to the interest paid or the dividends declared on the loaned
securities during the term of the loan as well as the interest on the collateral
securities, less any finders' or administrative fees the Fund pays in arranging
the loan. The Fund may share the interest it receives on the collateral
securities with the borrower as long as it realizes at least a minimum amount of
interest required by the lending guidelines established by its Board of
Trustees. The Fund will not lend its portfolio securities to any officer,
trustee, employee or affiliate of the Fund or its Manager. The terms of the
Fund's loans must meet certain tests under the Internal Revenue Code and permit
the Fund to reacquire loaned securities on five business days' notice or in time
to vote on any important matter.
o Hedging. As described in the Prospectus, the Fund may employ one or more
types of hedging instruments. When hedging to attempt to protect against
declines in the market value of the Fund's portfolio, to permit the Fund to
retain unrealized gains in the value of portfolio securities which have
appreciated, or to facilitate selling securities for investment reasons, the
Fund may: (i) sell futures contracts, (ii) buy puts on such futures contracts or
securities, or (iii) write calls on securities held by it or on futures
contracts. When hedging to attempt to protect against the possibility that
portfolio securities are not fully included in a rise in value of the securities
or commodities markets, the Fund may: (i) buy futures contracts, or (ii) buy
calls or write puts on such futures contracts, commodity indices, financial
indices, or on the Fund's securities. Covered calls and puts may also be written
on debt securities to attempt to increase the Fund's income. When hedging to
protect against declines in the dollar value of a foreign currency-denominated
security, the Fund may: (a) buy puts on that foreign currency and on foreign
currency Futures, (b) write calls on that currency or on such futures contracts,
or (c) enter into forward contracts at a higher or lower rate than the spot
("cash") rate.
Additional Information about the hedging instruments the Fund may use is
provided below. In the future, the Fund may employ hedging instruments and
strategies that are not presently contemplated but which may be developed, to
the extent such investment methods are consistent with the Fund's investment
objective, legally permissible and adequately disclosed.
o Writing Covered Call Options. When the Fund writes a call on a security,
future, index or currency, it receives a premium and agrees to sell the callable
investment to a purchaser of a corresponding call on the same security during
the call period at a fixed exercise price (which may
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differ from the market price of the underlying security), regardless of market
price changes during the call period. The Fund has retained the risk of loss
should the price of the underlying security decline during the call period,
which may be offset to some extent by the premium.
The Fund may also write call options on financial and commodity indices.
When writing a call on a index, the Fund receives a premium and agrees to pay to
the call buyer a cash amount equal to the appreciation of the index in excess of
the option strike price over the call period. If the index declines in value the
Fund has no payment obligation and retains the option premium. When writing a
call option on an index, the Fund will segregate liquid assets equal to the
settlement value of the option.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." A profit or
loss will be realized, depending upon whether the net of the amount of the
option transaction costs and the premium received on the call written is more or
less than the price of the call subsequently purchased. A profit may also be
realized if the call lapses unexercised, because the Fund retains the underlying
investment and the premium received. Any such profits are considered short-term
capital gains for Federal income tax purposes, and when distributed by the Fund
are taxable as ordinary income. An option position may be closed out only on a
market that provides secondary trading for option of the same series, and there
is no assurance that a liquid secondary market will exist for a particular
option. If the Fund could not effect a closing purchase transaction due to lack
of a market, it would have to hold the callable investments until the call
lapsed or was exercised.
The Fund may also write calls on futures contracts without owning a
futures contract or a deliverable security, provided that at the time the call
is written, the Fund covers the call by segregating in escrow an equivalent
dollar amount of liquid assets. The Fund will segregate additional liquid assets
if the value of the escrowed assets drops below 100% of the obligation under the
futures contracts. In no circumstances would an exercise notice require the Fund
to deliver a futures contract; it would simply put the Fund in a short futures
position, which is permitted by the Fund's hedging policies.
o Writing Put Options. A put option on securities, futures contracts,
financial and commodity indices, and currencies, gives the purchaser the right
to sell, and the writer the obligation to buy, the underlying investment at the
exercise price during the option period. A put option on an index gives the
purchaser the right to collect a cash payment and the writer the obligation to
pay the decline in value of the index below the strike price during the option
period. The premium the Fund receives from writing a put option represents a
profit, as long as the price of the underlying investment remains above the
exercise price. However, the Fund has also assumed the obligation during the
option period to either buy the underlying investment from the buyer of the put
at the exercise price or pay the cash value of the decline in the index below
the exercise price, even though the value of the investment may fall below the
exercise price. If the put lapses unexercised, the Fund (as the writer of the
put) realizes a gain in the amount of the premium. If the put is exercised, the
Fund must fulfill its obligation to purchase the underlying investment at the
exercise price or make a cash payment equal to the decline in value of the
index, which will usually exceed the market value of the investment at that
time. In that case, the Fund may incur a loss, equal to the sum of the current
market value of the underlying investment and the premium received minus the sum
of the exercise price and any transaction costs incurred.
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When writing put options, to secure its obligation to pay for the
underlying asset, the Fund will deposit in escrow liquid assets with a value
equal to or greater than the exercise price of the put option. The Fund
therefore forgoes the opportunity of investing the segregated assets or writing
calls against those assets. As long as the obligation of the Fund as the put
writer continues, it may be assigned an exercise notice by the broker-dealer
through whom such option was sold, requiring the Fund to take delivery of the
underlying security against payment of the exercise price. The Fund has no
control over when it may be required to purchase the underlying security, since
it may be assigned an exercise notice at any time prior to the termination of
its obligation as the writer of the put. This obligation terminates upon
expiration of the put, or such earlier time at which the Fund effects a closing
purchase transaction by purchasing a put of the same series as that previously
sold. Once the Fund has been assigned an exercise notice, it is thereafter not
allowed to effect a closing purchase transaction.
The Fund may effect a closing purchase transaction to realize a profit on
an outstanding put option it has written or to prevent an underlying security,
futures contract, swap or index from being put. Furthermore, effecting such a
closing purchase transaction will permit the Fund to write another put option to
the extent that the exercise price thereof is secured by the deposited assets,
or to utilize the proceeds from the sale of such assets for other investments by
the Fund. The Fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from writing the option. As above for writing covered calls, any and
all such profits described herein from writing puts are considered short-term
gains for Federal tax purposes, and when distributed by the Fund, are taxable as
ordinary income.
o Purchasing Calls and Puts. When the Fund purchases a call (other than in
a closing purchase transaction), it pays a premium and, except as to calls on
indices or futures contracts, has the right to buy the underlying investment
from a seller of a corresponding call on the same investment during the call
period at a fixed exercise price. When the Fund purchases a call on an index or
future contract, it pays a premium, but settlement is in cash rather than by
delivery of the underlying investment to the Fund. In purchasing a call, the
Fund benefits only if the call is sold at a profit or if, during the call
period, the market price of the underlying investment is above the sum of the
exercise price plus the transaction costs and the premium paid and the call is
exercised. If the call is not exercised or sold (whether or not at a profit), it
will become worthless at its expiration date and the Fund will lose its premium
payment and the right to purchase the underlying investment.
When the Fund purchases a put, it pays a premium and, except as to puts on
indices, has the right to sell the underlying investment to a seller of a
corresponding put on the same investment during the put period at a fixed
exercise price. Buying a put on an investment the Fund owns enables the Fund to
protect itself during the put period against a decline in the value of the
underlying investment below the exercise price by selling such underlying
investment at the exercise price to a seller of a corresponding put. If the
market price of the underlying investment is equal to or above the exercise
price and as a result the put is not exercised or resold, the put will become
worthless at its expiration date, and the Fund will lose its premium payment and
the right to sell the underlying investment. The put may, however, be sold prior
to expiration (whether or not at a profit.)
Buying a put on an investment it does not own, either a put on an index or
a put on a Future not held by the Fund, permits the Fund either to resell the
put or buy the underlying investment and sell it at the exercise price. The
resale price of the put will vary inversely with the price of the
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underlying investment. If the market price of the underlying investment is above
the exercise price and as a result the put is not exercised, the put will become
worthless on its expiration date. When the Fund purchases a put on an index, or
on a Future not held by it, the put protects the Fund to the extent that the
index moves in a similar pattern to the securities held. In the case of a put on
an index or Future, settlement is in cash rather than by delivery by the Fund of
the underlying investment.
Puts and calls on broadly-based indices or futures contracts are similar
to puts and calls on securities except that all settlements are in cash and gain
or loss depends on changes in the index or futures contracts in question (and
thus on price movements in the securities markets generally) rather than on
price movements in individual securities or futures contracts. When the Fund
buys a call on an index or futures contracts, it pays a premium. During the call
period, upon exercise of a call by the Fund, a seller of a corresponding call on
the same investment will pay the Fund an amount of cash to settle the call if
the closing level of the index or Future upon which the call is based is greater
than the exercise price of the call. That cash payment is equal to the
difference between the closing price of the index or futures contracts and the
exercise price of the call times a specified multiple (the "multiplier"), which
determines the total dollar value for each point of difference. When the Fund
buys a put on an index or futures contracts, it pays a premium and has the right
during the put period to require a seller of a corresponding put, upon the
Fund's exercise of its put, to deliver to the Fund an amount of cash to settle
the put if the closing level of the index or futures contracts upon which the
put is based is less than the exercise price of the put. That cash payment is
determined by the multiplier, in the same manner as described above as to calls.
An option position may be closed out only on a market which provides
secondary trading for options of the same series and there is no assurance that
a liquid secondary market will exist for any particular option. The Fund's
option activities may affect its turnover rate and brokerage commissions. The
exercise by the Fund of puts on securities will cause the sale of related
investments, increasing portfolio turnover. Although such exercise is within the
Fund's control, holding a put might cause the Fund to sell the related
investments for reasons which would not exist in the absence of the put. The
Fund will pay a brokerage commission each time it buys a put or call, sells a
put or call, or buys or sells an underlying investment in connection with the
exercise of a put or call. Such commissions may be higher than those which would
apply to direct purchases or sales of such underlying investments. Premiums paid
for options are small in relation to the market value of the related
investments, and consequently, put or call options offer large amounts of
leverage. The leverage offered by trading in options could result in the Fund's
net asset value being more sensitive to changes in the value of the underlying
investments.
o Options on Foreign Currencies. The Fund intends to write and purchase
calls and puts on foreign currencies. The Fund may purchase and write puts and
calls on foreign currencies that are traded on a securities or commodities
exchange or over-the-counter markets or are quoted by major recognized dealers
in such options. It does so to protect against declines in the dollar value of
foreign securities and against increases in the dollar cost of foreign
securities to be acquired. If the Manager anticipates a rise in the dollar value
of a foreign currency in which securities to be acquired are denominated, the
increased cost of such securities may be partially offset by purchasing calls or
writing puts on that foreign currency. If a decline in the dollar value of a
foreign currency is anticipated, the decline in value of portfolio securities
denominated in that currency may be partially offset by writing calls or
purchasing puts on that foreign currency. However, in the event of currency rate
fluctuations adverse to the Fund's position, it would lose the premium it paid
and
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transaction costs.
A call written on a foreign currency by the Fund is covered if the Fund
owns an underlying security denominated in the foreign currency covered by the
call or has an absolute and immediate right to acquire that foreign currency
without additional cash consideration (or for additional cash consideration held
in a segregated account by its Custodian) upon conversion or exchange of other
foreign currency held in its portfolio. A call may be written by the Fund on a
foreign currency to provide a hedge against a decline in the U.S. dollar value
of a security which the Fund owns or has the right to acquire and which is
denominated in the currency underlying the option due to an expected adverse
change in the exchange rate. In such circumstances, the Fund covers the option
by maintaining in a segregated account with the Fund's Custodian, cash or U.S.
government securities or other liquid securities in an amount equal to the
exercise price of the option.
o Interest Rate Futures. No price is paid or received upon the purchase or
sale of an Interest Rate Future. Interest Rate Futures obligate one party to
deliver and the other party to take a specific debt security or amount of
foreign currency, respectively, at a specified price on a specified date. Upon
entering into a futures transaction, the Fund will be required to deposit an
initial margin payment with the futures commission merchant (the "futures
broker"). The initial margin will be deposited with the Fund's Custodian in an
account registered in the futures broker's name; however the futures broker can
gain access to that account only under specified conditions. As the futures
contract is marked to market to reflect changes in its market value, subsequent
margin payments, called variation margin, will be made to and from the futures
broker on a daily basis. Prior to expiration of the futures contract, if the
Fund elects to close out its position by taking an opposite position, a final
determination of variation margin is made, additional cash is required to be
paid by or released to the Fund, and any loss or gain is realized for tax
purposes. Although Interest Rate Futures by their terms call for settlement by
delivery or acquisition of debt securities, in most cases the obligation is
fulfilled by entering into an offsetting position. All futures transactions are
effected through a clearinghouse associated with the exchange on which the
contracts are traded.
o Commodity Futures. No price is paid upon the purchase or sale of a
commodity futures contract. Commodity futures contracts obligate one party to
deliver and another party to purchase a specific commodity at a specified price
on a specified date. Commodity futures contracts are traded on domestic and
international commodity exchanges and have standardized contract terms. Similar
to Interest Rate Futures, the Fund will deposit an initial margin requirement
with its Custodian in an account registered in the futures broker's name.
Commodity futures contracts are marked to market daily to reflect changes in
market value.
o Financial Futures. Financial Futures are similar to Interest Rate
Futures except that settlement is made in cash, and net gain or loss on options
on Financial Futures depends on price movements of the securities included in
the index. The strategies which the Fund employs regarding Financial Futures are
similar to those described above with regard to Interest Rate Futures.
o Foreign Currency Forward Contracts. A Forward Contract involves
bilateral obligations of one party to purchase, and another party to sell, a
specific currency at a future date (which may be any fixed number of days from
the date of the contract agreed upon by the parties), at a price set at the time
the contract is entered into. These contracts typically, although not
exclusively, relate to foreign currency transactions, and are traded in the
interbank market conducted directly between currency traders (usually large
commercial banks) and their customers. The Fund may enter into a
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<PAGE>
Forward Contract to "lock in" the U.S. dollar price of an investment denominated
in a foreign currency which it has purchased or sold but which has not yet
settled, or to protect against a possible loss resulting from an adverse change
in the relationship between the U.S. dollar and a foreign currency.
The Fund may use Forward Contracts to protect against uncertainty in the
level of future exchange rates. The use of Forward Contracts does not eliminate
fluctuations in the prices of the underlying investments the Fund owns or
intends to acquire, but it does fix a rate of exchange in advance. In addition,
although Forward Contracts limit the risk of loss due to a decline in the value
of the hedged currencies, at the same time they limit any potential gain that
might result should the value of the currencies increase.
The Fund may also enter into a forward contract to sell a foreign currency
other than that in which the underlying investment is denominated. This
technique is referred to as "cross hedging," and is done when the foreign
currency sold through the forward contract is correlated with the foreign
currency or currencies in which the underlying investment positions are
denominated. The foreign currency sold through the forward contract may be sold
for a fixed U.S. dollar amount or for a fixed amount of another currency
correlated with the U.S. dollar.
The success of cross hedging is dependent on many factors, including the
ability of the Manager to correctly identify and monitor the correlation among
foreign currencies and between foreign currencies and the U.S. dollar. To the
extent that these correlations are not identical, the Fund may experience losses
or gains on both the underlying security and the cross currency hedge. However,
the Manager shall determine that any cross hedge is a bona fide hedge in that it
is expected to reduce the volatility of the Fund's total return.
The Fund may enter into Forward Contracts with respect to specific
transactions. For example, when the Fund enters into a contract for the purchase
or sale of an investment denominated in a foreign currency, or when the Fund
anticipates receipt of dividend payments in a foreign currency, the Fund may
desire to "lock in" the U.S. dollar price of the security or the U.S. dollar
equivalent of such payment. To do so, the Fund enters into a Forward Contract,
for a fixed amount of U.S. dollars per unit of foreign currency, for the
purchase or sale of the amount of foreign currency involved in the underlying
transaction ("transaction hedge"). The Fund will thereby be able to protect
itself against a possible loss resulting from an adverse change in the
relationship between the currency exchange rates during the period between the
date on which the investment is purchased or sold, or on which the payment is
declared, and the date on which such payments are made or received.
The Fund may also use Forward Contracts to lock in the value of portfolio
positions ("position hedges"). In a position hedge, for example, when the Fund
believes that a foreign currency in which the Fund has investment holdings may
suffer a substantial decline against the U.S. dollar, the Fund may enter into a
forward sale contract to sell an amount of that foreign currency for a fixed
U.S. dollar amount. Additionally, when the Fund believes that the U.S. dollar
may suffer a substantial decline against a foreign currency, it may enter into a
forward purchase contract to buy that foreign currency for a fixed U.S. dollar
amount.
The Fund may also cross hedge its portfolio positions by entering into a
forward contract to buy or sell a foreign currency other than the currency in
which its underlying investments are
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<PAGE>
denominated for a fixed amount in U.S. dollars or a fixed amount in another
currency which is correlated with the U.S. dollar. If the Fund does not own
portfolio securities denominated in the currency on the long side of the cross
hedge, the Fund will not be required to later purchase portfolio securities
denominated in that currency. Instead, the Fund may unwind the cross hedge by
reversing the original transaction, that is, by transacting in a forward
contract that is opposite to the original cross hedge or it may extend the hedge
by "rolling" the hedge forward.
The Fund's Custodian will place cash or U.S. Government securities or
other liquid high-quality debt securities in a separate account of the Fund
having a value equal to the aggregate amount of the Fund's commitment under
Forward Contracts to cover its short positions. The Fund will not enter into
such Forward Contracts or maintain a net exposure to such contracts where the
consummation of the contracts would obligate the Fund to deliver an amount of
foreign currency in excess of the value of the Fund's portfolio securities or
other assets denominated in that currency or a closely-correlated currency. The
Fund, however, in order to avoid excess transactions and transaction costs, may
maintain a net exposure to Forward Contracts in excess of the value of the
Fund's portfolio securities or other assets denominated in that currency or a
closely-correlated currency provided the excess amount is "covered" by liquid,
high-grade debt securities, denominated in any currency, at least equal at all
times to the amount of such excess. As an alternative, the Fund may purchase a
call option permitting the Fund to purchase the amount of foreign currency being
hedged by a forward sale contract at a price no higher than the forward contract
price or the Fund may purchase a put option permitting the Fund to sell the
amount of foreign currency subject to a forward purchase contract at a price as
high or higher than the forward contract price. Unanticipated changes in
currency prices may result in poorer overall performance for the Fund than if it
had not entered into such contracts.
The precise matching of the Forward Contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of these securities between the date the Forward Contract
is entered into and the date it is sold. Accordingly, it may be necessary for
the Fund to purchase additional foreign currency on the spot (i.e., cash) market
(and bear the expense of such purchase), if the market value of the security is
less than the amount of foreign currency the Fund is obligated to deliver and if
a decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some of the
foreign currency received upon the sale of the portfolio security if its market
value exceeds the amount of foreign currency the Fund is obligated to deliver.
The projection of short-term currency market movements is extremely difficult,
and the successful execution of a short-term hedging strategy is highly
uncertain. Forward Contracts involve the risk that anticipated currency
movements will not be accurately predicted, causing the Fund to sustain losses
on these contracts and transactions costs.
At or before the maturity of a Forward Contract requiring the Fund to sell
a currency, the Fund may either sell a portfolio security and use the sale
proceeds to make delivery of the currency or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which the Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, the Fund may
close out a Forward Contract requiring it to purchase a specified currency by
entering into a second contract entitling it to sell the same amount of the same
currency on the maturity date of the first contract. The Fund would realize a
gain or loss as a result of entering into such an offsetting Forward Contract
under either
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circumstance to the extent the exchange rate or rates between the currencies
involved moved between the execution dates of the first contract and offsetting
contract.
The cost to the Fund of engaging in Forward Contracts varies with factors
such as the currencies involved, the length of the contract period and the
market conditions then prevailing. Because Forward Contracts are usually entered
into on a principal basis, no fees or commissions are involved. Such contracts
are not traded on an exchange. Therefore, the Fund must evaluate the credit and
performance risk of each particular counterparty under a Forward Contract.
Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund may convert foreign currency from time to time, and
investors should be aware of the costs of currency conversion. Foreign exchange
dealers do not charge a fee for conversion, but they do seek to realize a profit
based on the difference between the prices at which they buy and sell various
currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at
one rate, while offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer.
In addition to foreign currency contracts, the Fund may enter into forward
contracts for the purchase or sale of commodities, securities or indices.
Forward contracts for these underlying cash instruments operate the same as
exchange traded futures contracts with two important differences. First, forward
contracts are individually negotiated while futures contracts are standardized
in terms of amount, maturity and underlying cash instrument. Second, forward
contracts expose the investor to the credit risk of the counterparty while
futures contracts are settled by the exchange clearinghouse.
o Interest Rate Swap Transactions. In an interest rate swap, the Fund and
another party exchange their right to receive, or their obligation to pay,
interest on a security. For example, they may swap a right to receive floating
rate interest payments for fixed rate payments. The Fund enters into swaps only
on securities it owns. The Fund may not enter into an interest swap for hedging
purposes with respect to more than 25% of its total assets. The Fund will
segregate liquid assets (such as cash or U.S. Government securities) to cover
any amounts it could owe under swaps that exceed the amounts it is entitled to
receive, and it will adjust that amount daily, as needed. Interest rate swap
agreements entail both interest rate risk and credit risk. There is a risk that,
based on movements of interest rates in the future, the payments made by the
Fund under a swap agreement will have been greater than those received by it.
Credit risk arises from the possibility that the counterparty will default. If
the counterparty to an interest rate swap defaults, the Fund's loss will consist
of the net amount of contractual interest payments that the Fund has not yet
received. The Manager will monitor the creditworthiness of counterparties to the
Fund's interest rate swap transactions on an ongoing basis. The Fund will enter
into swap transactions with appropriate counterparties pursuant to master
netting agreements.
o Additional Information About Hedging Instruments and Their Use. The
Fund's Custodian, or a securities depository acting for the Custodian, will act
as the Fund's escrow agent, through the facilities of the Options Clearing
Corporation ("OCC"), as to the investments on which the Fund has written options
traded on exchanges or as to other acceptable escrow securities, so that no
margin will be required for such transactions. OCC will release the securities
on the expiration of the option or upon the Fund's entering into a closing
transaction. An option position may be closed out only on a market which
provides secondary trading for options of the same series, and there is no
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assurance that a liquid secondary market will exist for any particular option.
When the Fund writes an over-the-counter ("OTC") option, it will enter
into an arrangement with a primary U.S. Government securities dealer, which
would establish a formula price at which the Fund would have the absolute right
to repurchase that OTC option. That formula price would generally be based on a
multiple of the premium received for the option, plus the amount by which the
option is exercisable below the market price of the underlying security (that
is, the extent to which the option is "in-the-money"). When the Fund writes an
OTC option, it will treat as illiquid (for purposes of the limit on its assets
that may be invested in illiquid securities, stated in the Prospectus) the
mark-to-market value of any OTC option held by it. The Securities and Exchange
Commission is evaluating whether OTC options should be considered liquid
securities, and the procedure described above could be affected by the outcome
of that evaluation.
The Fund's option activities may affect its turnover rate and brokerage
commissions. The exercise of calls written by the Fund may cause the Fund to
sell related portfolio securities, thus increasing its turnover rate in a manner
beyond the Fund's control. The exercise by the Fund of puts on securities or
Futures may cause the sale of related investments, also increasing portfolio
turnover. Although such exercise is within the Fund's control, holding a put
might cause the Fund to sell the related investments for reasons which would not
exist in the absence of the put. The Fund will pay a brokerage commission each
time it buys or sells a put, a call, or an underlying investment in connection
with the exercise of a put or call. Such commissions may be higher than those
which would apply to direct purchases or sales of the underlying investments.
Premiums paid for options are small in relation to the market value of the
related investments, and consequently, put and call options offer large amounts
of leverage. The leverage offered by trading in options could result in the
Fund's net asset value being more sensitive to changes in the value of the
underlying investments.
o Regulatory Aspects of Hedging Instruments. The Fund is required to
operate within certain guidelines and restrictions with respect to its use of
Futures and options on Futures established by the Commodity Futures Trading
Commission ("CFTC"). In particular, the Fund is exempted from registration with
the CFTC as a "commodity pool operator" if the Fund complies with the
requirements of the Rule adopted by the CFTC. The Rule does not limit the
percentage of the Fund's assets that may be used for Futures margin and related
options premiums for a bona fide hedging position. However, under the Rule the
Fund must limit its aggregate Futures margin and related options premiums to no
more than 5% of the Fund's net assets for hedging strategies that are not
considered bona fide hedging strategies under the Rule.
Transactions in options by the Fund are subject to limitations established
by option exchanges governing the maximum number of options that may be written
or held by a single investor or group of investors acting in concert, regardless
of whether the options were written or purchased on the same or different
exchanges or are held in one or more accounts or through one or more different
exchanges or through one or more brokers. Thus, the number of options which the
Fund may write or hold may be affected by options written or held by other
entities, including other investment companies having the same adviser as the
Fund (or an adviser that is an affiliate of the Fund's adviser. The exchanges
also impose position limits on Futures transactions which apply to Futures. An
exchange may order the liquidation of positions found to be in violation of
those limits and may impose certain other sanctions.
Due to requirements under the Investment Company Act, when the Fund buys or
sells a
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Future, the Fund will maintain, in a segregated account or accounts with its
Custodian, cash or readily-marketable, short-term (maturing in one year or less)
debt instruments in an amount equal to the net exposure between the market value
and the contract price of the Future, less the margin deposit applicable to it.
o Tax Aspects of Covered Calls and Hedging Instruments. The Fund intends
to qualify as a "regulated investment company" under the Internal Revenue Code
(although it reserves the right not to qualify). That qualification enables the
Fund to "pass through" its income and realized capital gains to shareholders
without having to pay tax on them. This avoids a "double tax" on that income and
capital gains, since shareholders normally will be taxed on the dividends and
capital gains they receive from the Fund (unless the Fund's shares are held in a
retirement account or the shareholder is otherwise exempt from tax). One of the
current tests for the Fund's qualification as a regulated investment company is
that less than 30% of its gross income must be derived from gains realized on
the sale of securities held for less than three months. To comply with this 30%
cap, the Fund will limit the extent to which it engages in the following
activities, but will not be precluded from them: (i) selling investments,
including Futures, held for less than three months, whether or not they were
purchased on the exercise of a call held by the Fund; (ii) purchasing calls or
puts which expire in less than three months; (iii) effecting closing
transactions with respect to calls or puts purchased less than three months
previously; (iv) exercising puts or calls held by the Fund for less than three
months; or (v) writing calls on investments held for less than three months.
This test was repealed by the Taxpayer Tax Relief Act of 1997, effective for
taxable years beginning after August 5, 1997. Accordingly, the above limitations
will no longer be necessary after March 31, 1998.
Certain foreign currency exchange contracts ("Forward Contracts") in which
the Fund may invest are treated as "section 1256 contracts." Gains or losses
relating to section 1256 contracts generally are characterized under the
Internal Revenue Code as 60% long-term and 40% short-term capital gains or
losses. However, foreign currency gains or losses arising from certain section
1256 contracts (including Forward Contracts) generally are treated as ordinary
income or loss. In addition, section 1256 contracts held by the Fund at the end
of each taxable year are "marked-to- market" with the result that unrealized
gains or losses are treated as though they were realized. These contracts also
must be marked-to-market for purposes of the excise tax applicable to investment
company distributions and for other purposes under rules prescribed pursuant to
the Internal Revenue Code. An election can be made by the Fund to exempt these
transactions from this marked-to-market treatment.
Certain Forward Contracts entered into by the Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may affect the
character and timing of gains (or losses) recognized by the Fund on straddle
positions. Generally, a loss sustained on the disposition of a position making
up a straddle is allowed only to the extent such loss exceeds any unrecognized
gain in the offsetting positions making up the straddle. Disallowed loss is
generally allowed at the point where there is no unrecognized gain in the
offsetting positions making up the straddle, or the offsetting position is
disposed of.
Under the Internal Revenue Code, gains or losses attributable to
fluctuations in exchange rates that occur between the time the Fund accrues
interest or other receivables or accrues expenses or other liabilities
denominated in a foreign currency and the time the Fund actually collects such
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<PAGE>
receivables or pays such liabilities generally are treated as ordinary income or
ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency and on disposition of foreign currency forward contracts, gains
or losses attributable to fluctuations in the value of a foreign currency
between the date of acquisition of the security or contract and the date of
disposition also are treated as ordinary gain or loss. Currency gains and losses
are offset against market gains and losses on each trade before determining a
net "Section 988" gain or loss under the Internal Revenue Code for that trade,
which may increase or decrease the amount of the Fund's investment company
income available for distribution to its shareholders.
o Risks of Hedging With Options and Futures. An option position may be
closed out only on a market that provides secondary trading for options of the
same series, and there is no assurance that a liquid secondary market will exist
for any particular option. In addition to the risks associated with hedging that
are discussed in the Prospectus and above, there is a risk in using short
hedging by selling futures contracts to attempt to protect against decline in
value of the Fund's portfolio securities (due, for example, to an increase in
interest rates) that the prices of such futures contracts will correlate
imperfectly with the behavior of the cash (i.e., market value) prices of the
Fund's securities. The ordinary spreads between prices in the cash and futures
markets are subject to distortions due to differences in the natures of those
markets. First, all participants in the futures markets are subject to margin
deposit and maintenance requirements. Rather than meeting additional margin
deposit requirements, investors may close out futures contracts through
offsetting transactions which could distort the normal relationship between the
cash and futures markets. Second, the liquidity of the futures markets depend on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures markets could be reduced, thus producing distortion. Third, from
the point of view of speculators, the deposit requirements in the futures
markets are less onerous than margin requirements in the securities markets.
Therefore, increased participation by speculators in the futures markets may
cause temporary price distortions.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable index.
To compensate for the imperfect correlation of movements in the price of the
investments being hedged and movements in the price of the hedging instruments,
the Fund may use hedging instruments in a greater dollar amount than the dollar
amount of securities being hedged if the historical volatility of the prices of
the securities being hedged is more than the historical volatility of the
applicable index. It is also possible that if the Fund has used hedging
instruments in a short hedge, the market may advance and the value of securities
held in the Fund's portfolio may decline. If that occurred, the Fund would lose
money on the hedging instruments and also experience a decline in value in its
portfolio securities. However, while this could occur for a very brief period or
to a very small degree, over time the value of a diversified portfolio of
securities will tend to move in the same direction as the indices upon which the
hedging instruments are based.
If the Fund uses hedging instruments to establish a position in the
commodities markets as a temporary substitute for the purchase of
commodity-linked securities (long hedging) by buying futures contracts and/or
calls on such futures contracts or on debt securities, it is possible that the
market may decline; if the Fund then concludes not to invest in such securities
at that time because of concerns as to possible further market decline or for
other reasons, the Fund will realize a loss on the hedging instruments that is
not offset by a reduction in the price of the commodity-linked securities
purchased.
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<PAGE>
o Short Sales "Against-the-Box." In a short sale, the seller does not own
the security that is sold, but normally borrows the security to fulfill the
delivery obligation. The seller later buys the security to repay the loan, in
the expectation that the price of the security will be lower when the purchase
is made, resulting in a gain. In these transactions, the Fund owns an equivalent
amount of the securities sold short. This technique is primarily used for tax
purposes.
Other Investment Restrictions
The Fund's most significant investment restrictions are set forth in the
Prospectus. The following are fundamental policies, and together with the Funds
fundamental policies described in the Prospectus, cannot be changed without the
vote of a "majority" of the Fund's outstanding voting securities. Such a
"majority" vote is defined in the Investment Company Act of 1940 as the vote of
the holders of the lesser of: (1) 67% or more of the shares present or, at a
shareholder meeting if the holders of more than 50% of the outstanding shares
are present, or (2) more than 50% of the outstanding shares.
Under these additional restrictions, the Fund cannot:
o buy or sell real estate; however, the Fund may invest in debt securities
secured by real estate or interests therein or issued by companies, including
real estate investment trusts, which invest in real estate or interests therein,
and also invest in real estate operating companies and shares of companies
engaged in other real estate related businesses;
o buy securities on margin, except that the Fund may make margin deposits
in connection with any of the Hedging Instruments which it may use;
o underwrite securities issued by other persons except to the extent that,
in connection with the disposition of its portfolio investments, it may be
deemed to be an underwriter for purposes of the Securities Act of 1933;
o buy securities of any issuer if those officers, Trustees or Directors of
the Fund or the Manager who beneficially own more than 0.5% of the securities of
such issuer together own more than 5% of the securities of such issuer;
o invest in oil, gas, or other mineral exploration or development programs
or leases, except that the Fund may invest in Hybrid Instruments, options swaps,
futures contracts and other investments which are linked to oil, gas and mineral
values; or
o buy the securities of any company for the purpose of exercising
management control, except in connection with a merger, consolidation,
reorganization or acquisition of assets.
The percentage restrictions described above and in the Fund's Prospectus
(other than the percentage limitations that apply on an on-going basis) apply
only at the time of investment and require no action by the Fund as a result of
subsequent changes in relative values.
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<PAGE>
For purposes of the Fund's policy not to concentrate its assets as
described in the Fund's Prospectus, the Fund has adopted the corporate industry
classifications set forth in Appendix A to this Statement of Additional
Information. This is not a fundamental policy.
How the Fund Is Managed
Organization and History. As a Massachusetts business trust, the Fund is not
required to hold, and does not plan to hold, regular annual meetings of
shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a shareholder meeting is
called by the Trustees or upon proper request of the shareholders. Shareholders
have the right, upon the declaration in writing or vote of two-thirds of the
outstanding shares of the Fund, to remove a Trustee. The Trustees will call a
meeting of shareholders to vote on the removal of a Trustee upon the written
request of the record holders of 10% of its outstanding shares. In addition, if
the Trustees receive a request from at least 10 shareholders (who have been
shareholders for at least six months) holding shares of the Fund valued at
$25,000 or more or holding at least 1% of the Fund's outstanding shares,
whichever is less, stating that they wish to communicate with other shareholders
to request a meeting to remove a Trustee, the Trustees will then either make the
Fund's shareholder list available to the applicants or mail their communications
to all other shareholders at the applicants' expense, or the Trustees may take
such other action as set forth under Section 16(c) of the Investment Company
Act.
The Fund's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides for
indemnification and reimbursement of expenses out of its property for any
shareholder held personally liable for its obligations. The Declaration of Trust
also provides that the Fund shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the Fund and satisfy
any judgment thereon. Thus, while Massachusetts law permits a shareholder of a
business trust (such as the Fund) to be held personally liable as a "partner"
under certain circumstances, the risk of a Fund shareholder incurring financial
loss on account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Trust, and any shareholder
of the Trust, agrees under the Trust's Declaration of Trust to look solely to
the assets of the Trust for satisfaction of any claim or demand which may arise
out of any dealings with the Trust, and the Trustees shall have no personal
liability to any such person, to the extent permitted by law.
Trustees and Officers of the Fund. The Fund's Trustees and officers are listed
below, together with their principal occupations and business affiliations and
occupations during the past five years. All of the Trustees are also Trustees,
Directors or Managing General Partners of Daily Cash Accumulation Fund, Inc.,
Centennial Money Market Trust, Centennial Tax Exempt Trust, Centennial
Government Trust, Centennial New York Tax Exempt Trust, Centennial California
Tax Exempt Trust, Centennial America Fund, L.P., Oppenheimer Total Return Fund,
Inc., Oppenheimer Equity Income Fund, Oppenheimer Champion Income Fund,
Oppenheimer High Yield Fund, Oppenheimer International Bond Fund, Oppenheimer
Cash Reserves, Oppenheimer Variable Account Funds, Oppenheimer Main Street
Funds, Inc., Oppenheimer Integrity Funds, Oppenheimer Strategic Income Fund,
Oppenheimer Municipal Fund, Oppenheimer Limited-Term Government Fund, Panorama
Series Fund, Inc. and The New York Tax-Exempt Income Fund, Inc. (all of the
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<PAGE>
foregoing are collectively referred to as the "Denver-based Oppenheimer funds")
except for Ms. Macaskill who is a Trustee, Director or Managing General Partner
of all of the Denver-based Oppenheimer funds except Oppenheimer Integrity Funds,
Oppenheimer Strategic Income Fund, Panorama Series Fund, Inc. and Oppenheimer
Variable Account Funds and Mr. Fossel, who is a Trustee, Director or Managing
General Partner of all the Denver-based Oppenheimer funds except of Centennial
New York Tax Exempt Trust and of Centennial America Fund, L.P. Messrs. Bishop,
Bowen, Donohue, Farrar and Zack hold similar positions as officers of all such
funds. Ms. Macaskill is President and Mr. Swain is Chairman and Chief Executive
Officer of the Denver-based Oppenheimer funds. As of August 6, 1997, the
Trustees and officers of the Fund as a group owned less than 1% of each class of
shares of the Fund, not including shares held of record by an employee benefit
plan for employees of the Adviser (for which two of the officers listed below,
Ms. Macaskill and Mr. Donohue, are trustees), other than shares beneficially
owned under that plan by the officers of the Fund listed above.
Robert G. Avis, Trustee*, Age: 66 One North Jefferson Ave., St. Louis,
Missouri 63103 Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer)
and A.G. Edwards, Inc. (its parent holding company); Chairman of A.G.E.
Asset Management and A.G. Edwards Trust Company (its affiliated investment
adviser and trust company, respectively).
William A. Baker, Trustee; Age: 82
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
Charles Conrad, Jr., Trustee; Age: 67 1501 Quail Street, Newport Beach,
California 92660 Chairman and CEO of Universal Space Lines, Inc. (a space
services management company); formerly Vice President of McDonnell Douglas
Space Systems, Co. and associated with the National Aeronautics and Space
Administration.
Jon S. Fossel, Trustee+: Age: 54 Box 44, Mead Street, Waccabuc, New York
10597 Member of the Board of Governors of the Investment Company Institute
(a national trade association of investment companies); Chairman of the
Investment Company Institute Education Foundation; formerly Chairman and
Director of OppenheimerFunds, Inc. ("OFI"); President and a Director of
Oppenheimer Acquisition Corp. ("OAC"), OFI's parent holding company,
Shareholder Services, Inc. ("SSI") and Shareholder Financial Services, Inc.
("SFSI"), transfer agent subsidiaries of OFI.
Sam Freedman, Trustee; Age: 56
4975 Lakeshore Drive, Littleton, Colorado 80123
Formerly Chairman and Chief Executive Officer of OppenheimerFunds
Services; Chairman, Chief Executive Officer and a director of SSI and
SFSI; Vice President and a director of OAC and a director of OFI.
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<PAGE>
Raymond J. Kalinowski, Trustee; Age: 68
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc. (a computer products
training company); formerly Vice Chairman and a director of A.G. Edwards,
Inc., parent holding company of A.G. Edwards & Sons, Inc. (a
broker-dealer), of which he was a Senior Vice President.
C. Howard Kast, Trustee; Age: 75
2552 East Alameda, Denver, Colorado 80209
Formerly Managing Partner of Deloitte, Haskins & Sells (an accounting firm).
Robert M. Kirchner, Trustee; Age: 75
7500 East Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Bridget A. Macaskill, President and Trustee*#; Age: 49
Two World Trade Center, New York, New York 10048-0203
President, Chief Executive Officer and a Director of OFI and HarbourView
Asset Management Corporation ("HarbourView"), a subsidiary of OFI;
Chairman and a Director of SSI and SFSI, President and a Director of OAC
and Oppenheimer Partnership Holdings, Inc., a holding company subsidiary
of OFI; a Director of the Manager; formerly an Executive Vice President of
OFI.
Ned M. Steel, Trustee; Age: 82
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; a Director of Visiting Nurse
Corporation of Colorado; formerly Senior Vice President and a Director of
Van Gilder Insurance Corp.
(insurance brokers).
James C. Swain, Chairman, Chief Executive Officer and Trustee*; Age: 63
6803 South Tuscon Way, Englewood, Colorado 80112 Vice Chairman of OFI;
formerly President and a director of Centennial Asset Management
Corporation ("Centennial"), an investment adviser subsidiary of OFI, and
Chairman of the Board of SSI.
Mark J.P. Anson, Vice President and Portfolio Manager; Age: 39
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager (since March, 1997) and OFI (since January,
1996); formerly a Registered Options Principal on the equity derivatives
desk at Solomon Brothers, Inc.; and formerly an attorney with Chapman and
Cutler.
Russell Read, Vice President and Portfolio Manager; Age: 34
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager (since March, 1997) and OFI (since July,
1995); formerly an investment manager for The Prudential and Associate
Economist for the First National Bank of Chicago.
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<PAGE>
Andrew J. Donohue, Vice President and Secretary; Age: 47
Two World Trade Center, New York, New York 10048-0203
Executive Vice President, General Counsel and a director of OFI,
OppenheimerFunds Distributor, Inc. (the "Distributor"), HarbourView, SSI,
SFSI, Oppenheimer Partnership Holdings, Inc., and MultiSource Services,
Inc. (a broker-dealer); President and Director of the Manager and
Centennial; Secretary and General Counsel of OAC; an officer of other
Oppenheimer funds.
George C. Bowen, Vice President, Treasurer and Assistant Secretary; Age:
61 6803 South Tuscon Way, Englewood, Colorado 80112 Senior Vice President
and Treasurer of OFI; Vice President and Treasurer of the Distributor and
HarbourView; Senior Vice President, Treasurer, Assistant Secretary and a
director of Centennial; President, Treasurer and a Director of Centennial
Capital Corporation; Senior Vice President, Treasurer and Secretary of
SSI; Vice President, Treasurer and Secretary of SFSI; Treasurer of OAC and
Oppenheimer Partnership Holdings, Inc.; Vice President and Treasurer of
the Manager; Chief Executive Officer, Treasurer and a director of
MultiSource Services, Inc.; an officer of other Oppenheimer funds.
Robert G. Zack, Assistant Secretary; Age: 49
Two World Trade Center, New York, New York 10048-0203
Senior Vice President and Associate General Counsel of OFI; Assistant
Secretary of SSI and SFSI; an officer of other Oppenheimer funds.
Robert J. Bishop, Assistant Treasurer; Age: 38
6803 South Tuscon Way, Englewood, Colorado 80112
Vice President of OFI/Mutual Fund Accounting; an officer of other
Oppenheimer funds; formerly a Fund Controller for OFI.
Scott Farrar, Assistant Treasurer; Age: 32
6803 South Tuscon Way, Englewood, Colorado 80112
Vice President of OFI/Mutual Fund Accounting, an officer of other
Oppenheimer funds; formerly a Fund Controller for OFI.
---------------------------
* A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
+ Not a Trustee of Centennial New York Tax Exempt Trust nor a Managing
General Partner of Centennial America Fund, L.P.
* A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
# Not a Trustee, Director or Managing General Partner of Oppenheimer
Strategic Income Fund, Oppenheimer Variable Account Funds, Oppenheimer
Integrity Funds, and Panorama Series Fund, Inc.
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<PAGE>
o Remuneration of Trustees. All officers of the Fund and Ms. Macaskill and
Mr. Swain, Trustees of the Fund, are affiliated with the Manager and receive no
salary or fee from the Fund. Compensation for all Trustees other than Ms.
Macaskill and Mr. Swain is compensation received as a Director, Trustee or
General Managing Partner or member of a committee of the Board of Trustees. The
compensation (unaudited) from the Fund was paid for the fiscal period March 31,
1997 (commencement of operations) to August 31, 1997, the Fund's fiscal year
end. The compensation from all of the Denver-based Oppenheimer funds is for the
calendar year ended December 31, 1996.
<TABLE>
<CAPTION>
Total
Aggregate Compensation
Compensation From All
From the Denver-based
Name and Position Fund OppenheimerFunds1
<S> <C> <C>
Robert G. Avis, Trustee $52 $58,003
William A. Baker, Trustee $72 $79,715
Charles Conrad, Jr $67 $74,717
Sam Freedman, Audit and $27 $29,502
Review Committee Member
and Trustee
Raymond J. Kalinowski, Audit $67 $74,173
and Review Committee Member
and Trustee
C. Howard Kast, Audit and $67 $74,173
Review Committee Member
and Trustee
Robert M. Kirchner, Trustee $67 $74,717
Ned M. Steel, Trustee $52 $58,003
- ----------------
1 For the 1996 calendar year.
</TABLE>
o Major Shareholders. As of August 6, 1997, no person or entity owned of
record or was known by the Fund to own beneficially 5% or more of the Fund as a
whole or the Fund's outstanding Class A, Class B, Class C or Class Y shares
except:
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<PAGE>
Class A Shares: (i) OppenheimerFunds, Inc., 3410 South Galena Street,
Denver, Colorado 80231, who owns 513,000.823 Class A shares (representing
approximately 16.75% of the Fund's outstanding Class A shares) and (ii)
Charles Schwab & Co., Inc., Special Custody Account for the Exclusive
Benefit of Customers, 101 Montgomery Street, San Francisco, CA 94104, who
owns 487,895.382 Class A shares (representing approximately 15.91% of the
Funds outstanding Class A shares).
Class B Shares: Merrill Lynch Pierce Fenner & Smith, For the Sole Benefit
of Its Customers, 4800 Deer Lake Drive East, Floor 3, Jacksonville,
Florida 32246, who owns 367,075.000 Class B shares (representing 29.34% of
the Fund's outstanding Class B shares).
Class C Shares: Merrill Lynch Pierce Fenner & Smith, For the Sole Benefit
of Its Customers, 4800 Deer Lake Drive East, Floor 3, Jacksonville,
Florida 32246, who owns 402,815.009 Class C shares (representing 44.71% of
the Fund's outstanding Class C shares).
Class Y Shares: OppenheimerFunds, Inc., 3410 South Galena Street, Denver,
Colorado 80231, who owns 100.000 Class Y shares (representing 100% of the
Fund's outstanding Class Y shares).
The Manager and Its Affiliates. The Manager is wholly-owned by OppenheimerFunds,
Inc. ("OFI"), which is wholly-owned by Oppenheimer Acquisition Corp. ("OAC"), a
holding company controlled by Massachusetts Mutual Life Insurance Company. OAC
is also owned in part by certain of OFI's directors and officers, some of whom
may also serve as officers of the Fund, and two of whom may (Ms. Macaskill and
Mr. Swain) serve as Trustees of the Fund. The Manager and the Fund have a Code
of Ethics. It is designed to detect and prevent improper personal trading by
certain employees, including portfolio managers, that would compete with or take
advantage of the Fund's portfolio transactions. Compliance with the Code of
Ethics is carefully monitored and strictly enforced by the Manager.
o The Investment Advisory Agreement and Sub-Advisory Agreement. The
Investment Advisory Agreement (the "Advisory Agreement") between OFI and the
Fund requires OFI, at its expense, to provide the Fund with adequate office
space, facilities and equipment, and to provide and supervise the activities of
all administrative and clerical personnel required to provide effective
corporate administration for the Fund, including the compilation and maintenance
of records with respect to its operations, the preparation and filing of
specified reports, and composition of proxy materials and registration
statements for continuous public sale of shares of the Fund.
Expenses not expressly assumed by OFI or the Manager under the Advisory
Agreement or the Sub-Advisory Agreement or by the Distributor under the General
Distributor's Agreement are paid by the Fund. The Advisory Agreement and the
Sub-Advisory Agreement lists examples of expenses paid by the Fund, the major
categories of which relate to interest, taxes, brokerage
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<PAGE>
commissions, fees to certain Trustees, legal and audit expenses, custodian and
transfer agent and custodian expenses, share issuance costs, certain printing
and registration costs and non-recurring expenses, including litigation costs.
For the fiscal period March 31, 1997 (commencement of operations) to
August 31, 1997, the fees paid by the Fund to OFI were $65,263 (unaudited). For
that same period, fees paid by OFI to the Manager were $65,262 (unaudited).
The advisory agreement and the sub-advisory agreement provide that in the
absence of willful misfeasance, bad faith or gross negligence in the performance
of its duties, or reckless disregard for its obligations and duties under the
advisory agreement, OFI and the Manager are not liable for any loss resulting
from a good faith error or omission on their part with respect to any of its
duties thereunder. The advisory agreement and sub-advisory agreement permit OFI
and the Manager to act as investment adviser for any other person, firm or
corporation and to use the name "Oppenheimer" in connection with other
investment companies for which it may act as investment adviser or general
distributor. If OFI or the Manager shall no longer act as an investment adviser
to the Fund, the right of the Fund to use the name "Oppenheimer" as part of its
name may be withdrawn.
o The Distributor. Under its General Distributor's Agreement with the
Fund, the Distributor acts as the Fund's principal underwriter in the continuous
public offering of the Fund's Class A, Class B, Class C and Class Y shares, but
is not obligated to sell a specific number of shares. Expenses normally
attributable to sales (other than those paid under the Distribution and Service
Plans but including advertising and the cost of printing and mailing
prospectuses other than those furnished to existing shareholders), are borne by
the Distributor. For additional information about distribution of the Fund's
shares and the expenses connected with such activities, please refer to
"Distribution and Service Plans," below.
For the fiscal period March 31, 1997 (commencement of operations) to
August 31, 1997, the aggregate amount of sales charges (unaudited) on sales of
the Fund's Class A shares was $437,358, of which the Distributor and an
affiliated broker/dealer retained (unaudited) in the aggregate $109,980. The
contingent deferred sales charges collected (unaudited) by the Distributor on
the redemption of Class B shares and Class C shares for the fiscal period March
31, 1997 to August 31, 1997 totalled $847 and $1,580, respectively. No sales
charges are assessed by the Distributor on Class Y shares.
o The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer Agent, is
responsible for maintaining the Fund's shareholder registry and shareholder
accounting records, and for shareholder servicing and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the duties of
the Manager
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<PAGE>
under the Sub-Advisory Agreement is to arrange the portfolio transactions for
the Fund. The Sub- Advisory Agreement contains provisions relating to the
employment of broker-dealers ("brokers") to effect the Fund's portfolio
transactions in securities and futures contracts. In doing so, the Manager is
authorized by the sub-advisory agreement to employ broker-dealers, including
"affiliated" brokers, as that term is defined in the Investment Company Act, as
may, in its best judgment based on all relevant factors, implement the policy of
the Fund to obtain, at reasonable expense, the "best execution" (prompt and
reliable execution at the most favorable price obtainable) of such transactions.
The Manager need not seek competitive commission bidding but is expected to be
aware of the current rates of eligible brokers and to minimize the commissions
paid to the extent consistent with the interest and policies of the Fund as
established by its Board of Trustees.
Under the Sub-Advisory Agreement, the Manager is authorized to select
brokers that provide brokerage and/or research services for the Fund and/or the
other accounts over which the Manager or its affiliates have investment
discretion. The commissions paid to such brokers may be higher than another
qualified broker would have charged if a good faith determination is made by the
Manager that the commission is fair and reasonable in relation to the services
provided. Subject to the foregoing considerations, the Manager may also consider
sales of shares of the Fund and other investment companies managed by the
Manager or their affiliates as a factor in the selection of brokers for the
Fund's portfolio transactions.
Description of Brokerage Practices Followed by the Manager. Subject to the
provisions of the Sub-Advisory Agreement, and the procedures and rules described
above, allocations of brokerage generally are made by the Manager's portfolio
traders based upon recommendations from the Manager's portfolio managers. In
certain instances, portfolio managers may directly place trades and allocate
brokerage, also subject to the provisions of the Sub-Advisory Agreement and the
procedures and rules described above. In either case, brokerage is allocated
under the supervision of the Manager's executive officers. Transactions in
securities other than those for which an exchange is the primary market are
generally done with principals or market makers. Brokerage commissions are paid
primarily for effecting transactions in listed securities and futures and/or for
certain fixed-income agency transactions in the secondary market and are
otherwise paid only if it appears likely that a better price or execution can be
obtained. When the Fund engages in an option transaction, ordinarily the same
broker will be used for the purchase or sale of the option and any transaction
in the securities or futures contract to which the option relates. When
possible, concurrent orders to purchase or sell the same security or futures
contract by more than one of the accounts managed by the Manager or its
affiliates are combined. The transactions effected pursuant to such combined
orders are averaged as to price and allocated in accordance with the purchase or
sale orders actually placed for each account.
Most purchases of money market instruments and debt obligations are
principal transactions at net prices. Instead of using a broker for those
transactions, the Fund normally deals directly with the selling or purchasing
principal or market maker unless it determines that a better price or execution
can be obtained by using a broker. Purchases of these securities from
underwriters include a commission or concession paid by the issuer to the
underwriter. Purchases from dealers include a spread between the bid and asked
prices. The Fund seeks to obtain prompt execution of these orders at the most
favorable net price. Options commissions may be relatively higher than those
-39-
<PAGE>
which would apply to direct purchases and sales of portfolio securities.
The research services provided by a particular broker may be useful only
to one or more of the advisory accounts of OFI, the Manager or their affiliates,
and investment research received for the commissions of those other accounts may
be useful both to the Fund and one or more of such other accounts. Such
research, which may be supplied by a third party at the instance of a broker,
includes information and analyses on particular companies and industries as well
as market or economic trends and portfolio strategy, receipt of market
quotations for portfolio evaluations, information systems, computer hardware and
similar products and services. If a research service also assists the Advisor or
the Manager in a non-research capacity (such as bookkeeping or other
administrative functions), then only the percentage or component that provides
assistance to the Advisor or the Manager in the investment decision-making
process may be paid for in commission dollars. The Board of Trustees permits the
Advisor and the Manager to use concessions on fixed-price offerings to obtain
research, in the same manner as is permitted for agency transactions. The Board
also permits the Advisor and the Manager to use stated commissions on secondary
fixed-income agency trades to obtain research where the broker has represented
to the Advisor or the Manager that: (i) the trade is not from or for the
broker's own inventory, (ii) the trade was executed by the broker on an agency
basis at the stated commission, and (iii) the trade is not a riskless principal
transaction.
The research services provided by brokers broaden the scope and supplement
the research activities of the Advisor and the Manager, by making available
additional views for consideration and comparisons, and by enabling the Advisor
and the Manager to obtain market information for the valuation of securities
held in the Fund's portfolio or being considered for purchase. The Board of
Trustees, including the "independent" Trustees of the Fund (those Trustees of
the Fund who are not "interested persons" as defined in the Investment Company
Act, and who have not direct or indirect financial interest in the operation of
the Investment Advisory Agreement or Sub-Advisory Agreement or the Distribution
and Service Plans described below) annually reviews information furnished by OFI
and the Manager as to the commissions paid to brokers furnishing such services
so that the Board of Trustees may ascertain whether the amount of such
commissions was reasonably related to the value or benefit of such services.
For the fiscal period March 31, 1997 (commencement of operations) to
August 31, 1997, total brokerage commissions paid by the Fund (not including any
spreads or concessions on principal transactions on a net trade basis) amounted
to $33,431 (unaudited). For that same period, no payments were made to brokers
as commissions in return for research services. The transactions giving rise to
those commissions were allocated in accordance with OFI's internal allocation
procedures.
Performance of the Fund
Total Return Information. As described in the Prospectus, from time to time the
"average annual total return," "cumulative total return," "average annual total
return at net asset value" and "cumulative total return at net asset value" of
an investment in a class of shares of the Fund may be
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advertised. An explanation of how these total returns are calculated for each
class and the components of those calculations is set forth below.
The Fund's advertisements of its performance data must, under applicable
rules of the Securities and Exchange Commission, include the average annual
total returns for each advertised class of shares of the Fund for the 1, 5, and
10-year periods (or the life of the class, if less) ending as of the most
recently-ended calendar quarter prior to the publication of the advertisement.
This enables an investor to compare the Fund's performance to the performance of
other funds for the same periods. However, a number of factors should be
considered before using such information as a basis for comparison with other
investments. An investment in the Fund is not insured; its returns and share
prices are not guaranteed and normally will fluctuate on a daily basis. When
redeemed, an investor's shares may be worth more or less than their original
cost. Returns for any given past period are not a prediction or representation
by the Fund of future returns. The returns of each class of shares of the Fund
are affected by portfolio quality, the type of investments the Fund holds and
its operating expenses allocated to the particular class.
o Total Return Information.
o Average Annual Total Returns. The "average annual total return" of each
class is an average annual compounded rate of return for each year in a
specified number of years. It is the rate of return based on the change in value
of a hypothetical initial investment of $1,000 ("P" in the formula below) held
for a number of years ("n") to achieve an Ending Redeemable Value ("ERV") of
that investment, according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
o Cumulative Total Returns. The cumulative "total return" calculation
measures the change in value of a hypothetical investment of $1,000 over an
entire period of years. Its calculation uses some of the same factors as average
annual total return but it does not average the rate of return on an annual
basis. Cumulative total return is determined as follows:
ERV - P
------- = Total Return
P
In calculating total returns for Class A shares, the current maximum sales
charge of 5.75% (as a percentage of the offering price) is deducted from the
initial investment ("P") (unless the return is shown at net asset value, as
described below). For Class B shares, payment of the contingent deferred sales
charge (5.0% for the first year, 4.0% for the second year, 3.0% for the third
and fourth years, 2.0% for the fifth year, and 1.0% for the sixth year,
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and none thereafter) is applied, as described in the Prospectus. For Class C
shares, the payment of the 1% contingent deferred sales charge for the first 12
months is applied, as described in the Prospectus. Class Y shares are not
subject to a sales charge. Total returns also assume that all dividends and
capital gains distributions during the period are reinvested to buy additional
shares, at net asset value per share, and that the investment is redeemed at the
end of the period.
o Total Returns At Net Asset Value. From time to time the Fund may also
quote an average annual total return at net asset value or a cumulative total
return at net asset value for Class A, Class B, Class C or Class Y shares. Each
is based on the difference in net asset value per share at the beginning and the
end of the period for a hypothetical investment in that class of shares (without
considering front-end or contingent deferred sales charges) and takes into
consideration the reinvestment of dividends and capital gains distributions.
Other Performance Comparisons. From time to time the Fund may publish the
ranking of its Class A, Class B, Class C or Class Y shares by Lipper Analytical
Services, Inc. ("Lipper"), a widely- recognized independent mutual fund
monitoring service. Lipper monitors the performance of regulated investment
companies, including the Fund, and ranks their performance for various periods
based on categories relating to investment objectives. The performance of the
Fund's classes are ranked against (i) all other funds, (ii) all other
miscellaneous fixed income funds, and (iii) all other fixed-income funds,
excluding money market funds. The Lipper performance rankings are based on total
returns that include the reinvestment of capital gains distributions and income
dividends but do not take sales charges or taxes into consideration.
From time to time, the Fund may include in its advertisements and sales
literature performance information about the Fund cited in other newspapers and
periodicals, such as The New York Times, which may include performance
quotations from other sources, including Lipper.
From time to time the Fund may publish the ranking of the performance of
its Class A, Class B, Class C or Class Y shares by Morningstar, Inc., an
independent mutual fund monitoring service. Morningstar ranks mutual funds in
broad investment categories (domestic stock funds, international stock funds,
taxable funds, municipal bond funds and hybrid funds) based on risk-adjusted
total returns. The Fund is ranked among hybrid funds. Investment return measures
a fund's or class's one, three, five and ten-year average annual total returns
(depending on the inception of the fund or class) in excess of 90-day U.S.
Treasury bill returns after considering the fund's sales charges and expenses.
Risk measures a fund's or class's performance below 90-day U.S. Treasury bill
returns. Risk and investment return are combined to produce star
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rankings reflecting performance relative to the average fund in a fund's
category. Five stars is the "highest" ranking (top 10%), four stars is "above
average" (next 22.5%), three stars is "average" (next 35%), two stars is "below
average" (next 22.5%) and one star is "lowest" (bottom 10%). The current star
ranking is the fund's or class's 3-year ranking or its combined 3 and 5-year
ranking (weighted 60%/40%, respectively) or its combined 3, 5 and 10-year
ranking (weighted 40%, 30% and 30%, respectively), depending on the inception of
the fund or class. Rankings are subject to change monthly.
The Fund may also compare its performance to that of other funds in its
Morningstar Category. In addition to its star rankings, Morningstar also
categorizes and compares a fund's 3-year performance on Morningstar's
classification of the fund's investments and investment style, rather than how a
fund defines its investment objective. Morningstar's four broad categories
(domestic equity, international equity, municipal bond and taxable bond) are
each further subdivided into categories based on types of investments and
investment styles. Those comparison by Morningstar are based on the same risk
and return measurements as its star rankings but do not consider the effect of
sales charges.
The total return on an investment in the Fund's Class A, Class B, Class C
or Class Y shares may be compared with the performance for the same period of
one or more of the indices, including the Goldman Sachs Commodity Index (GSCI).
Whereas the Consumer Price Index is generally considered to be a measure of
inflation, the GSCI is a commodity index which tracks the prices in five major
commodity markets: energy, agriculture, livestock, precious metals, and
industrial metals. The index is a total return index. Its value is based on the
total return of fully collateralized near-term futures positions. The
performance of the Fund's Class A, Class B, Class C or Class Y shares may also
be compared in publications to (i) the performance of various market indices or
to other investments for which reliable performance data is available, and (ii)
to averages, performance rankings or other benchmarks prepared by recognized
mutual fund statistical services.
Total return information may be useful to investors in reviewing the
performance of the Fund's Class A, Class B, Class C or Class Y shares. However,
when comparing total return of an investment in Class A, Class B, Class C or
Class Y shares of the Fund, a number of factors should be considered before
using such information as a basis for comparison with other investments. The
total return through a diversified portfolio of commodity-link instruments,
securities, futures contracts and other investments, is designed as an attempt
to outperform more traditional investments in debt and equity securities when
the value of these traditional securities is declining due to adverse economic
consequences.
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From time to time, the Fund's Manager may publish rankings or ratings of
the Manager or Transfer Agent or the investor services provided by them to
shareholders of the Oppenheimer funds, other than performance rankings of the
Oppenheimer funds themselves. Those ratings or rankings of shareholder/investor
services by third parties may compare the Oppenheimer funds' services to those
of other mutual fund families selected by the rating or ranking services and may
be based upon the opinions of the rating or ranking service itself, based on its
research or judgment, or based upon surveys of investors, brokers, shareholders
or others.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A shares and Distribution
and Service Plans for Class B and Class C shares of the Fund under Rule 12b-1 of
the Investment Company Act pursuant to which the Fund makes payments to the
Distributor in connection with the distribution and/or servicing of the shares
of that class, as described in the Prospectus. There is no such Plan for Class Y
shares. Each Plan has been approved by a vote of (i) the Board of Trustees of
the Fund, including a majority of the Independent Trustees, cast in person at a
meeting called for the purpose of voting on that Plan, and (ii) the holders of a
"majority" of the outstanding voting securities (as defined in the Investment
Company Act) of the shares of each class in each instance that vote having been
cast by OFI as the sole initial holder of shares of that class.
In addition, under the Plans, the Manager and the Distributor, in their
sole discretion, from time to time, may use their own resources (which, in the
case of the Manager, may include profits from the advisory fee it receives from
the Fund), to make payments to brokers, dealers or other financial institutions
(each is referred to as a "Recipient" under the Plans) for distribution and
administrative services they perform, at no cost to the Fund. The Distributor
and the Manager may, in their sole discretion, increase or decrease the amount
of payments they make from their own resources to Recipients.
Unless terminated as described below, each Plan continues in effect from
year to year but only as long as its continuance is specifically approved at
least annually by the Fund's Board of Trustees and its Independent Trustees by a
vote cast in person at a meeting called for the purpose of voting on such
continuance. Each Plan may be terminated at any time by the vote of a majority
of the Independent Trustees or by the vote of the holders of a "majority" (as
defined in the Investment Company Act) of the outstanding shares of that class.
None of the Plans may be amended to increase materially the amount of payments
to be made unless such amendment is approved by shareholders of the class
affected by the amendment. In addition, because Class B shares automatically
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convert into Class A shares after six years, the Fund is required by a
Securities and Exchange Commission rule to obtain the approval of Class B as
well as Class A shareholders for a proposed amendment to the Class A Plan that
would materially increase payments under the Plan. Such approval must be by a
"majority" of the Class A and Class B shares (as defined in the Investment
Company Act), voting separately by class. All material amendments must be
approved by the Independent Trustees.
While the Plans are in effect, the Treasurer of the Fund shall provide
separate written reports to the Fund's Board of Trustees at least quarterly for
its review, detailing the services rendered in connection with the distribution
of the Fund's shares, the amount of all payments made pursuant to each Plan and
the purpose for which payments were made. The reports shall also include the
distribution costs for that quarter. Those reports, including the allocations on
which they are based, will be subject to the review and approval of the
Independent Trustees in the exercise of their fiduciary duty. Each Plan further
provides that while it is in effect, the selection and nomination of those
Trustees of the Fund who are not "interested persons" of the Fund is committed
to the discretion of the Independent Trustees. This does not prevent the
involvement of others in such selection and nomination if the final decision on
any such selection or nomination is approved by a majority of the Independent
Trustees.
Under the Plans, no payment will be made to any Recipient in any quarter
if the aggregate net asset value of all Fund shares held by the Recipient for
itself and its customers does not exceed a minimum amount, if any, that may be
determined from time to time by a majority of the Fund's Independent Trustees.
Initially, the Board of Trustees has set the fee at the maximum rate and set no
minimum amount of assets to qualify for payment.
For the period March 31, 1997 (commencement of operations) to August 31,
1997, payments under the Class A Plan totaled $12,308 (unaudited). Any
unreimbursed expenses incurred by the Distributor with respect to Class A shares
for any fiscal year may not be recovered in subsequent fiscal years. Payments
received by the Distributor under the Plan for Class A shares will not be used
to pay any interest expense, carrying charges, or other financial costs, or
allocation of overhead by the Distributor.
The Class B and the Class C Plans allow the service fee payment to be paid
by the Distributor to Recipients in advance for the first year such shares are
outstanding, and thereafter on a quarterly basis, as described in the
Prospectus. The advance payment is based on the net asset value of Class B and
Class C shares sold. An exchange of shares does not entitle the Recipient to an
advance service fee payment. In the event Class B or Class C shares are redeemed
during the first year that the shares are outstanding, the Recipient will be
obligated to repay a pro rata portion of the advance payment for those shares to
the Distributor.
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Payments made under the Class B Plan during the period March 31, 1997
(commencement of operations) to August 31, 1997, totaled $30,711 (unaudited), of
which $27,304 (unaudited) was retained by the Distributor. Payments made under
the Class C Plan during that same period, totaled $23,276 (unaudited), of which
$21, 022 (unaudited) was retained by the Distributor.
Although the Class B and the Class C Plans permit the Distributor to
retain both the asset-based sales charges and the service fee on such shares, or
to pay Recipients the service fee on a quarterly basis, without payment in
advance, the Distributor presently intends to pay the service fee to Recipients
in the manner described above. A minimum holding period may be established from
time to time under the Class B Plan and the Class C Plan by the Board.
Initially, the Board has set no minimum holding period. All payments under the
Class B Plan and the Class C Plan are subject to the limitations imposed by the
Conduct Rules of the National Association of Securities Dealers, Inc. on
payments of asset-based sales charges and service fees.
The Class B and Class C Plans provide for the Distributor to be
compensated at a flat rate, whether the Distributor's distribution expenses are
more or less than the amounts paid by the Fund during that period. Such payments
are made in recognition that the Distributor (i) pays sales commissions to
authorized brokers and dealers at the time of sale and pays service fees as
described in the Prospectus, (ii) may finance such commissions and/or the
advance of the service fee payment to Recipients under those Plans, or may
provide such financing from its own resources, or from an affiliate, (iii)
employs personnel to support distribution of shares, and (iv) may bear the costs
of sales literature, advertising and prospectuses (other than those furnished to
current shareholders), state "blue sky" registration fees and certain other
distribution expenses.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C Shares. The
availability of three classes of shares permits an investor to choose the method
of purchasing shares that is more beneficial to the investor depending on the
amount of the purchase, the length of time the investor expects to hold shares
and other relevant circumstances. Investors should understand that the purpose
and function of the deferred sales charge and asset-based sales charge with
respect to Class B and Class C shares are the same as those of the initial sales
charge with respect to Class A shares. Any salesperson or other person entitled
to receive compensation for selling Fund shares may receive different
compensation with respect to one class of shares than the other. The Distributor
normally will not accept any order for $500,000 or more of Class B shares or any
order for $1 million or more of Class
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C shares, on behalf of a single investor (not including dealer "street name" or
omnibus accounts) because generally it will be more advantageous for that
investor to purchase Class A shares of the Fund instead. A fourth class of
shares may be purchased only by certain institutional investors at net asset
value per share (the "Class Y shares").
The four classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different shareholder
privileges and features. The net income attributable to Class B and Class C
shares and the dividends payable on Class B and Class C shares will be reduced
by incremental expenses borne solely by that class, including the asset-based
sales charge to which Class B and Class C shares are subject.
The conversion of Class B shares to Class A shares after six years is
subject to the continuing availability of a private letter ruling from the
Internal Revenue Service, or an opinion of the Fund's counsel or tax adviser, to
the effect that the conversion of Class B shares does not constitute a taxable
event for the holder under Federal income tax law. If such a revenue ruling or
opinion is no longer available, the automatic conversion feature may be
suspended, in which event no further conversions of Class B shares would occur
while such suspension remained in effect. Although Class B shares could then be
exchanged for Class A shares on the basis of relative net asset value of the two
classes, without the imposition of a sales charge or fee, such exchange could
constitute a taxable event for the holder, and absent such exchange, Class B
shares might continue to be subject to the asset-based sales charge for longer
than six years.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A, Class B, Class C and Class Y shares
recognizes two types of expenses. General expenses that do not pertain
specifically to any one class are allocated pro rata to the shares of each
class, based on the percentage of the net assets of such class to the Fund's
total assets, and then equally to each outstanding share within a given class.
Such general expenses include (i) management fees, (ii) legal, bookkeeping and
audit fees, (iii) printing and mailing costs of shareholder reports,
Prospectuses, Statements of Additional Information and other materials for
current shareholders, (iv) fees to Independent Trustees, (v) custodian expenses,
(vi) share issuance costs, (vii) organization and start-up costs, (viii)
interest, taxes and brokerage commissions, and (ix) non-recurring expenses, such
as litigation costs. Other expenses that are directly attributable to a class
are allocated equally to each outstanding share within that class. Such expenses
include (a) Distribution and Service Plan fees, (b) incremental transfer and
shareholder servicing agent fees and expenses, (c) registration fees and (d)
shareholder meeting expenses, to the extent that such expenses pertain to a
specific class rather than to the Fund as a whole.
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None of the instructions described elsewhere in the Prospectus or
Statement of Additional Information for the purchase, redemption, reinvestment,
exchange, or transfer of shares of the Fund, the selection of classes of shares,
or the reinvestment of dividends apply to Class Y shares. Clients of Class Y
Sponsors must request their Sponsor to effect all transactions in Class Y shares
on their behalf.
Determination of Net Asset Value Per Share. The net asset values per share of
Class A, Class B, Class C and Class Y shares of the Fund are determined as of
the close of business of The New York Stock Exchange (the "Exchange") on each
day that the Exchange is open, by dividing the value of the Fund's net assets
attributable to that class by the number of shares of that class that are
outstanding. The Exchange normally closes at 4:00 P.M., New York time, but may
close earlier on some other days (for example, in case of weather emergencies or
on days falling before a holiday). The Exchange's most recent annual holiday
announcement (which is subject to change) states that it will close on New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. It may also close on other days. The
Fund may invest a portion of its assets in foreign securities primarily listed
on foreign exchanges which may trade on Saturdays or customary U.S. business
holidays on which the Exchange is closed. Because the Fund's price and net asset
value will not be calculated on those days, the Fund's net asset values per
share may be significantly affected on such days when shareholders may not
purchase or redeem shares.
The Fund's Board of Trustees has established procedures for the valuation
of the Fund's securities, generally as follows: (i) equity securities traded on
a U.S. securities exchange or on the Automated Quotation System ("NASDAQ") of
the Nasdaq Stock Market, Inc. for which last sale information is regularly
reported are valued generally at the last reported sale price on their primary
exchange or NASDAQ that day (or, in the absence of sales that day, at values
based on the last sales prices of the preceding trading day, or closing "bid"
prices that day); (ii) securities actively traded on a foreign securities
exchange are valued generally at the last sales price available to the pricing
service approved by the Fund's Board of Trustees or to the Manager as reported
by the principal exchange on which the security is traded at its last trading
session on or immediately preceeding the valuation date, or at the mean between
"bid" and "asked" prices obtained from the principal exchange or two active
market makers in the security on the basis of reasonable inquiry; (iii)
long-term debt securities having a remaining maturity in excess of 60 days are
valued based on the mean between the "bid" and "asked" prices determined by a
portfolio pricing service approved by the Fund's Board of Trustees or obtained
from two active market makers in the security on the basis of reasonable
inquiry; (iv) debt instruments having a maturity of more than 397 days when
issued, and non-money market type instruments having a maturity of 397 days or
less when issued, which have a remaining maturity of 60 days or less are valued
at
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the mean between the "bid" and "asked" prices determined by a pricing service
approved by the Fund's Board of Trustees or obtained from two active market
makers in the security on the basis of reasonable inquiry; (v) money market-type
debt securities that had a maturity of less than 397 days when issued that have
a remaining maturity of 60 days or less are valued at cost, adjusted for
amortization of premiums and accretion of discounts; and (vii) securities
(including restricted securities) not having readily- available market
quotations are valued at fair value determined under the Board's procedures. If
the Manager is unable to locate two market makers willing to give quotes (see
(ii), (iii) and (iv) above, the security may be priced at the mean between the
"bid" and "asked" prices provided by a single market maker (which in certain
cases may be the "bid" price if no "asked" price is available.
Trading in securities on European and Asian exchanges and over-the-counter
markets is normally completed before the close of The New York Stock Exchange.
Events affecting the values of foreign securities traded in securities markets
that occur between the time their prices are determined and the close of the
Exchange will not be reflected in the Fund's calculation of net asset value
unless the Board of Trustees or the Manager, under procedures established by the
Board of Trustees, determines that the particular event would materially affect
the Fund's net asset value, in which case an adjustment would be made. Foreign
currency, including forward contracts, will be valued at the closing price in
the London foreign exchange market that day as provided by a reliable bank,
dealer or pricing service. Foreign securities priced in a foreign currency as
well as foreign currency reflect prevailing rates of exchange and have their
value converted to U.S. dollars at the closing price in the London foreign
exchange market as provided by a reliable bank, dealer or pricing service.
In the case of U.S. Government Securities, mortgage-backed securities and
corporate bonds, where last sale information is not generally available, such
pricing procedures may include "matrix" comparisons to the prices for comparable
instruments on the basis of quality, yield, maturity, and other special factors
involved. The Fund's Board of Trustees has authorized the Manager to employ a
pricing service to price U.S. Government Securities, mortgage-backed securities,
and foreign government and corporate bonds for which last sale information is
not generally available. The Manager will monitor the accuracy of such pricing
services which may include comparing prices used for portfolio evaluation to
actual sales prices of selected securities.
Puts, calls and Futures are valued at the last sales price on the
principal exchange on which they are traded, or on NASDAQ as applicable, as
determined by a pricing service approved by the Board of Trustees or by the
Manager. If there were no sales that day, value shall be the last sale price on
the preceeding trading day if it is within the spread of the closing "bid" and
"asked" prices on the principal exchange or on NASDAQ on the valuation
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date, or, if not, value shall be the closing "bid" price on the principal
exchange or on NASDAQ on the valuation date. If the put, call or future is not
traded on an exchange or on NASDAQ, it shall be valued at the mean between "bid"
and "asked" prices obtained by the Manager from two active market makers (which
in certain cases may be the "bid" price if no "asked" price is available).
When the Fund writes an option, an amount equal to the premium received by
the Fund is included in the Fund's Statement of Assets and Liabilities as an
asset, and an equivalent deferred credit is included in the liability section.
The credit is adjusted ("marked-to-market") to reflect the current market value
of the call or put. In determining the Fund's gain on investments, if a call or
put written by the Fund is exercised, the proceeds are increased by the premium
received. If a call or put written by the Fund expires, the Fund has a gain in
the amount of the premium; if the Fund enters into a closing purchase
transaction, it will have a gain or loss depending on whether the premium
received was more or less than the cost of the closing transaction. If the Fund
exercises a put it holds, the amount the Fund receives on its sale of the
underlying investment is reduced by the amount of the premium paid by the Fund.
In the case of foreign securities and corporate bonds, when last sale
information is not generally available, such pricing procedures may include
"matrix" comparisons to the prices for comparable instruments on the basis of
quality, yield, maturity and other special factors involved. The Manager may use
pricing services approved by the Board of Trustees to price any of the types of
securities described above. The Manager will monitor the accuracy of such
pricing services, which may include comparing prices used for portfolio
evaluation to actual sales prices of selected securities.
AccountLink. When shares are purchased through AccountLink, each purchase must
be at least $25.00. Shares will be purchased on the regular business day the
Distributor is instructed to initiate the Automated Clearing House ("ACH")
transfer to buy shares. Dividends will begin to accrue on such day the Fund
receives Federal Funds for the purchase through the ACH system before the close
of The New York Stock Exchange that day, which is normally three days after the
ACH transfer is initiated. The Exchange normally closes at 4:00 P.M., but may
close earlier on certain days. If Federal Funds are received on a business day
after the close of the Exchange, the shares will be purchased and dividends will
begin to accrue on the next regular business day. The Distributor and the Fund
are not responsible for any delays in purchasing shares resulting from delays in
ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales charge
rate may be obtained for Class A shares under Right of Accumulation and Letters
of Intent because of the economies of sales efforts and reduction in expenses
realized by the Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in the Prospectus
because the Distributor or dealer or broker incurs
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little or no selling expenses. The term "immediate family" refers to one's
spouse, children, grandchildren, grandparents, parents, parents-in-law, brothers
and sisters, sons- and daughters-in-law, siblings, a sibling's spouse, a
spouse's siblings, aunts, uncles, nieces and nephews.
o The Oppenheimer Funds. The Oppenheimer funds are those
mutual funds for which the Distributor acts as the distributor or
the sub-distributor and include the following:
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer California Municipal Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer Insured Municipal Fund
Oppenheimer Main Street California Municipal Fund Oppenheimer Florida
Municipal Fund Oppenheimer Pennsylvania Municipal Fund Oppenheimer New
Jersey Municipal Fund Oppenheimer Discovery Fund Oppenheimer Capital
Appreciation Fund Oppenheimer Growth Fund Oppenheimer Equity Income Fund
Oppenheimer Multiple Strategies Fund Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund Oppenheimer High Yield Fund
Oppenheimer Champion Income Fund Oppenheimer Bond Fund Oppenheimer U.S.
Government Trust Oppenheimer Limited-Term Government Fund Oppenheimer
Global Fund Oppenheimer Real Asset Fund Oppenheimer Global Growth & Income
Fund Oppenheimer Gold & Special Minerals Fund Oppenheimer International
Bond Fund Oppenheimer Strategic Income Fund Oppenheimer Enterprise Fund
Oppenheimer International Growth Fund Oppenheimer Quest Global Value Fund,
Inc. Oppenheimer Quest Capital Value Fund, Inc. Oppenheimer Quest
Opportunity Value Fund Oppenheimer Quest Small Cap Value Fund, Inc.
Oppenheimer Quest Growth & Income Value Fund Oppenheimer Quest Officers
Value Fund Oppenheimer Quest Value Fund, Inc. Oppenheimer Developing
Markets Fund Oppenheimer Bond Fund for Growth Oppenheimer Disciplined
Value Fund Oppenheimer Disciplined Allocation Fund Oppenheimer LifeSpan
Balanced Fund Oppenheimer LifeSpan Income Fund
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Oppenheimer LifeSpan Growth Fund
Oppenheimer Bond Fund for Growth
Rochester Fund Municipals
Limited-Term New York Municipal Fund
and the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc. Oppenheimer Cash Reserves Centennial
Money Market Trust Centennial Tax Exempt Trust Centennial Government Trust
Centennial New York Tax Exempt Trust Centennial California Tax Exempt
Trust Centennial America Fund, L.P.
There is an initial sales charge on the purchase of Class A shares of each
of the Oppenheimer funds except Money Market Funds (under certain circumstances
described herein, redemption proceeds of Money Market Fund shares may be subject
to a contingent deferred sales charge).
o Letters of Intent. A Letter of Intent (referred to as a "Letter") is an
investor's statement in writing to the Distributor of the intention to purchase
Class A shares of the Fund or Class A and Class B shares of the Fund (and other
Oppenheimer funds) during a 13-month period (the "Letter of Intent period"),
which may, at the investor's request, include purchases made up to 90 days prior
to the date of the Letter. The Letter states the investor's intention to make
the aggregate amount of purchases of shares which, when added to the investor's
holdings of shares of those funds, will equal or exceed the amount specified in
the Letter. Purchases made by reinvestment of dividends or distributions of
capital gains and purchases made at net asset value without sales charge do not
count toward satisfying the amount of the Letter. A Letter enables an investor
to count the Class A and Class B shares purchased under the Letter to obtain the
reduced sales charge rate on purchases of Class A shares of the Fund (and other
Oppenheimer funds) that applies under the Right of Accumulation to current
purchases of Class A shares. Each purchase under the Letter will be made at the
public offering price applicable to a single lump-sum purchase of shares in the
intended purchase amount, as described in the Prospectus.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of Intent
period, when added to the value (at offering price) of the investor's holdings
of shares on the last day of that period, do not equal or exceed the intended
purchase amount, the investor agrees to pay the additional amount of sales
charge applicable to such purchases, as set forth in "Terms of Escrow,"
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below (as those terms may be amended from time to time). The investor agrees
that shares equal in value to 5% of the intended purchase amount will be held in
escrow by the Transfer Agent subject to the Terms of Escrow. Also, the investor
agrees to be bound by the terms of the Prospectus, this Statement of Additional
Information and the Application used for such Letter of Intent, and if such
terms are amended, as they may be from time to time by the Fund, that those
amendments will apply automatically to existing Letters of Intent.
For purchases of shares of the Fund and other Oppenheimer funds by
OppenheimerFunds prototype 401(k) plans under a Letter of Intent, the Transfer
Agent will not hold shares in escrow. If the intended purchase amount under the
Letter entered into by an OppenheimerFunds prototype 401(k) plan is not
purchased by the plan by the end of the Letter of Intent period, there will be
no adjustment of commissions paid to the broker-dealer or financial institution
of record for accounts held in the name of that plan.
If the total eligible purchases made during the Letter of Intent period do
not equal or exceed the intended purchase amount, the commissions previously
paid to the dealer of record for the account and the amount of sales charge
retained by the Distributor will be adjusted to the rates applicable to actual
purchases. If total eligible purchases during the Letter of Intent period exceed
the intended purchase amount and exceed the amount needed to qualify for the
next sales charge rate reduction set forth in the applicable prospectus, the
sales charges paid will be adjusted to the lower rate, but only if and when the
dealer returns to the Distributor the excess of the amount of commissions
allowed or paid to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the Distributor
will be used to purchase additional shares for the investor's account at the net
asset value per share in effect on the date of such purchase, promptly after the
Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter, shares
redeemed by the investor prior to the termination of the Letter of Intent period
will be deducted. It is the responsibility of the dealer of record and/or the
investor to advise the Distributor about the Letter in placing any purchase
orders for the investor during the Letter of Intent period. All of such
purchases must be made through the Distributor.
o Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if necessary) made
pursuant to a Letter, shares of the Fund equal in value up to 5% of the intended
purchase amount specified in the Letter shall be held in escrow by the Transfer
Agent. For example, if the intended purchase amount is $50,000, the escrow shall
be shares valued in the amount of $2,500 (computed at the public offering price
adjusted for a $50,000 purchase). Any dividends and
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capital gains distributions on the escrowed shares will be credited
to the investor's account.
2. If the intended purchase amount specified under the Letter is completed
within the thirteen-month Letter of Intent period, the escrowed shares will be
promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the total
purchases pursuant to the Letter are less than the intended purchase amount
specified in the Letter, the investor must remit to the Distributor an amount
equal to the difference between the dollar amount of sales charges actually paid
and the amount of sales charges which would have been paid if the total amount
purchased had been made at a single time. Such sales charge adjustment will
apply to any shares redeemed prior to the completion of the Letter. If such
difference in sales charges is not paid within twenty days after a request from
the Distributor or the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed shares necessary to
realize such difference in sales charges. Full and fractional shares remaining
after such redemption will be released from escrow. If a request is received to
redeem escrowed shares prior to the payment of such additional sales charge, the
sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for redemption any
or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the holding of
which may be counted toward completion of a Letter) include (a) Class A shares
sold with a front-end sales charge or subject to a Class A contingent deferred
sales charge, (b) Class B shares of other Oppenheimer funds acquired subject to
a contingent deferred sales charge, and (c) Class A shares or Class B shares
acquired in exchange for either (i) Class A shares of one of the other
Oppenheimer funds that were acquired subject to a Class A initial or contingent
deferred sales charge or (ii) Class B shares of one of the other Oppenheimer
funds that were acquired subject to a contingent deferred sales charge.
6. Shares held in escrow hereunder will automatically be exchanged for
shares of another fund to which an exchange is requested, as described in the
section of the Prospectus entitled "How to Exchange Shares," and the escrow will
be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank account, a
check (minimum $25) for the initial purchase must accompany the application.
Shares purchased by Asset Builder Plan payments from bank accounts are subject
to the redemption restrictions for recent purchases described in "How to Sell
Shares" in the Prospectus. Asset Builder Plans also enable shareholders of
Oppenheimer Cash Reserves to use those accounts for monthly
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automatic purchases of shares of up to four other Oppenheimer funds. If you make
payments from your bank account to purchase shares of the Fund, your bank
account will be automatically debited normally four to five business days prior
to the investment dates selected in the Account Application. Neither the
Distributor, the Transfer Agent nor the Fund shall be responsible for any delays
in purchasing shares resulting from delays in ACH transmissions.
There is a front-end sales charge on the purchase of certain Oppenheimer
funds, or a contingent deferred sales charge may apply to shares purchased by
Asset Builder payments. An application should be obtained from the Distributor,
completed and returned, and a prospectus of the selected fund(s) should be
obtained from the Distributor or your financial advisor before initiating Asset
Builder payments. The amount of the Asset Builder investment may be changed or
the automatic investments may be terminated at any time by writing to the
Transfer Agent. A reasonable period (approximately 15 days) is required after
the Transfer Agent's receipt of such instructions to implement them. The Fund
reserves the right to amend, suspend, or discontinue offering such plans at any
time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for the Fund's
shares (for example, when a purchase check is returned to the Fund unpaid)
causes a loss to be incurred when the net asset value of the Fund's shares on
the cancellation date is less than on the purchase date. That loss is equal to
the amount of the decline in the net asset value per share multiplied by the
number of shares in the purchase order. The investor is responsible for that
loss. If the investor fails to compensate the Fund for the loss, the Distributor
will do so. The Fund may reimburse the Distributor for that amount by redeeming
shares from any account registered in that investor's name, or the Fund or the
Distributor may seek other redress.
Retirement Plans. In describing certain types of employee benefit plans that may
purchase Class A shares without being subject to the Class A contingent deferred
sales charge, the term "employee benefit plan" means any plan or arrangement,
whether or not "qualified" under the Internal Revenue Code, including, medical
savings accounts, payroll deduction plans or similar plans in which Class A
shares are purchased by a fiduciary or other person for the account of
participants who are employees of a single employer or of affiliated employers,
if the Fund account is registered in the name of the fiduciary or other person
for the benefit of participants in the plan.
The term "group retirement plan" means any qualified or non-qualified
retirement plan (including 457 plans, SEPs, SARSEPs, 403(b) plans, and SIMPLE
plans) for employees of a corporation or a sole proprietorship, members and
employees of a partnership or association or other organized group of persons
(the members of which may include other groups), if the group has made special
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arrangements with the Distributor and all members of the group
participating in the plan purchase Class A shares of the Fund
through a single investment dealer, broker or other financial
institution designated by the group.
How To Sell Shares
Information on how to sell shares of the Fund is stated in the Prospectus.
The information below supplements the terms and conditions for redemptions set
forth in the Prospectus.
o Involuntary Redemptions. The Fund's Board of Trustees has the right to
cause the involuntary redemption of the shares held in any account if the
aggregate net asset value of those shares is less than $200 or such lesser
amount as the Board may fix. The Board of Trustees will not cause the
involuntary redemption of shares in an account if the aggregate net asset value
of the shares has fallen below the stated minimum solely as a result of market
fluctuations. Should the Board elect to exercise this right, it may also fix, in
accordance with the Investment Company Act, the requirements for any notice to
be given to the shareholders in question (not less than 30 days), or the Board
may set requirements for granting permission to the shareholder to increase the
investment, and set other terms and conditions so that the shares would not be
involuntarily redeemed.
o Payments "In Kind". The Prospectus states that payment for shares
tendered for redemption is ordinarily made in cash. However, the Board of
Trustees of the Fund may determine that it would be detrimental to the best
interests of the remaining shareholders of the Fund to make payment of a
redemption order wholly or partly in cash. In that case the Fund may pay the
redemption proceeds in whole or in part by a distribution "in kind" of
securities from the portfolio of the Fund, in lieu of cash, in conformity with
applicable rules of the Securities and Exchange Commission. The Fund has elected
to be governed by Rule 18f-1 under the Investment Company Act, pursuant to which
the Fund is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net assets of the Fund during any 90-day period for any
one shareholder. If shares are redeemed in kind, the redeeming shareholder might
incur brokerage or other costs in selling the securities for cash. The method of
valuing securities used to make redemptions in kind will be the same as the
method the Fund uses to value its portfolio securities described above under
"Determination of Net Asset Values Per Share" and that valuation will be made as
of the time the redemption price is determined.
Reinvestment Privilege. Within six months of a redemption, a
shareholder may reinvest all or part of the redemption proceeds of
(i) Class A shares that were purchased subject to an initial sales
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charge or Class A contingent deferred sales charge, which was paid, or (ii)
Class B shares that were subject to the Class B contingent deferred sales charge
when redeemed. This privilege does not apply to Class C or Class Y shares. The
reinvestment may be made without sales charge only in Class A shares of the Fund
or any of the other Oppenheimer funds into which shares of the Fund are
exchangeable as described in "How to Exchange Shares" below, at the net asset
value next computed after the Transfer Agent receives the reinvestment order.
The shareholder must ask the Distributor for that privilege at the time of
reinvestment. Any capital gain that was realized when the shares were redeemed
is taxable, and reinvestment will not alter any capital gains tax payable on
that gain. If there has been a capital loss on the redemption, some or all of
the loss may not be tax deductible, depending on the timing and amount of the
reinvestment. Under the Internal Revenue Code, if the redemption proceeds of
Fund shares on which a sales charge was paid are reinvested in shares of the
Fund or another of the Oppenheimer funds within 90 days of payment of the sales
charge, the shareholder's basis in the shares of the Fund that were redeemed may
not include the amount of the sales charge paid. That would reduce the loss or
increase the gain recognized from the redemption. However, in that case the
sales charge would be added to the basis of the shares acquired by the
reinvestment of the redemption proceeds. The Fund may amend, suspend or cease
offering this reinvestment privilege at any time as to shares redeemed after the
date of such amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a contingent
deferred sales charge of any class at the time of transfer to the name of
another person or entity (whether the transfer occurs by absolute assignment,
gift or bequest, not involving, directly or indirectly, a public sale). The
transferred shares will remain subject to the contingent deferred sales charge,
calculated as if the transferee shareholder had acquired the transferred shares
in the same manner and at the same time as the transferring shareholder. If less
than all shares held in an account are transferred, and some but not all shares
in the account would be subject to a contingent deferred sales charge if
redeemed at the time of transfer, the priorities described in the Prospectus
under "How to Buy Shares" for the imposition of the Class B and Class C
contingent deferred sales charge will be followed in determining the order in
which shares are transferred.
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans, 401(k) plans, or
pension or profit-sharing plans should be addressed to "Trustee,
OppenheimerFunds Retirement Plans," c/o the Transfer Agent at its address listed
in "How To Sell Shares" in the Prospectus or on the back cover of this Statement
of Additional Information. The request must: (i) state the reason for the
distribution; (ii) state the owner's awareness of tax penalties if the
distribution is premature; and (iii) conform to the requirements of the plan and
the Fund's other redemption
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requirements. Participants other than self-employed persons maintaining a plan
account in their own name in OppenheimerFunds- sponsored prototype pension or
profit-sharing or 401(k) plans may not directly redeem or exchange shares held
for their account under those plans. The employer or plan administrator must
sign the request. Distributions from pension and profit sharing plans are
subject to special requirements under the Internal Revenue Code and certain
documents (available from the Transfer Agent) must be completed before the
distribution may be made. Distributions from retirement plans are subject to
withholding requirements under the Internal Revenue Code, and IRS Form W-4P
(available from the Transfer Agent) must be submitted to the Transfer Agent with
the distribution request, or the distribution may be delayed. Unless the
shareholder has provided the Transfer Agent with a certified tax identification
number, the Internal Revenue Code requires that tax be withheld from any
distribution even if the shareholder elects not to have tax withheld. The Fund,
the Manager, the Distributor, the Trustee and the Transfer Agent assume no
responsibility to determine whether a distribution satisfies the conditions of
applicable tax laws and will not be responsible for any tax penalties assessed
in connection with a distribution.
Special Arrangements for Repurchase of Shares from Dealers and Brokers. The
Distributor is the Fund's agent to repurchase its shares from authorized dealers
or brokers on behalf of their customers. The shareholder should contact the
broker or dealer to arrange this type of redemption. The repurchase price per
share will be the net asset value next computed after the Distributor receives
the order placed by the dealer or broker, except that if the Distributor
receives a repurchase order from a dealer or broker after the close of The New
York Stock Exchange on a regular business day, it will be processed at that
day's net asset value if the order was received by the dealer or broker from its
customers prior to the time the Exchange closes (normally, that is 4:00 P.M.,
but may be earlier on some days) and the order was transmitted to and received
by the Distributor prior to its close of business that day (normally 5:00 P.M.).
Ordinarily, for accounts redeemed by a broker-dealer under this procedure,
payment will be made within three business days after the shares have been
redeemed upon the Distributor's receipt of the required redemption documents in
proper form, with the signature(s) of the registered owners guaranteed on the
redemption document as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the Fund
valued at $5,000 or more can authorize the Transfer Agent to redeem shares
(minimum $50) automatically on a monthly, quarterly, semi-annual or annual basis
under an Automatic Withdrawal Plan. Shares will be redeemed three business days
prior to the date requested by the shareholder for receipt of the payment.
Automatic withdrawals of up to $1,500 per month may be requested by telephone if
payments are to be made by check payable
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to all shareholders of record and sent to the address of record for the account
(and if the address has not been changed within the prior 30 days). Required
minimum distributions from OppenheimerFunds-sponsored retirement plans may not
be arranged on this basis. Payments are normally made by check, but shareholders
having AccountLink privileges (see "How To Buy Shares") may arrange to have
Automatic Withdrawal Plan payments transferred to the bank account designated on
the OppenheimerFunds New Account Application or signature-guaranteed
instructions. Shares are normally redeemed pursuant to an Automatic Withdrawal
Plan three business days before the date selected in the Account Application. If
a contingent deferred sales charge applies to the redemption, the amount of the
check or payment will be reduced accordingly. The Fund cannot guarantee receipt
of a payment on the date requested and reserves the right to amend, suspend or
discontinue offering such plans at any time without prior notice. Because of the
sales charge assessed on Class A share purchases, shareholders should not make
regular additional Class A share purchases while participating in an Automatic
Withdrawal Plan. Class B and Class C shareholders should not establish
withdrawal plans, because of the imposition of the contingent deferred sales
charges on such withdrawals (except where the Class B and Class C contingent
deferred sales charges are waived as described in the Prospectus under "Waivers
of Class B and Class C Sales Charges".
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions applicable to such plans, as stated below, as
well as in the Prospectus. These provisions may be amended from time to time by
the Fund and/or the Distributor. When adopted, such amendments will
automatically apply to existing Plans.
o Automatic Exchange Plans. Shareholders can authorize the Transfer Agent
(on the OppenheimerFunds Application or signature- guaranteed instructions) to
exchange a pre-determined amount of shares of the Fund for shares (of the same
class) of other Oppenheimer funds automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Exchange Plan. The minimum amount
that may be exchanged to each other fund account is $25. Exchanges made under
these plans are subject to the restrictions that apply to exchanges as set forth
in "How to Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
o Automatic Withdrawal Plans. Fund shares will be redeemed as necessary to
meet withdrawal payments. Shares acquired without a sales charge will be
redeemed first and shares acquired with reinvested dividends and capital gains
distributions will be redeemed next, followed by shares acquired with a sales
charge, to the extent necessary to make withdrawal payments. Depending upon the
amount withdrawn, the investor's principal may be depleted. Payments made under
such plans should not be considered as a yield or income on your investment. It
may not be desirable to purchase additional Class A shares while making
automatic withdrawals
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because of the sales charges that apply to purchases when made. Accordingly, a
shareholder normally may not maintain an Automatic Withdrawal Plan while
simultaneously making regular purchases of Class A shares.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan (the "Plan") as agent for the investor (the "Planholder") who executed the
Plan authorization and application submitted to the Transfer Agent. Neither the
Transfer Agent nor the Fund shall incur any liability to the Planholder for any
action taken or omitted by the Transfer Agent in good faith to administer the
Plan. Certificates will not be issued for shares of the Fund purchased for and
held under the Plan, but the Transfer Agent will credit all such shares to the
account of the Planholder on the records of the Fund. Any share certificates
held by a Planholder may be surrendered unendorsed to the Transfer Agent with
the Plan application so that the shares represented by the certificate may be
held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done at
net asset value without a sales charge. Dividends on shares held in the account
may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made at
the net asset value per share determined on the redemption date. Checks or
AccountLink payments of the proceeds of Plan withdrawals will normally be
transmitted three business days prior to the date selected for receipt of the
payment (receipt of payment on the date selected cannot be guaranteed),
according to the choice specified in writing by the Planholder.
The amount and the interval of disbursement payments and the address to
which checks are to be mailed or AccountLink payments are to be sent may be
changed at any time by the Planholder by writing to the Transfer Agent. The
Planholder should allow at least two weeks' time in mailing such notification
for the requested change to be put in effect. The Planholder may, at any time,
instruct the Transfer Agent by written notice (in proper form in accordance with
the requirements of the then-current Prospectus of the Fund) to redeem all, or
any part of, the shares held under the Plan. In that case, the Transfer Agent
will redeem the number of shares requested at the net asset value per share in
effect in accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing to the
Transfer Agent. A Plan may also be terminated at any time by the Transfer Agent
upon receiving directions to that effect from the Fund. The Transfer Agent will
also terminate a Plan upon receipt of evidence satisfactory to it of the death
or legal incapacity of the Planholder. Upon termination of a Plan by the
Transfer Agent or the Fund, shares that have not been redeemed
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from the account will be held in uncertificated form in the name of the
Planholder, and the account will continue as a dividend- reinvestment,
uncertificated account unless and until proper instructions are received from
the Planholder or his or her executor or guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the Planholder
may request issuance of a portion of the shares in certificated form. Upon
written request from the Planholder, the Transfer Agent will determine the
number of shares for which a certificate may be issued without causing the
withdrawal checks to stop because of exhaustion of uncertificated shares needed
to continue payments. However, should such uncertificated shares become
exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund, the
Planholder will be deemed to have appointed any successor transfer agent to act
as agent in administering the Plan.
How To Exchange Shares
As stated in the Prospectus, shares of a particular class of Oppenheimer
funds having more than one class of shares may be exchanged only for shares of
the same class of other Oppenheimer funds. Shares of the Oppenheimer funds that
have a single class without a class designation are deemed "Class A" shares for
this purpose. Shares of Oppenheimer funds that have a single Class without a
class designation are deemed "Class A" shares for this purpose. All of the
Oppenheimer funds offer Class A Class B and Class C shares except Oppenheimer
Money Market Fund, Inc., Centennial Money Market Trust, Centennial Tax Exempt
Trust, Centennial Government Trust, Centennial New York Tax Exempt Trust,
Centennial California Tax Exempt Trust, Centennial America Fund, L.P., and Daily
Cash Accumulation Fund, Inc., which only offer Class A shares and Oppenheimer
Main Street California Tax-Exempt Fund, which only offers Class A and Class B
shares (Class B and Class C shares of Oppenheimer Cash Reserves are generally
available only by exchange from the same class of shares of other Oppenheimer
funds or through OppenheimerFunds sponsored 401(k) plans). A current list
showing which funds offer which class can be obtained by calling the Distributor
at 1-800-525-7048.
For accounts established on or before March 8, 1996 holding Class M shares
of Oppenheimer Bond Fund for Growth, Class M shares can be exchanged only for
Class A shares of other Oppenheimer funds. Exchanges to Class M shares of
Oppenheimer Bond Fund for Growth are permitted from Class A shares of
Oppenheimer Money Market Fund, Inc. or Oppenheimer Cash Reserves that were
acquired by exchange from Class M shares. Otherwise no exchanges of any class of
any Oppenheimer fund into Class M shares are permitted.
Class A shares of Oppenheimer funds may be exchanged at net
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asset value for shares of any Money Market Fund. Shares of any Money Market Fund
purchased without a sales charge may be exchanged for shares of Oppenheimer
funds offered with a sales charge upon payment of the sales charge (or, if
applicable, may be used to purchase shares of Oppenheimer funds subject to a
contingent deferred sales charge). However, shares of Oppenheimer Money Market
Fund, Inc., purchased with the redemption proceeds of shares of other mutual
funds (other than funds managed by the Manager or its subsidiaries) redeemed
within the 12 months prior to that purchase may subsequently be exchanged for
shares of other Oppenheimer funds without being subject to an initial or
contingent deferred sales charge, whichever is applicable. To qualify for that
privilege, the investor or the investor's dealer must notify the Distributor of
eligibility for this privilege at the time the shares of Oppenheimer Money
Market Fund, Inc. are purchased, and if requested, must supply proof of
entitlement to this privilege.
Shares of the Fund acquired by reinvestment of dividends or distributions
from any of the other Oppenheimer funds or from any unit investment trust for
which reinvestment arrangements have been made with the Distributor may be
exchanged at net asset value for shares of any of the Oppenheimer funds. No
contingent deferred sales charge is imposed on exchanges of shares of any class
purchased subject to a contingent deferred sales charge. However, when Class A
shares acquired by exchange of Class A shares of other Oppenheimer funds
purchased subject to a Class A contingent deferred sales charge are redeemed
within 12 months of the end of the calendar month of the initial purchase of the
exchanged Class A shares (18 months if the shares were initially purchased prior
to May 1, 1997), the Class A contingent deferred sales charge is imposed on the
redeemed shares (see "Class A Contingent Deferred Sales Charge" in the
Prospectus. The Class B contingent deferred sales charge is imposed on Class B
shares acquired by exchange if they are redeemed within six years of the initial
purchase of the exchanged Class B shares. The Class C contingent deferred sales
charge is imposed on Class C shares acquired by exchange if they are redeemed
within 12 months of the initial purchase of the exchanged Class C shares.
When Class B or Class C shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the imposition
of the Class B or the Class C contingent deferred sales charge will be followed
in determining the order in which the shares are exchanged. Shareholders should
take into account the effect of any exchange on the applicability and rate of
any contingent deferred sales charge that might be imposed in the subsequent
redemption of remaining shares. Shareholders owning shares of more than one
class must specify whether they intend to exchange Class A, Class B or Class C
shares.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of more than one account. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers
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that qualify for this privilege. In connection with any exchange request, the
number of shares exchanged may be less than the number requested if the exchange
or the number requested would include shares subject to a restriction cited in
the Prospectus or this Statement of Additional Information or would include
shares covered by a share certificate that is not tendered with the request. In
those cases, only the shares available for exchange without restriction will be
exchanged.
When exchanging shares by telephone, a shareholder must either have an
existing account in, or obtain and acknowledge receipt of a prospectus of, the
fund to which the exchange is to be made. For full or partial exchanges of an
account made by telephone, any special account features such as Asset Builder
Plans, Automatic Withdrawal Plans and retirement plan contributions will be
switched to the new account unless the Transfer Agent is instructed otherwise.
If all telephone lines are busy (which might occur, for example, during periods
of substantial market fluctuations), shareholders might not be able to request
exchanges by telephone and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the "Redemption
Date"). Normally, shares of the fund to be acquired are purchased on the
Redemption Date, but such purchases may be delayed by either fund up to five
business days if it determines that it would be disadvantaged by an immediate
transfer of the redemption proceeds. The Fund reserves the right, in its
discretion, to refuse any exchange request that may disadvantage it (for
example, if the receipt of multiple exchange requests from a dealer might
require the disposition of portfolio securities at a time or at a price that
might be disadvantageous to the Fund).
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure that
the Fund selected is appropriate for his or her investment and should be aware
of the tax consequences of an exchange. For federal income tax purposes, an
exchange transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above, discusses some
of the tax consequences of reinvestment of redemption proceeds in such cases.
The Fund, the Distributor, and the Transfer Agent are unable to provide
investment, tax or legal advice to a shareholder in connection with an exchange
request or any other investment transaction.
Dividends, Capital Gains and Taxes
Dividends and Distributions. Dividends will be payable on shares held of record
at the time of the previous determination of net asset value. The Fund intends
to pay any dividends annually. Dividends on newly purchased shares will not be
declared or paid until such time as Federal Funds (funds credited to a member
bank's
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account at the Federal Reserve Bank) are available from the purchase payment for
such shares. Normally, purchase checks received from investors are converted to
Federal Funds on the next business day. Dividends will be declared on shares
repurchased by a dealer or broker for four business days following the trade
date (i.e., to and including the day prior to settlement of the repurchase). If
all shares in an account are redeemed, all dividends accrued on shares of the
same class in the account will be paid together with the redemption proceeds.
However, the investment objective of the Fund is total return and not income
generation. Consequently, the amount of dividends distributed by the Fund is
expected to be small.
Dividends, distributions and the proceeds of the redemption of Fund shares
represented by checks returned to the Transfer Agent by the Postal Service as
undeliverable will be invested in shares of Oppenheimer Money Market Fund, Inc.,
as promptly as possible after the return of such checks to the Transfer Agent,
to enable the investor to earn a return on otherwise idle funds.
The amount of a class's distributions may vary from time to time depending
on market conditions, the composition of the Fund's portfolio, and expenses
borne by the Fund or borne separately by a class, as described in "Alternative
Sales Arrangements -- Class A, Class B and Class C Shares," above. Dividends are
calculated in the same manner, at the same time and on the same day for shares
of each class. However, dividends on Class B and Class C shares are expected to
be lower than dividends on Class A or Class Y shares as a result of the
asset-based sales charges on Class B and Class C shares, and Class B and Class C
dividends will also differ in amount as a consequence of any difference in net
asset value between the classes.
Tax Status of the Fund's Dividends and Distributions. The Federal tax treatment
of the Fund's dividends and capital gains distributions is explained in the
Prospectus under the caption "Dividends, Capital Gains and Taxes." Special
provisions of the Internal Revenue Code govern the eligibility of the Fund's
dividends for the dividends received deduction for corporate shareholders.
Long-term capital gains distributions are not eligible for the deduction. In
addition, the amount of dividends paid by the Fund which may qualify for the
deduction is limited to the aggregate amount of qualifying dividends that the
Fund derives from its portfolio investments that the Fund has held for a minimum
period, usually 46 days either before or immediately after the Fund becomes
entitled to the dividend. A corporate shareholder will not be eligible for the
deduction on dividends paid on Fund shares held for 45 days or less. To the
extent the Fund's dividends are derived from gross income from option premiums,
interest income or short-term gains from the sale of securities or dividends
from foreign corporations, those dividends will not qualify for the deduction.
-64-
<PAGE>
If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on amounts
paid by it as dividends and distributions. The Fund qualified as a regulated
investment company in its last fiscal year, and intends to qualify in future
years, but reserves the right not to qualify. The Internal Revenue Code contains
a number of complex tests relating to qualification which the Fund might not
meet in any particular year. For example, if the Fund derives 30% or more of its
gross income during its current taxable year from the sale of securities held
less than three months, it may fail to qualify for that year (see "Tax Aspects
of Covered Calls and Hedging Instruments," above). If it does not qualify, the
Fund will be treated for tax purposes as an ordinary corporation and receive no
tax deduction for payments of dividends and distributions made to shareholders.
Under the Internal Revenue Code, by December 31 each year, the Fund must
distribute 98% of its taxable investment income earned from January 1 through
December 31 of that year and 98% of its capital gains realized in the period
from November 1 of the prior year through October 31 of the current year, or
else the Fund must pay an excise tax on the amounts not distributed. While it is
presently anticipated that the Fund will meet those requirements, the Fund's
Board of Trustees and the Manager might determine in a particular year that it
would be in the best interest of shareholders for the Fund not to make such
distributions at the required levels and to pay the excise tax on the
undistributed amounts. That would reduce the amount of income or capital gains
available for distribution to shareholders.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to
reinvest all dividends and/or capital gains distributions in shares of the same
class of any of the other Oppenheimer funds listed in "Reduced Sales Charges,"
above, at net asset value without a sales charge. To elect this option, a
shareholder must notify the Transfer Agent in writing and either have an
existing account in the fund selected for reinvestment or must obtain a
prospectus for that fund and an application from the Distributor to establish an
account. The investment will be made at the net asset value per share in effect
at the close of business on the payable date of the dividend or distribution.
Dividends and/or distributions from shares of other Oppenheimer funds may be
invested in shares of this Fund on the same basis.
Additional Information About the Fund
The Custodian. The Bank of New York is the Custodian of the Fund's assets. The
Custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities, collecting income on the portfolio securities and handling
the delivery of such securities to and from the Fund. The Manager has
represented to the Fund that the banking relationships between The Manager and
the
-65-
<PAGE>
Custodian have been and will continue to be unrelated to and unaffected by the
relationship between the Fund and the Custodian. It will be the practice of the
Fund to deal with the Custodian in a manner uninfluenced by any banking
relationship the Custodian may have with the Manager and its affiliates. The
Fund's cash balances with the Custodian in excess of $100,000 are not protected
by Federal deposit insurance. Such uninsured balances at times may be
substantial.
Independent Auditors. The independent auditors of the Fund audit the Manager's
and the Fund's financial statements and perform other related audit services.
They also act as auditors for certain other funds advised by the Manager and its
affiliates.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of
Oppenheimer Real Asset Fund:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Real Asset Fund as of January 15, 1997. This financial statement is
the responsibility of the Fund's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such statement of assets and liabilities presents fairly, in all
material respects, the financial position of Oppenheimer Real Asset Fund as of
January 15, 1997 in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
- ------------------------------------
DELOITTE & TOUCHE LLP
Denver, Colorado
January 16, 1997
-66-
<PAGE>
<PAGE>
Oppenheimer Real Asset Fund
Statement of Assets and Liabilities
January 15, 1997
<TABLE>
<caption
ASSETS Composite Class A Class B Class C Class Y
<S> <C> <C> <C> <C> <C>
Cash $103,000
Deferred Organization Costs-Note $ 0
Total Assets $103,000
LIABILITIES-Payable to OppenheimerFunds,
Inc. (OFI)-Note 3 $ 0
Net Assets $103,000
NET ASSETS- Applicable to 10,000 Class A shares,100 Class B shares, 100 Class C
shares, and 100 Class Y shares of
beneficial interest outstanding. $103,000 $100,000 $1,000 $1,000 $1,000
NET ASSET VALUE PER SHARE (net assets divided by 10,000,100 and 100 shares of
beneficial interest for Class A,
Class B, Class C and Class Y respectively) $10.00 $10.00 $10.00 $10.00
MAXIMUM OFFERING PRICE PER SHARE (net asset value plus sales charge of 5.75%
of offering price for Class A shares) $10.61 $10.00
</TABLE>
Notes:
1. Oppenheimer Real Asset Fund (the "Fund"), a diversified, open-end
management investment company, was formed on July 22, 1996, and has had no
operations through January 15, 1997 other than those relating to
organizational matters and the sale and issuance of 10,000 Class A shares,
100 Class B, 100 Class C, and 100 Class Y shares of beneficial interest to
OppenheimerFunds, Inc. (OFI).
2. On August 27, 1996, the Fund's Board approved an Investment Advisory
Agreement with OFI, a Service Plan and Agreement for Class A shares and
Service and Distribution Plans and Agreements for Class B, Class C and
Class Y shares of the Fund with OppenheimerFunds Distributor, Inc. (OFDI)
and a General Distributor's Agreement wit OFDI as explained in the Fund's
Prospectus and Statement of Additional Information.
3. OFI will advance all organizational and start-up costs of the
Fund. Such expenses will be capitalized and amortized over a
five-year period from the date operations commence. On the
-67-
<PAGE>
first day that total assets exceed $5 million, the Fund will reimburse OFI
for all start-up expenses. In the event that all or part of OFI's initial
investment in shares of the Fund is withdrawn during the amortization
period, by any holder thereof, the redemption proceeds will be reduced by
the proportionate amount of the unamortized organization costs represented
by the ratio that the number of shares redeemed bears to the number of
initial shares outstanding at the time of such redemption.
4. The Fund intends to comply in its initial fiscal year and thereafter with
provisions of the internal Revenue Code applicable to regulated investment
companies and as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains)
distributed to shareholders.
<PAGE>
<TABLE>
<CAPTION>
================================================================================
STATEMENT OF INVESTMENTS JULY 31, 1997 (UNAUDITED)
FACE MARKET VALUE
AMOUNT SEE NOTE 1
===========================================================================================================================
MORTGAGE-BACKED OBLIGATIONS - 34.8%
- ---------------------------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY - 32.8%
- ---------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.:
<S> <C> <C> <C>
Interest-Only Stripped Mtg.-Backed Security, Series 180,
13.81%, 10/1/26 (1) $1,608,180 $ 471,901
Principal-Only Stripped Mtg.-Backed Security, Series 179,
4.36%, 9/1/26 (2) 988,963 766,756
- ---------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
5.89%, 5/21/98 6,500,000 6,516,965
6.03%, 7/07/99 1,990,000 1,996,567
6.07%, 7/1/99 1,220,000 1,225,148
6.29%, 5/7/99 3,000,000 3,023,814
Interest-Only Stripped Mtg.-Backed Security, Series 1997-3,
11.38%, 3/18/26 (1)(3) 3,424,713 1,128,015
Principal-Only Stripped Mtg.-Backed Security, Series 267,
6.52%, 10/1/24 (2) 290,291 232,415
Principal-Only Stripped Mtg.-Backed Security, Series 267,
Cl. 1, 6.55%, 10/1/24 (2) 190,354 152,403
- ---------------------------------------------------------------------------------------------------------------------------
Government National Mortgage Assn., Interest-Only Stripped
Mtg.-Backed Security, Series 1997-5, Cl. PJ, 7%, 5/20/22 (1) 2,442,142
506,172
------------
16,020,156
- ---------------------------------------------------------------------------------------------------------------------------
PRIVATE - 2.0%
- ---------------------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through
Certificates, Series 1994-C2, Cl.G, 8%, 4/25/25 976,569
981,452
------------
Total Mortgage-Backed Obligations (Cost $16,995,316)
17,001,608
===========================================================================================================================
U.S. GOVERNMENT OBLIGATIONS - 14.6%
- ---------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank, 5.82%, 6/16/98 (Cost $7,101,614) 7,100,000
7,107,100
===========================================================================================================================
STRUCTURED INSTRUMENTS - 41.5%
- ---------------------------------------------------------------------------------------------------------------------------
AIG International, Inc., Goldman Sachs Commodity Total
Return Index Linked Nts., 5.875%, 6/30/98 (4) 6,000,000
6,732,132
- ---------------------------------------------------------------------------------------------------------------------------
Bayerische Landesbank Girozentrale, (New York Branch)
CD Linked Nts., 5.10%, 11/19/97 (linked to the Goldman Sachs
Commodity Index Excess Return Index) (4)(5) 2,000,000
2,269,400
- ---------------------------------------------------------------------------------------------------------------------------
Bayerische Landesbank Girozentrale, (New York Branch)
CD Linked Nts., 5.57%, 8/1/97 (linked to the Goldman Sachs
Commodity Index Excess Return Index) (4) 1,250,000
1,222,250
- ---------------------------------------------------------------------------------------------------------------------------
Business Development Bank of Canada, Goldman Sachs
Commodity Index Non Energy Excess Return Index Linked
Commercial Paper, 5.556%, 8/22/97 (4) 1,200,000
1,121,760
- ---------------------------------------------------------------------------------------------------------------------------
Cargill Financial Services Corp., Commodity Option Linked
Trust Nts., Zero Coupon, 9/16/97 2,000,000
1,979,837
- ---------------------------------------------------------------------------------------------------------------------------
Cargill Financial Services Corp., Goldman Sachs Commodity
Index Total Return Linked Nts., 5.59%, 8/7/97 (4) 2,000,000
2,142,248
</TABLE>
1 Oppenheimer Real Asset Fund
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================================================
STATEMENT OF INVESTMENTS (UNAUDITED) (CONTINUED)
FACE MARKET VALUE
AMOUNT SEE NOTE 1
===========================================================================================================================
STRUCTURED INSTRUMENTS (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Daiwa Finance Corp. (New York), Daiwa Physical Commodity
Excess Return Index Linked Nts., 4.688%, 8/21/97 (5)(6) $5,000,000
$ 4,793,000
------------
<PAGE>
Total Structured Instruments (Cost $19,450,000)
20,260,627
===========================================================================================================================
REPURCHASE AGREEMENTS - 1.9%
- ---------------------------------------------------------------------------------------------------------------------------
Repurchase agreement with Goldman Sachs & Co., 5.76%,
dated 7/31/97, to be repurchased at $900,144 on 8/1/97,
collateralized by U.S. Treasury Nts., 4.75%-8.75%,
8/15/97-11/15/04, with a value of $918,894 (Cost $900,000) 900,000
900,000
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $44,446,930)
92.8% 45,269,335
- ---------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 7.2
3,532,454
------ ------------
NET ASSETS 100.0% $48,801,789
====== ============
</TABLE>
1. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future cash
flows. 2. Principal-Only Strips represent the right to receive the monthly
principal payments on an underlying pool of mortgage loans. The value of these
securities generally increases as interest rates decline and prepayment rates
rise. The price of these securities is typically more volatile than that of
coupon-bearing bonds of the same maturity. Interest rates disclosed represent
current yields based upon the current cost basis and estimated timing of future
cash flows. 3. Securities with an aggregate market value of $1,128,015 are held
in collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 5 of Notes to Financial Statements. 4. Security is
linked to the Goldman Sachs Commodity Index. The index is composed of the
futures prices of twenty-two different commodities in five main commodity groups
(energy, agriculture, livestock, industrial metals and precious metals) in rough
proportion to the value of their production in the world economy. 5. Represents
the current interest rate for a variable rate security. 6. Security is linked to
the Daiwa Physical Commodity Excess Return Index which is calculated in the same
manner as the Daiwa Physical Commodity Index (DPCI), but with a Treasury bill
rate of zero. The DPCI is a passively managed index showing the total return
from holding unleverage long positions in futures contracts of physical
commodities. Nineteen commodity markets representing five major commodity
industry groups are included in the calculation of the DPCI. These five major
commodity groups are: grains, metals, energy, livestock and food/fiber.
See accompanying Notes to Financial Statements.
2 Oppenheimer Real Asset Fund
<PAGE>
=============================================================
STATEMENT OF ASSETS AND LIABILITIES JULY 31, 1997 (UNAUDITED)
<TABLE>
================================================================================
ASSETS
<S> <C>
Investments, at value (cost $44,446,930) - see accompanying statement
$45,269,335
- -----------------------------------------------------------------------------------------------------------------
<PAGE>
Cash 2,067,375
- -----------------------------------------------------------------------------------------------------------------
Receivables:
Shares of beneficial interest sold 1,187,016
Interest and principal paydowns 360,340
Daily variation on futures contracts - Note 5 40,926
- -----------------------------------------------------------------------------------------------------------------
Deferred organization costs - Note 1 37,078
- -----------------------------------------------------------------------------------------------------------------
Other 753
------------
Total assets 48,962,823
================================================================================
LIABILITIES Payables and other liabilities:
Daily variation on futures contracts - Note 5 78,670
Shares of beneficial interest redeemed 49,321
Registration and filing fees 11,015
Transfer and shareholder servicing agent fees 10,209
Other 4,560
------------
Total liabilities 161,034
================================================================================
NET ASSETS $48,801,789
============
================================================================================
COMPOSITION OF NET ASSETS
Paid-in capital $47,929,327
- -----------------------------------------------------------------------------------------------------------------
Accumulated net investment income 343,857
- -----------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions (207,391)
- -----------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 735,996
------------
Net assets $48,801,789
============
================================================================================
NET ASSET VALUE PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets
of $27,938,246 and 2,760,522 shares of beneficial interest outstanding)
$10.12
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price) $10.74
- -----------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $12,267,152 and
1,216,142 shares
of beneficial interest outstanding) $10.09
- -----------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $8,595,379 and
853,020 shares of beneficial interest outstanding) $10.08
- -----------------------------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $1,012 and 100 shares of beneficial interest outstanding) $10.12
See accompanying Notes to Financial Statements.
</TABLE>
3 Oppenheimer Real Asset Fund
<PAGE>
======================================================================
STATEMENT OF OPERATIONS FOR THE PERIOD ENDED JULY 31, 1997
(UNAUDITED)
<TABLE>
================================================================================
INVESTMENT INCOME
<S> <C>
Interest $517,881
================================================================================
EXPENSES
Management fees - Note 4 82,742
- -----------------------------------------------------------------------------------------------------------------
Distribution and service plan fees - Note 4:
Class A 6,959
Class B 19,044
Class C 15,315
- -----------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees - Note 4 24,460
- -----------------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 6,792
Class B 2,300
Class C 1,922
- -----------------------------------------------------------------------------------------------------------------
<PAGE>
Shareholder reports 4,734
- -----------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 4,650
- -----------------------------------------------------------------------------------------------------------------
Legal and auditing fees 1,140
- -----------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 378
- -----------------------------------------------------------------------------------------------------------------
Other 3,588
---------
Total expenses 174,024
================================================================================
NET INVESTMENT INCOME 343,857
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on:
Investments 5,363
Closing of futures contracts (212,754)
---------
Net realized loss (207,391)
- -----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments
735,996
---------
Net realized and unrealized gain 528,605
================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$872,462
=========
</TABLE>
1. For the period from March 31, 1997 (commencement of operations) to
July 31, 1997.
See accompanying Notes to Financial Statements.
4 Oppenheimer Real Asset Fund
<PAGE>
=====================
STATEMENTS OF CHANGES
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1997(1)
================================================================================
OPERATIONS
<S> <C>
Net investment income $ 343,857
- -----------------------------------------------------------------------------------------------------------------
Net realized loss (207,391)
- -----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 735,996
------------
Net increase in net assets resulting from operations 872,462
- -----------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS Net increase in net assets resulting from
beneficial interest transactions - Note 2:
Class A 27,331,044
Class B 12,084,356
Class C 8,512,927
Class Y 1,000
- -----------------------------------------------------------------------------------------------------------------
NET ASSETS
Total increase 48,801,789
- -----------------------------------------------------------------------------------------------------------------
Beginning of period --
------------
End of period (including accumulated net investment
income of $343,857) $48,801,789
============
</TABLE>
1. For the period from March 31, 1997 (commencement of operations) to
July 31, 1997.
See accompanying Notes to Financial Statements.
5 Oppenheimer Real Asset Fund
<PAGE>
================================
FINANCIAL HIGHLIGHTS (Unaudited)
<TABLE>
<CAPTION>
<PAGE>
CLASS A CLASS B CLASS C
CLASS Y
------------ ------------ ------------ ------------
PERIOD ENDED PERIOD ENDED PERIOD
ENDED PERIOD ENDED
JULY 31, JULY 31, JULY 31, JULY
31,
1997(1) 1997(1) 1997(1) 1997(1)
================================================================================
PER SHARE OPERATING DATA:
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.00 $10.00 $10.00
$10.00
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .08 .06 .06 .09
Net realized and unrealized gain (loss) .04 .03 .02 .03
- -------------------------------------------------------------------------------------------------------------------------------
Total income from investment
operations .12 .09 .08 .12
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.12 $10.09 $10.08
$10.12
====================================================================
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(2) 1.20% 0.90%
0.80% 1.20%
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $27,938 $12,267 $8,595
$1
- -------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $14,561 $5,753 $4,632
$1
- -------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets(3):
Net investment income 4.51% 3.52% 3.48%
4.96%
Expenses 1.73% 2.55% 2.55% 1.55%
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 51.0% 51.0% 51.0%
51.0%
</TABLE>
1. For the period from March 31, 1997 (commencement of operations) to July 31,
1997. 2. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period (or commencement of operations), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
3. Annualized.
4. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended July 31, 1997 were $20,921,157 and $5,519,569, respectively.
See accompanying Notes to Financial Statements.
6 Oppenheimer Real Asset Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Real Asset Fund (the Fund) is a non-diversified, open-end
management investment company registered under the Investment Company Act
of 1940, as amended. Oppenheimer Real Asset Fund is a mutual fund that
seeks to provide total return as its investment objective. The Fund's
investment adviser is OppenheimerFunds, Inc. (the Adviser). The Sub-Adviser
<PAGE>
is Oppenheimer Real Asset Management, Inc. (the Manager), a wholly owned
subsidiary of the Adviser. The Adviser owns 10.66% of the net assets of the
Fund as of July 31, 1997. The Fund offers Class A, Class B, Class C and
Class Y shares. Class A shares are sold with a front-end sales charge.
Class B and Class C shares may be subject to a contingent deferred sales
charge. All classes of shares have identical rights to earnings, assets and
voting privileges, except that each class has its own distribution and/or
service plan, expenses directly attributable to that class and exclusive
voting rights with respect to matters affecting that class. Class B shares
will automatically convert to Class A shares six years after the date of
purchase. The following is a summary of significant accounting policies
consistently followed by the Fund.
INVESTMENT VALUATION. Portfolio securities are valued at the close of the
New York Stock Exchange on each trading day. Listed and unlisted securities
for which such information is regularly reported are valued at the last
sale price of the day or, in the absence of sales, at values based on the
closing bid or the last sale price on the prior trading day. Long-term and
short-term "non-money market" debt securities are valued by a portfolio
pricing service approved by the Board of Trustees. Such securities which
cannot be valued by an approved portfolio pricing service are valued using
dealer-supplied valuations provided the Manager is satisfied that the firm
rendering the quotes is reliable and that the quotes reflect current market
value, or are valued under consistently applied procedures established by
the Board of Trustees to determine fair value in good faith. Short-term
"money market type" debt securities having a remaining maturity of 60 days
or less are valued at cost (or last determined market value) adjusted for
amortization to maturity of any premium or discount. Forward foreign
currency exchange contracts are valued based on the closing prices of the
forward currency contract rates in the London foreign exchange markets on a
daily basis as provided by a reliable bank or dealer. Options are valued
based upon the last sale price on the principal exchange on which the
option is traded or, in the absence of any transactions that day, the value
is based upon the last sale price on the prior trading date if it is within
the spread between the closing bid and asked prices. If the last sale price
is outside the spread, the closing bid is used.
REPURCHASE AGREEMENTS. The Fund requires the custodian to take possession,
to have legally segregated in the Federal Reserve Book Entry System or to
have segregated within the custodian's vault, all securities held as
collateral for repurchase agreements. The market value of the underlying
securities is required to be at least 102% of the resale price at the time
of purchase. If the seller of the agreement defaults and the value of the
collateral declines, or if the seller enters an insolvency proceeding,
realization of the value of the collateral by the Fund may be delayed or
limited.
ALLOCATION OF INCOME, EXPENSES, AND GAINS AND LOSSES. Income,
expenses
(other than those attributable to a specific class) and gains and losses
are allocated daily to each class of shares based upon the relative
proportion of net assets represented by such class. Operating expenses
directly attributable to a specific class are charged against the
operations of that class.
FEDERAL TAXES. The Fund intends to continue to comply with provisions of
the Internal Revenue Code applicable to regulated investment companies and
to distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required.
DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to declare dividends
<PAGE>
separately for Class A, Class B, Class C and Class Y shares from net
investment income each day the New York Stock Exchange is open for business
and pay such dividends annually. Distributions from net realized gains on
investments, if any, will be declared at least once each year.
7 Oppenheimer Real Asset Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)(Continued)
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
ORGANIZATION COSTS. The Adviser advanced $37,476 for organization and
start-up costs of the Fund. Such expenses are being amortized over a
five-year period from the date operations commenced. In the event that all
or part of Adviser's initial investment in shares of the Fund is withdrawn
during the amortization period, by any holder thereof, the redemption
proceeds will be reduced by the proportionate amount of the unamortized
organization costs represented by the ratio that the number of shares
redeemed bears to the number of initial shares outstanding at the time of
such redemption.
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment
income
(loss) and net realized gain (loss) may differ for financial statement and
tax purposes primarily because of the recognition of certain foreign
currency gains (losses) as ordinary income (loss) for tax purposes. The
character of distributions made during the year from net investment income
or net realized gains may differ from its ultimate characterization for
federal income tax purposes. Also, due to timing of dividend distributions,
the fiscal year in which amounts are distributed may differ from the fiscal
year in which the income or realized gain was recorded by the Fund.
OTHER. Investment transactions are accounted for on the date the
investments are purchased or sold (trade date) and dividend income is
recorded on the ex-dividend date. Discount on securities purchased is
amortized over the life of the respective securities, in accordance with
federal income tax requirements. Realized gains and losses on investments
and options written and unrealized appreciation and depreciation are
determined on an identified cost basis, which is the same basis used for
federal income tax purposes.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during
the reporting period. Actual results could differ from those estimates.
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of no par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1997(1)
SHARES AMOUNT
Class A:
<PAGE>
<S> <C> <C>
Sold 3,060,956 $30,289,896
Redeemed (300,434) (2,958,852)
---------- ------------
Net increase 2,760,522 $27,331,044
========== ============
Class B:
Sold 1,227,656 $12,198,266
Redeemed (11,514) (113,910)
---------- ------------
Net increase 1,216,142 $12,084,356
========== ============
Class C:
Sold 875,151 $ 8,727,311
Redeemed (22,131) (214,384)
---------- ------------
Net increase 853,020 $ 8,512,927
========== ============
Class Y:
Sold 100 $ 1,000
---------- ------------
Net increase 100 $ 1,000
========== ============
</TABLE>
1. For the period from March 31, 1997 (commencement of operations) to
July 31, 1997.
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
At July 31, 1997, net unrealized appreciation on investments and options
written of $822,405 was composed of gross appreciation of $1,365,591, and
gross depreciation of $543,186.
8 Oppenheimer Real Asset Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)(Continued)
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Management fees paid to the Adviser were in accordance with the investment
advisory agreement with the Fund which provides for a fee of 1.0% of the
first $200 million of average net assets, 0.90% of the next $200 million,
0.85% of the next $200 million, 0.80% of the next $200 million, and .075%
of net assets in excess of $800 million. Under the Sub-Advisory Agreement,
the Manager receives from the Adviser the following portions of the annual
fees: 0.50% of the first $200 million of average net assets, 0.45% of the
next $200 million, 0.425% of the next $200 million, 0.40% of the next $200
million, and 0.375% of the net assets in excess of $800 million.
For the period ended July 31, 1997, commissions (sales charges paid by
investors) on sales of Class A shares totaled $322,434, of which $84,200
<PAGE>
was retained by OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary of
the Adviser, as general distributor, and by an affiliated broker/dealer.
Sales charges advanced to broker/dealers by OFDI on sales of the Fund's
Class B and Class C shares totaled $418,004 and $71,223, respectively, of
which $7,451 and $741 was paid to an affiliated broker/dealer for Class B
and Class C shares, respectively. During the period ended July 31, 1997,
OFDI received contingent deferred sales charges of $795 and $606,
respectively, upon redemption of Class B and Class C shares as
reimbursement for sales commissions advanced by OFDI at the time of sale of
such shares.
OppenheimerFunds Services (OFS), a division of the Adviser, is the transfer
and shareholder servicing agent for the Fund and for other registered
investment companies. OFS's total costs of providing such services are
allocated ratably to these companies.
The Fund has adopted a Service Plan for Class A shares to reimburse OFDI
for a portion of its costs incurred in connection with the personal service
and maintenance of shareholder accounts that hold Class A shares.
Reimbursement is made quarterly at an annual rate that may not exceed 0.25%
of the average annual net assets of Class A shares of the Fund. OFDI uses
the service fee to reimburse brokers, dealers, banks and other financial
institutions quarterly for providing personal service and maintenance of
accounts of their customers that hold Class A shares.
The Fund has adopted Distribution and Service Plans for Class B and Class C
shares to compensate OFDI for its services and costs in distributing Class
B and Class C shares and servicing accounts. Under the Plans, the Fund pays
OFDI an annual asset-based sales charge of 0.75% per year on Class B and
Class C shares, as compensation for sales commissions paid from its own
resources at the time of sale and associated financing costs. OFDI also
receives a service fee of 0.25% per year as compensation for costs incurred
in connection with the personal service and maintenance of accounts that
hold shares of the Fund, including amounts paid to brokers, dealers, banks
and other financial institutions. Both fees are computed on the average
annual net assets of Class B and Class C shares, determined as of the close
of each regular business day. During the period ended July 31, 1997, OFDI
retained $17,708 and $14,378, respectively, as compensation for Class B and
Class C sales commissions and service fee advances, as well as financing
costs. If either Plan is terminated by the Fund, the Board of Directors may
allow the Fund to continue payments of the asset-based sales charge to OFDI
for distributing shares before the Plan was terminated. As of July 31,
1997, OFDI had incurred unreimbursed expenses of $569,560 for Class B and
$72,555 for Class C.
9 Oppenheimer Real Asset Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)(Continued)
5. FUTURES CONTRACTS
The Fund may buy and sell interest rate futures contracts in order to gain
exposure to or protect against changes in interest rates. The Fund may buy
and sell futures contracts, primarily to hedge the various commodities
exposures inherent in its holdings of structured notes that are linked to
commodities indices. The Fund may also buy or write put or call options on
these futures contracts.
<PAGE>
The Fund generally sells futures contracts to hedge against increases in
interest rates or decreases in commodity prices and the resulting negative
effect on the value of fixed rate portfolio securities. The Fund may also
purchase futures contracts without owning the underlying fixed-income
security as an efficient or cost effective means to gain exposure to
changes in interest rates or commodity prices. The Fund will then either
purchase the underlying fixed-income security or close out the futures
contract.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities (initial margin) in an amount equal to a certain
percentage of the contract value. Subsequent payments (variation margin)
are made or received by the Fund each day. The variation margin payments
are equal to the daily changes in the contract value and are recorded as
unrealized gains and losses. The Fund recognizes a realized gain or loss
when the contract is closed or expires.
Securities held in collateralized accounts to cover initial margin
requirements on open futures contracts are noted in the Statement of
Investments. The Statement of Assets and Liabilities reflects a receivable
or payable for the daily mark to market for variation margin.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the
value of the contract or option may not correlate with changes in the value
of the underlying securities or commodities.
10 Oppenheimer Real Asset Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)(Continued)
5. FUTURES CONTRACTS (continued)
At July 31, 1997, the Fund had outstanding futures contracts to purchase
and sell debt securities and commodities as follows:
<TABLE>
<CAPTION>
UNREALIZED
NUMBER OF VALUATION AS OF
APPRECIATION
CONTRACTS TO PURCHASE EXPIRATION DATE FUTURES
CONTRACTS JULY 31, 1997 (DEPRECIATION)
--------------------- ---------------- ----------------- --------------
- --------------
COMMODITIES
AGRICULTURE
<S> <C> <C> <C> <C>
Soybean 11/97 5 $164,500 $12,500
ENERGY
Natural Gas 9/97 35 761,950 3,050
Natural Gas 10/97 10 217,600 (4,900)
--------
$10,650
CONTRACTS TO SELL
- --------
COMMODITIES
AGRICULTURE
Cocoa 9/97 14 $211,820 $15,680
Coffee 9/97 2 138,375 (3,375)
Corn 12/97 10 133,875 (6,875)
Corn 9/97 39 517,725 (47,775)
Cotton 10/97 7 262,395 105
Soybean 9/97 16 548,000 (4,000)
Sugar 10/97 20 261,632 (4,548)
Wheat 9/97 28 506,800 (39,100)
ENERGY
Crude Oil 9/97 42 845,880 (28,300)
Heating Oil 9/97 20 471,996 (7,896)
<PAGE>
INDUSTRIAL METALS
Copper 9/97 10 272,250 5,563
LIVESTOCK
Lean Hogs 10/97 32 961,920
(12,000)
Live Cattle 10/97 41 1,158,250 5,310
PRECIOUS METALS
Gold 100 oz. 12/97 40 1,314,400
83,600
Silver 12/97 16 364,320 31,255
INDICES
Goldman Sachs Commodities Index 8/97 20 961,000
(66,000)
TREASURIES
U.S. Treasury Nts., 5 yr. 9/97 7 755,891
(18,703)
---------
(97,059)
---------
$(86,409)
=========
</TABLE>
<PAGE>
<PAGE>
Appendix A
Corporate Industry Classifications
Aerospace/Defense Air Transportation Auto Parts Distribution Automotive
Beverages Broadcasting Building Materials Cable Television Chemicals Computer
Hardware Computer Software Conglomerates Containers Convenience Stores
Department Stores Diversified Financial Diversified Media Drug Stores Drug
Wholesalers Durable Household Goods Education Electric Utilities Electrical
Equipment Electronics
Energy Services & Producers
Entertainment/Film
Environmental
Finance, Insurance and Real Estate
National Commercial Banks
State Commercial Banks
Commercial Banks, NEC
Savings Institution, Federally Chartered
Savings Institutions, Not Federally
A-1
<PAGE>
Chartered
Functions Related to Depository Banking,
NEC
Federal & Federally-Sponsored Credit
Agencies
Personal Credit Institutions
Short-Term Business Credit Institutions
Miscellaneous Business Credit Institutions
Mortgage Bankers & Correspondence
Foreign National Banks
Foreign Commercial Banks
Foreign-Sponsored Credit Institutions
A-2
<PAGE>
Asset-Backed Securities
Finance Services
Security & Commodity Brokers, Dealers,
Exchanges & Services
Security Brokers, Dealers & Flotation Cos.
Investment Advice
Life Insurance
Accident & Health Insurance
Fire, Marine & Casualty Insurance
Insurance Carriers, NEC
Insurance Agents, Brokers & Services
Food
Gas Transmission*
Gas Utilities*
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Leasing & Factoring
Leisure
Manufacturing
Mining
Gold & Silver Ores
Gold
Silver Ores
Miscellaneous Metal Ores
Crude Petroleum Natural Gas
Drilling Oil and Gas Wells
Oil and Gas Field Exploration Services Nondurable Household Goods Paper
Publishing/Printing Railroads Restaurants Shipping Special Purpose Financial
Specialty Retailing Steel Supermarkets Telecommunications - Technology Telephone
- - Utility Textile/Apparel Tobacco Toys Trucking
*For purposes of the Fund's investment policy not to concentrate in securities
of issuers in the same industry, gas utilities and gas transmission utilities
each will be considered a separate industry.
<PAGE>
<PAGE>
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
Special Counsel
Kramer, Levin, Naftalis, & Frankel
919 Third Avenue
New York, New York 10022
<PAGE>
OPPENHEIMER REAL ASSET FUND
FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
- -------- ---------------------------------
C-4
<PAGE>
(a) Financial Statements:
(1) Financial Highlights (See Part A): To be filed by
amendment.
(2) Report of Independent Auditors (See Part B): Filed
herewith.
(3) Statement of Investments (See Part B): To be filed
by amendment.
(4) Statement of Assets and Liabilities (See Part B):
Filed herewith.
(5) Statement of Operations: To be filed by amendment.
(6) Statement of Changes in Net Asset Value: To be filed
by amendment.
(7) Notes to Financial Statements: To be filed by
amendment.
(b) Exhibits:
(1) Registrant's Amended and Restated Declaration of
Trust dated August 27, 1996: Filed herewith.
(2) By-Laws dated 7/22/96: Filed with Registrant's
Initial Registration Statement (Reg. No. 333-14887), 10/15/96, and
incorporated herein by reference.
(3) Not applicable.
(4) (I) Specimen Class A Share Certificate: Filed with
Registrant's Initial Registration Statement (Reg. No. 333-14887),
10/15/96, and incorporated herein by reference.
(ii) Specimen Class B Share Certificate: Filed with
Registrant's Initial Registration Statement (Reg. No. 333-14887),
10/15/96, and incorporated herein by reference.
(iii) Specimen Class C Share Certificate: Filed with
Registrant's Initial Registration Statement (Reg. No. 333-14887),
10/15/96, and incorporated herein by reference.
(iv) Specimen Class Y Share Certificate: Filed with
Registrant's Initial Registration Statement (Reg. No. 333-14887),
10/15/96, and incorporated herein by reference.
C-5
<PAGE>
(5) (i) Investment Advisory Agreement dated 10/14/96:
Filed with Registrant's Initial Registration Statement (Reg. No.
333-14887), 10/15/96, and incorporated herein by reference.
(ii) Sub-Advisory Agreement dated 10/14/96: Filed
herewith.
(6) (i) General Distributor's Agreement dated 03/31/97:
Filed herewith.
(ii) OppenheimerFunds Distributor, Inc. Dealer
Agreement: Filed with Post-Effective Amendment No. 14 of Oppenheimer
Main Street Funds, Inc. (Reg. No. 33-17850), 9/30/94, and
incorporated herein by reference.
(iii) OppenheimerFunds Distributor, Inc. Broker
Agreement: Filed with Post-Effective Amendment No. 14 of Oppenheimer
Main Street Funds, Inc. (Reg. No. 33-17850), 9/30/94, and
incorporated herein by reference.
(iv) OppenheimerFunds Distributor, Inc. Agency
Agreement: Filed with Post-Effective Amendment No. 14 of Oppenheimer
Main Street Funds, Inc. (Reg. No. 33-17850), 9/30/94, and
incorporated herein by reference.
(v) Broker Agreement between OppenheimerFunds
Distributor, Inc. and Newbridge Securities, Inc. dated October 1,
1986: Previously filed with Post-Effective Amendment No. 25 to the
Registration Statement of Oppenheimer Growth Fund (Reg. No. 2-
45272), 11/1/86, and refiled with Post-Effective Amendment No. 45
of Oppenheimer Growth Fund (Reg. No. 2-45272), 8/22/94 pursuant to
Item 102 of Regulation S-T and incorporated herein by reference.
(7) Not applicable.
(8) Custodian Agreement dated 1/15/97 between Registrant
and The Bank of New York: Filed herewith.
(9) Not applicable.
(10) Opinion and Consent of Counsel: Filed herewith.
(11) Independent Auditors' Consent: Filed herewith.
(12) Not applicable.
(13) Investment Letter from OppenheimerFunds, Inc.: Filed
with Registrant's Pre-Effective Amendment No. 1 (Reg. No. 333-
14887), 2/5/97, and incorporated herein by reference.
C-6
<PAGE>
(14) (I) Form of prototype Standardized and Non-
Standardized Profit-Sharing Plans and Money Purchase Plans for self-
employed persons and corporations: Filed with Post-Effective
Amendment No. 3 to the Registration Statement of Oppenheimer Global
Growth & Income Fund (Reg. No. 33-23799), 1/31/92, and refiled with
Post-Effective Amendment No. 7 to the Registration Statement of
Oppenheimer Global Growth & Income Fund (Reg. No. 33-23799),
12/1/94, pursuant to Item 102 of Regulation S-T, and incorporated
herein by reference.
(ii) Form of Individual Retirement Account Trust
Agreement: Previously filed with Post-Effective Amendment No. 21 to
the Registration Statement of Oppenheimer U.S. Government Trust
(Reg. No. 2-76645), 8/25/93 and incorporated herein by reference.
(iii) Form of Tax Sheltered Retirement Plan and
Custody Agreement for employees of public schools and tax-exempt
organizations: Previously filed with Post-Effective Amendment No.
47 to the Registration Statement of Oppenheimer Growth Fund (Reg.
No. 2-45272), 10/21/94, and incorporated herein by reference.
(iv) Form of Simplified Employee Pension IRA:
Previously filed with Post-Effective Amendment No. 42 to the
Registration Statement of Oppenheimer Equity Income Fund (Reg. No.
2-33043), 10/28/94, and incorporated herein by reference.
(v) Form of Prototype 401(k) Plan: Previously filed
with Post-Effective Amendment No. 7 to the Registration Statement
of Oppenheimer Strategic Income & Growth Fund (Reg. No. 33-47378),
9/28/95, and incorporated herein by reference.
(15) (i) Service Plan and Agreement for Class A shares
under Rule 12b-1: Filed herewith.
(ii) Distribution and Service Plan and Agreement for
Class B shares under Rule 12b-1: Filed herewith.
(iii) Distribution and Service Plan and Agreement
for Class C shares under Rule 12b-1: Filed herewith.
(16) Performance Data Computation Schedule: Not
applicable.
(17) (I) Financial Data Schedule for Class A shares for fiscal year
ended 8/31/97: Filed herewith.
(ii) Financial Data Schedule for Class B shares for
fiscal year ended 8/31/97: Filed herewith.
C-7
<PAGE>
(iii) Financial Data Schedule for Class C shares for
fiscal year ended 8/31/97: Filed herewith.
(iv) Financial Data Schedule for Class Y shares for
fiscal year ended 8/31/97: Filed herewith.
(18) Oppenheimer Funds Multiple Class Plan under Rule 18f-
3 dated 10/24/95: Previously filed with Post-Effective Amendment No.
12 to the Registration Statement of Oppenheimer California Tax-
Exempt Fund (Reg. No. 33-23566), 11/1/95, and incorporated herein
by reference.
-- Powers of Attorney.
Item 25. Persons Controlled by or Under Common Control with
Registrant
- -------- --------------------------------------------------------
None
Item 26. Number of Holders of Securities
- -------- -------------------------------
Number of
Record Holders
Title of Class as of August 6, 1997
-------------- ------------------------
Class A Shares of Beneficial Interest 2074
Class B Shares of Beneficial Interest 1133
Class C Shares of Beneficial Interest 473
Class Y Shares of Beneficial Interest 1
Item 27. Indemnification
- -------- ---------------
Reference is made to the provisions of Article Seventh of Registrant's
Declaration of Trust filed as Exhibit 24(b)(1) to this Registration Statement.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons of
Registrant pursuant to the foregoing provisions or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities
C-8
<PAGE>
(other than the payment by Registrant of expenses incurred or paid by a trustee,
officer or controlling person of Registrant in the successful defense of any
action, suit or proceeding) is asserted by such trustee, officer or controlling
person, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
- -------- ----------------------------------------------------
(a) OppenheimerFunds, Inc. is the investment adviser of the
Registrant; it and certain subsidiaries and affiliates act in the same capacity
to other registered investment companies as described in Parts A and B hereof
and listed in Item 28(b) below.
(b) There is set forth below information as to any other business,
profession, vocation or employment of a substantial nature in which each officer
and director of OppenheimerFunds, Inc. is, or at any time during the past two
fiscal years has been, engaged for his/her own account or in the capacity of
director, officer, employee, partner or trustee.
<TABLE>
<CAPTION>
Name and Current Position Other Business and Connections During
with OppenheimerFunds, Inc. the Past Two Years
- --------------------------- ------------------------------------
<S> <C>
Mark J.P. Anson,
Vice President Vice President of Oppenheimer Real
Asset Management, Inc. ("ORAMI");
formerly Vice President of Equity
Derivatives at Salomon Brothers, Inc.
Peter M. Antos,
Senior Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; a Chartered
Financial Analyst; Senior Vice
President of HarbourView; prior to
March, 1996 he was the senior equity
portfolio manager for the Panorama
Series Fund, Inc. (the "Company") and
other mutual funds and pension funds
managed by G.R. Phelps & Co. Inc.
("G.R. Phelps"), the Company's former
investment adviser, which was a
C-9
<PAGE>
subsidiary of Connecticut Mutual Life
Insurance Company; was also
responsible for managing the common
stock department and common stock
investments of Connecticut Mutual Life
Insurance Co.
Lawrence Apolito,
Vice President None.
Victor Babin,
Senior Vice President None.
Bruce Bartlett,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds. Formerly
a Vice President and Senior Portfolio
Manager at First of America Investment
Corp.
Rajeev Bhaman,
Assistant Vice President Formerly Vice President
(January 1992 - February, 1996) of
Asian Equities for Barclays de Zoete
Wedd, Inc.
Robert J. Bishop,
Vice President Assistant treasurer of the Oppenheimer
funds.
George C. Bowen,
Senior Vice President & Treasurer Treasurer of the Oppenheimer funds,
OppenheimerFunds Distributor, Inc.
(the "Distributor") and HarbourView
Asset Management Corporation
("HarbourView"), an investment adviser
subsidiary of OppenheimerFunds, Inc.
(the "Manager"); Vice President and
Assistant Secretary of the Denver-
based Oppenheimer funds; Vice
President of the Distributor and
HarbourView; Senior Vice President,
Treasurer, Assistant Secretary and a
Director of Centennial Asset
Management Corporation ("Centennial"),
Vice President, Treasurer and
Secretary of Shareholder Services,
Inc. ("SSI") and Shareholder Financial
Services, Inc. ("SFSI"), transfer
agent subsidiaries of the Manager;
Director, Treasurer and Chief
C-10
<PAGE>
Executive Officer of MultiSource
Services, Inc. (July, 1996 - present);
Vice President and Treasurer of ORAMI
(July, 1996 - present); President
Treasurer and Director of Centennial
Capital Corporation; Vice President
and Treasurer of Main Street Advisers.
Scott Brooks,
Vice President None.
Susan Burton,
Assistant Vice President None.
Adele Campbell,
Assistant Vice President & Assistant
Treasurer: Rochester Division Formerly Assistant Vice President of
Rochester Fund Services, Inc.
Michael Carbuto,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
Vice President of Centennial.
Ruxandra Chivu,
Assistant Vice President None.
H.D. Digby Clements,
Assistant Vice President:
Rochester Division None.
O. Leonard Darling,
Executive Vice President Trustee (1993 - present) of Awhtolia
College - Greece.
Robert A. Densen,
Senior Vice President None.
Sheri Devereux,
Assistant Vice President None.
Robert Doll, Jr.,
Executive Vice President &
Director An officer and/or portfolio manager of
certain Oppenheimer funds.
John Doney,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
C-11
<PAGE>
Andrew J. Donohue,
Executive Vice President,
General Counsel and Director Secretary of the Oppenheimer Funds;
Vice President of the Denver-based
Oppenheimer Funds; Executive Vice
President, Director and General
Counsel of the Distributor; President
and a Director of Centennial; Chief
Legal Officer and a Director of
MultiSource; President and a Director
of ORAMI; Executive Vice President,
General Counsel and Director of SFSI
and SSI; formerly Senior Vice
President and Associate General
Counsel of the Manager and the
Distributor.
George Evans,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Edward Everett,
Assistant Vice President None.
Scott Farrar,
Vice President Assistant Treasurer of the Oppenheimer
funds.
Leslie A. Falconio,
Assistant Vice President None.
Katherine P. Feld,
Vice President and Secretary Vice President and Secretary of the
Distributor; Secretary of HarbourView,
MultiSource and Centennial; Secretary,
Vice President and Director of
Centennial Capital Corporation; Vice
President and Secretary of Oppenheimer
Real Asset Management, Inc.
Ronald H. Fielding,
Senior Vice President; Chairman:
Rochester Division An officer, Director and/or portfolio
manager of certain Oppenheimer funds;
Presently he holds the following other
positions: Director (since 1995) of
ICI Mutual Insurance Company; Governor
(since 1994) of St. John's College;
Director (since 1994 - present) of
International Museum of Photography at
C-12
<PAGE>
George Eastman House; Director (since
1986) of GeVa Theatre. Formerly he
held the following positions:
formerly, Chairman of the Board and
Director of Rochester Fund
Distributors, Inc. ("RFD"); President
and Director of Fielding Management
Company, Inc. ("FMC"); President and
Director of Rochester Capital
Advisors, Inc. ("RCAI"); Managing
Partner of Rochester Capital Advisors,
L.P., President and Director of
Rochester Fund Services, Inc. ("RFS");
President and Director of Rochester
Tax Managed Fund, Inc.; Director (1993
- 1997) of VehiCare Corp.; Director
(1993 - 1996) of VoiceMode.
John Fortuna,
Vice President None.
Patricia Foster,
Vice President Formerly she held the following
positions: An officer of certain
Oppenheimer funds (May, 1993 -
January, 1996); Secretary of Rochester
Capital Advisors, Inc. and General
Counsel (June, 1993 - January 1996) of
Rochester Capital Advisors, L.P.
Jennifer Foxson,
Assistant Vice President None.
Paula C. Gabriele,
Executive Vice President Formerly, Managing Director (1990-
1996) for Bankers Trust Co.
Robert G. Galli,
Vice Chairman Trustee of the New York-based
Oppenheimer Funds. Formerly Vice
President and General Counsel of
Oppenheimer Acquisition Corp.
Linda Gardner,
Vice President None.
Jill Glazerman,
Assistant Vice President None.
C-13
<PAGE>
Robert Grill,
Vice President Formerly Marketing Vice
President for Bankers Trust Company
(1993-1996); Steering Committee
Member, Subcommittee Chairman for
American Savings Education Council
(1995-1996).
Caryn Halbrecht,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
formerly Vice President of Fixed
Income Portfolio Management at Bankers
Trust.
Elaine T. Hamann,
Vice President Formerly Vice President (September,
1989 - January, 1997) of Bankers Trust
Company.
Glenna Hale,
Director of Investor Marketing Formerly, Vice President (1994-1997)
of Retirement Plans Services for
OppenheimerFunds Services.
Thomas B. Hayes,
Assistant Vice President None.
Barbara Hennigar,
Executive Vice President and
Chief Executive Officer of
OppenheimerFunds Services,
a division of the Manager President and Director of SFSI;
President and Chief executive Officer
of SSI.
Dorothy Hirshman, None.
Assistant Vice President
Alan Hoden,
Vice President None.
Merryl Hoffman,
Vice President None.
Scott T. Huebl,
Assistant Vice President None.
Richard Hymes,
C-14
<PAGE>
Assistant Vice President None.
Jane Ingalls,
Vice President None.
Byron Ingram,
Assistant Vice President None.
Ronald Jamison,
Vice President Formerly Vice President and Associate
General Counsel at Prudential
Securities, Inc.
Frank Jennings,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; formerly,
a Managing Director of Global Equities
at Paine Webber's Mitchell Hutchins
division.
Thomas W. Keffer,
Senior Vice President Formerly Senior Managing Director
(1994 - 1996) of Van Eck Global.
Avram Kornberg,
Vice President None.
Joseph Krist,
Assistant Vice President None.
Paul LaRocco,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
formerly, a Securities Analyst for
Columbus Circle Investors.
Michael Levine,
Assistant Vice President None.
Shanquan Li,
Assistant Vice President Director of Board (since 2/96),
Chinese Finance Society; formerly,
Chairman (11/94-2/96), Chinese Finance
Society; and Director (6/94-
6/95),Greater China Business Networks,
Stephen F. Libera,
Vice President An officer and/or portfolio manager
for certain Oppenheimer funds; a
C-15
<PAGE>
Chartered Financial Analyst; a Vice
President of HarbourView; prior to
March 1996, the senior bond portfolio
manager for Panorama Series Fund Inc.,
other mutual funds and pension
accounts managed by G.R. Phelps; also
responsible for managing the public
fixed-income securities department at
Connecticut Mutual Life Insurance Co.
Mitchell J. Lindauer,
Vice President None.
David Mabry,
Assistant Vice President None.
Steve Macchia,
Assistant Vice President None.
Bridget Macaskill,
President, Chief Executive Officer
and Director President, Director and Trustee of the
Oppenheimer funds; President and a
Director of OAC, HarbourView and
Oppenheimer Partnership Holdings,
Inc.; Director of Oppenheimer Real
Asset Management, Inc.; Chairman and
Director of SSI; Director (since 1993)
of Hillsdown Holdings plc, U.K.;
Director (since 1996) of NASDAQ Stock
Market, Inc.
Wesley Mayer,
Vice President Formerly Vice President (January, 1995
- June, 1996) of Manufacturers Life
Insurance Company.
Loretta McCarthy,
Executive Vice President None.
Kevin McNeil,
Vice President Treasurer (September, 1994 - present)
for the Martin Luther King Multi-
Purpose Center (non-profit community
organization); Formerly Vice President
(January, 1995 - April, 1996) for
Lockheed Martin IMS.
C-16
<PAGE>
Tanya Mrva,
Assistant Vice President None.
Lisa Migan,
Assistant Vice President None.
Robert J. Milnamow,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
formerly a Portfolio Manager (August,
1989 August, 1995) with Phoenix
Securities Group.
Denis R. Molleur,
Vice President None.
Linda Moore,
Vice President Formerly, Marketing Manager (July
1995-November 1996) for Chase
Investment Services Corp.
Tanya Mrva,
Assistant Vice President None.
Kenneth Nadler,
Vice President None.
David Negri,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Barbara Niederbrach,
Assistant Vice President None.
Robert A. Nowaczyk,
Vice President None.
Richard M. O'Shaugnessy,
Assistant Vice President:
Rochester Division None.
Gina M. Palmieri,
Assistant Vice President None.
Robert E. Patterson,
Senior Vice President An officer and/or portfolio manager of
C-17
<PAGE>
certain Oppenheimer funds.
John Pirie,
Assistant Vice President Formerly, a Vice President with Cohane
Rafferty Securities, Inc.
Tilghman G. Pitts III,
Executive Vice President
and Director Chairman and Director of the
Distributor.
Jane Putnam,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Russell Read,
Senior Vice President Formerly a consultant for Prudential
Insurance on behalf of the General
Motors Pension Plan.
Thomas Reedy,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
formerly, a Securities Analyst for the
Manager.
David Robertson,
Vice President None.
Adam Rochlin,
Vice President None.
Michael S. Rosen
Vice President; President,
Rochester Division An officer and/or portfolio manager of
certain Oppenheimer funds; Formerly,
Vice President (June, 1983 - January,
1996) of RFS, President and Director
of RFD; Vice President and Director of
FMC; Vice President and director of
RCAI; General Partner of RCA; Vice
President and Director of Rochester
Tax Managed Fund Inc.
Richard H. Rubinstein,
Senior Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; formerly
Vice President and Portfolio
Manager/Security Analyst for
Oppenheimer Capital Corp., an
investment adviser.
C-18
<PAGE>
Lawrence Rudnick,
Assistant Vice President None.
James Ruff,
Executive Vice President None.
Valerie Sanders,
Vice President None.
Ellen Schoenfeld,
Assistant Vice President None.
Stephanie Seminara,
Vice President Formerly, Vice President of Citicorp
Investment Services
Richard Soper,
Assistant Vice President None.
Nancy Sperte,
Executive Vice President None.
Donald W. Spiro,
Chairman Emeritus and Director Vice Chairman and Trustee of the New
York-based Oppenheimer Funds; formerly
Chairman of the Manager and the
Distributor.
Richard A. Stein,
Vice President: Rochester Division Assistant Vice President (since 1995)
of Rochester Capitol Advisors, L.P.
Arthur Steinmetz,
Senior Vice President An officer and/or
portfolio manager of certain
Oppenheimer funds.
Ralph Stellmacher,
Senior Vice President An officer and/or
portfolio manager of certain
Oppenheimer funds.
John Stoma,
Senior Vice President, Director
Retirement Plans Formerly Vice President of U.S. Group
Pension Strategy and Marketing for
Manulife Financial.
Michael C. Strathearn,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
a Chartered Financial Analyst; a Vice
President of
C-19
<PAGE>
HarbourView; prior to March 1996, an
equity portfolio manager for Panorama
Series Fund, Inc. and other mutual
funds and pension accounts managed by
G.R. Phelps.
James C. Swain,
Vice Chairman of the Board Chairman, CEO and Trustee, Director or
Managing Partner of the Denver-based
Oppenheimer Funds; President and a
Director of Centennial; formerly
President and Director of OAMC, and
Chairman of the Board of SSI.
James Tobin,
Vice President None.
Jay Tracey,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
formerly Managing Director of
Buckingham Capital Management.
Gary Tyc,
Vice President, Assistant
Secretary and Assistant Treasurer Assistant Treasurer of the Distributor
and SFSI.
Ashwin Vasan,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Dorothy Warmack,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Jerry Webman,
Senior Vice President Director of New York-based tax-exempt
fixed income Oppenheimer funds;
Formerly, Managing Director and Chief
Fixed Income Strategist at Prudential
Mutual Funds.
Christine Wells,
Vice President None.
Joseph Welsh,
Assistant Vice President None.
C-20
<PAGE>
Kenneth B.White,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; a Chartered
Financial Analyst; Vice President of
HarbourView; prior to March 1996, an
equity portfolio manager for Panorama
Series Fund, Inc. and other mutual
funds and pension funds managed by
G.R. Phelps.
William L. Wilby,
Senior Vice President An officer and/or
portfolio manager of certain
Oppenheimer funds; Vice President of
HarbourView.
Carol Wolf,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; Vice
President of Centennial; Vice
President, Finance and Accounting and
member of the Board of Directors of
the Junior League of Denver, Inc.;
Point of Contact: Finance Supporters
of Children; Member of the Oncology
Advisory Board of the Childrens
Hospital; Member of the Board of
Directors of the Colorado Museum of
Contemporary Art.
Caleb Wong,
Assistant Vice President None.
Robert G. Zack,
Senior Vice President and
Assistant Secretary, Associate
General Counsel Assistant Secretary of the Oppenheimer
funds; Assistant Secretary of SSI and
SFSI.
Jill Zachman,
Assistant Vice President:
Rochester Division None.
Arthur J. Zimmer,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
Vice President of Centennial.
</TABLE>
C-21
<PAGE>
The Oppenheimer Funds include the New York-based Oppenheimer Funds,
the Denver-based Oppenheimer Funds and the Oppenheimer/Quest Rochester Funds, as
set forth below:
New York-based Oppenheimer Funds
- --------------------------------
Oppenheimer Multiple Strategies Fund Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund Oppenheimer Discovery Fund Oppenheimer
Enterprise Fund Oppenheimer Global Fund Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund Oppenheimer Growth Fund Oppenheimer
International Growth Fund Oppenheimer Money Market Fund, Inc. Oppenheimer
Multi-Sector Income Trust Oppenheimer Multi-State Municipal Trust Oppenheimer
New York Municipal Fund Oppenheimer Fund Oppenheimer Series Fund, Inc.
Oppenheimer Municipal Bond Fund Oppenheimer U.S.Government Trust Oppenheimer
World Bond Fund Oppenheimer Developing Markets Fund
Quest/Rochester Funds
- ---------------------
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest For Value Funds
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Bond Fund For Growth
Rochester Fund Municipals
Limited Term New York Municipal Fund
Denver-based Oppenheimer Funds
- ------------------------------
Oppenheimer Cash Reserves
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust Centennial Government Trust Centennial
Money Market Trust Centennial New York Tax Exempt Trust Centennial Tax Exempt
Trust Daily Cash Accumulation Fund, Inc. The New York Tax-Exempt Income Fund,
Inc.
C-22
<PAGE>
Oppenheimer Champion Income Fund
Oppenheimer Equity Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Strategic Income Fund
Oppenheimer Municipal Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Panorama Series Fund, Inc.
Oppenheimer Real Asset Fund
The address of OppenheimerFunds, Inc., the New York-based
Oppenheimer Funds, the Quest Funds, OppenheimerFunds Distributor,
Inc., HarbourView Asset Management Corp., Oppenheimer Partnership
Holdings, Inc., and Oppenheimer Acquisition Corp. is Two World Trade
Center, New York, New York 10048-0203.
The address of the Denver-based Oppenheimer Funds, Shareholder
Financial Services, Inc., Shareholder Services, Inc.,
OppenheimerFunds Services, Centennial Asset Management Corporation,
Centennial Capital Corp., and Oppenheimer Real Asset Management,
Inc. is 6803 South Tucson Way, Englewood,Colorado 80012.
The address of MultiSource Services, Inc. is
1700 Lincoln Street, Denver, Colorado 80203.
The address of the Rochester-based funds is 350 Linden Oaks,
Rochester, New York 14625-2807.
Item 29. Principal Underwriter
- -------- ---------------------
(a) OppenheimerFunds Distributor, Inc. is the Distributor
of the Registrant's shares. It is also the Distributor of each of
the other registered open-end investment companies for which
OppenheimerFunds, Inc. is the investment adviser, as described in
Part A and B of this Registration Statement and listed in Item 28(b)
above.
(b) The directors and officers of the Registrant's
principal underwriter are:
C-23
<PAGE>
<TABLE>
<CAPTION>
Name & Principal Positions & Offices Positions & Offices
Business Address with Underwriter with Registrant
- ---------------- ------------------- -----------------
<S> <C> <C>
George C. Bowen(1) Vice President and Vice President and
Treasurer Treasurer of the
Oppenheimer funds.
Julie Bowers Vice President None
21 Dreamwold Road
Scituate, MA 02066
Peter W. Brennan Vice President None
1940 Cotswold Drive
Orlando, FL 32825
Maryann Bruce(2) Senior Vice President; None
Director: Financial
Institution Division
Robert Coli Vice President None
12 White Tail Lane
Bedminster, NJ 07921
Ronald T. Collins Vice President None
710-3 E. Ponce de Leon Ave.
Decatur, GA 30030
William Coughlin Vice President None
542 West Surf - #2N
Chicago, IL 60657
Mary Crooks(1)
E. Drew Devereaux(3) Assistant Vice
President
None
Rhonda Dixon-Gunner(1) Assistant Vice
President
None
Andrew John Donohue(2) Executive Vice Secretary of
President & Director the Oppen-heimer
funds.
C-24
<PAGE>
Wendy H. Ehrlich Vice President None
4 Craig Street
Jericho, NY 11753
Kent Elwell Vice President None
41 Craig Place
Cranford, NJ 07016
Todd Ermenio Vice President None
11011 South Darlington
Tulsa, OK 74137
John Ewalt Vice President None
2301 Overview Dr. NE
Tacoma, WA 98422
George Fahey Vice President None
201 E. Rund Grove Rd.
#26-22
Lewisville, TX 75067
Katherine P. Feld(2) Vice President None
& Secretary
Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697
Ronald H. Fielding(3) Vice President None
Reed F. Finley Vice President None
1657 Graefield
Birmingham, MI 48009
Wendy Fishler(2) Vice President None
Ronald R. Foster Senior Vice President None
11339 Avant Lane
Cincinnati, OH 45249
Patricia Gadecki Vice President None
950 First St., S.
Suite 204
Winter Haven, FL 33880
Luiggino Galleto Vice President None
10239 Rougemont Lane
Charlotte, NC 28277
C-25
<PAGE>
Mark Giles Vice President None
5506 Bryn Mawr
Dallas, TX 75209
Ralph Grant(2) Vice President/National None
Sales Manager
Sharon Hamilton Vice President None
720 N. Juanita Ave.,#1
Redondo Beach, CA 90277
Byron Ingram(2) Assistant Vice
President None
Mark D. Johnson Vice President None
129 Girard Place
Kirkwood, MO 63105
Michael Keogh(2) Vice President None
Richard Klein Vice President None
4820 Fremont Avenue So.
Minneapolis, MN 55409
Daniel Krause Vice President None
13416 Larchmere Square
Shaker Heights, OH 44120
Ilene Kutno(2) Assistant Vice
President None
Todd Lawson Vice President None
3333 E. Bayaud Avenue
Unit 714
Denver, CO 80209
Wayne A. LeBlang Senior Vice President None
23 Fox Trail
Lincolnshire, IL 60069
Dawn Lind Vice President None
7 Maize Court
Melville, NY 11747
James Loehle Vice President None
30 John Street
Cranford, NJ 07016
Todd Marion Vice President None
C-26
<PAGE>
21 N. Passaic Avenue
Chatham,N.J. 07928
Marie Masters Vice President None
520 E. 76th Street
New York, NY 10021
John McDonough Vice President None
P.O. Box 760
50 Riverview Road
New Castle, NH 03854
Tanya Mrva(2) Assistant Vice
President None
Laura Mulhall(2) Senior Vice President None
Charles Murray Vice President None
18 Spring Lake Drive
Far Hills, NJ 07931
Wendy Murray Vice President None
32 Carolin Road
Upper Montclair, NJ 07043
Chad V. Noel Vice President None
3238 W. Taro Lane
Phoenix, AZ 85027
Joseph Norton Vice President None
2518 Fillmore Street
San Francisco, CA 94115
Patrick Palmer Vice President None
958 Blue Mountain Cr.
West Lake Village, CA 91362
Kevin Parchinski Vice President None
1105 Harney St., #310
Omaha, NE 68102
Randall Payne Vice President None
3530 Providence Plantation Way
Charlotte, NC 28270
Gayle Pereira Vice President None
2707 Via Arboleda
San Clemente, CA 92672
C-27
<PAGE>
Charles K. Pettit Vice President None
22 Fall Meadow Dr.
Pittsford, NY 14534
Bill Presutti Vice President None
1777 Larimer St. #807
Denver, CO 80202
Tilghman G. Pitts, III(2) Chairman & Director None
Elaine Puleo(2) Vice President None
Minnie Ra Vice President None
895 Thirty-First Ave.
San Francisco, CA 94121
Michael Raso Vice President None
16 N. Chatsworth Ave.
Apt. 301
Larchmont, NY 10538
John C. Reinhardt(3) Vice President None
Douglas Rentschler Vice President None
867 Pemberton
Grosse Pointe Park, MI
48230
Ian Robertson Vice President None
4204 Summit Wa
Marietta, GA 30066
Michael S. Rosen(3) Vice President None
Kenneth Rosenson Vice President None
3802 Knickerbocker Place
Apt. #3D
Indianapolis, IN 46240
James Ruff(2) President None
Timothy Schoeffler Vice President None
1717 Fox Hall Road
Washington, DC 77479
Michael Sciortino Vice President None
785 Beau Chene Drive
Mandeville, LA 70471
C-28
<PAGE>
Robert Shore Vice President None
26 Baroness Lane
Laguna Niguel, CA 92677
George Sweeney Vice President None
1855 O'Hara Lane
Middletown, PA 17057
Andrew Sweeny Vice President None
5967 Bayberry Drive
Cincinnati, OH 45242
Scott McGregor Tatum Vice President None
7123 Cornelia Lane
Dallas, TX 75214
David G. Thomas Vice President None
8116 Arlingon Blvd.
#123
Falls Church, VA 22042
Philip St. John Trimble Vice President None
2213 West Homer
Chicago, IL 60647
Sarah Turpin Vice President None
2735 Dover Road
Atlanta, GA 30327
Marjorie Williams Vice President None
6930 East Ranch Road
Cave Creek, AZ 85331
</TABLE>
Item 30. Location of Accounts and Records
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
rules promulgated thereunder are in the possession of Oppenheimer Real Asset
Management, Inc. at its offices at 6803 South Tucson Way, Englewood, Colorado
80112.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
C-29
<PAGE>
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
C-30
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the Investment
Company Act of 1940, the Registrant certifies that it meets all the requirements
for effectiveness of this Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Englewood and State of Colorado on the 15th day of September, 1997.
OPPENHEIMER REAL ASSET FUND
/s/ James C. Swain *
By:--------------------------
James C. Swanin, Chairman
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities on
the dates indicated:
<TABLE>
<CAPTION>
Signatures: Title Date
<S> <C> <C>
/s/ James C. Swain * Chairman of the Board September 15, 1997
- ---------------------- of Trustees
James C. Swain
/s/ George Bowen * Treasurer and September 15, 1997
- ---------------------- Principal Financial
George Bowen And Accounting Officer
/s/ Robert G. Avis * Trustee September 15, 1997
- ----------------------
Robert G. Avis
/s/ William A. Baker * Trustee September 15, 1997
- ----------------------
William A. Baker
/s/ Charles Conrad, Jr.* Trustee September 15, 1997
- ----------------------
Charles Conrad, Jr.
/s/ Jon S. Fossel * Trustee September 15, 1997
- ----------------------
Jon S. Fossel
/s/ Sam Freedman Trustee September 15, 1997
- -----------------
Sam Freedman
/s/ Raymond J. Kalinowski* Trustee September 15, 1997
- --------------------------
Raymond J. Kalinowski
/s/ C. Howard Kast * Trustee September 15, 1997
- --------------------
C. Howard Kast
C-31
<PAGE>
/s/ Robert M. Kirchner * Trustee September 15, 1997
- ----------------------
Robert M. Kirchner
/s/ Bridget A. Macaskill President and September 15, 1997
- --------------------- Trustee
Bridget A. Macaskill
/s/ Ned M. Steel * Trustee September 15, 1997
- ---------------------
Ned M. Steel
/s/ Robert G. Zack
*By: --------------------------------
Robert G. Zack, Attorney-in-Fact
</TABLE>
<PAGE>
OPPENHEIMER REAL ASSET FUND
Post Effective Amendment No. 1
Registration No. 333-14887
EXHIBIT INDEX
Form N-1A
Item No. Description
24(b)(1) Amended and Restated Declaration of Trust dated
8/27/96
24(b)(6)(i) General Distributor's Agreement dated 03/31/97
24(b)(8) Custody Agreement dated 1/15/97
24(b)(10) Opinion and Consent of Counsel
24(b)(11) Independent Auditor's Consent
24(b)(15)(i) Service Plan and Agreement for Class A shares
(ii) Distribution and Service Plan Agreement for Class
B Shares
(iii) Distribution and Service Plan Agreement for Class
C shares
24(b)(17)(i) Financial Data Schedule for Class A shares (ii) Financial Data
Schedule for Class B shares (iii) Financial Data Schedule for Class C
shares
(iv) Financial Data Schedule for Class Y shares
AMENDED AND RESTATED DECLARATION OF TRUST
OF
OPPENHEIMER REAL ASSET FUND
This AMENDED AND RESTATED DECLARATION OF TRUST, made this 27th day of
August, 1996, by and among the individuals executing this Declaration of Trust
as the Trustees.
WHEREAS, the Trustees established a trust fund under the laws of the
Commonwealth of Massachusetts, for the investment and reinvestment of funds
contributed thereto under a Declaration of Trust dated July 22, 1996;
WHEREAS, the Trustees of the Fund have determined to amend Article FOURTH,
Section 2 and Section 3 of the Fund's Declaration of Trust pursuant to Article
NINTH, Section 12 thereof, to add a fourth Class of Trust shares ("Class Y
Shares");
NOW, THEREFORE, the Trustees declare that all money and property
contributed to the trust fund hereunder shall be held and managed under this
Declaration of Trust IN TRUST as herein set forth below.
FIRST: This Trust shall be known as OPPENHEIMER REAL ASSET FUND.
The address of Oppenheimer Real Asset Fund is 3410 South Galena Street,
Denver, Colorado 80231. The Registered Agent for Service is Massachusetts
Mutual Life Insurance Company, 1295 State Street, Springfield,
Massachusetts 01111, Attention: Stephen Kuhn, Esq.
SECOND: Whenever used herein, unless otherwise required by the
context or specifically provided:
1. All terms used in this Declaration of Trust that are defined in the
1940 Act (defined below) shall have the meanings given to them in the 1940 Act.
2. "Board" or "Board of Trustees" or the "Trustees" means the Board
of Trustees of the Trust.
3. "By-Laws" means the By-Laws of the Trust as amended from time to
time.
4. "Class" means a class of a series of Shares of the Trust
established and designated under or in accordance with the provisions of
Article FOURTH.
5. "Commission" means the Securities and Exchange Commission.
6. "Declaration of Trust" shall mean this Declaration of Trust as it
may be amended or restated from time to time.
7. The "1940 Act" refers to the Investment Company Act of 1940 and
<PAGE>
the Rules and Regulations of the Commission thereunder, all as amended
from time to time.
8. "Series" refers to series of Shares of the Trust established and
designated under or in accordance with the provisions of Article FOURTH.
9. "Shareholder" means a record owner of Shares of the Trust.
10. "Shares" refers to the transferable units of interest into which the
beneficial interest in the Trust or any Series or Class of the Trust (as the
context may require) shall be divided from time to time and includes fractions
of Shares as well as whole Shares.
11. The "Trust" refers to the Massachusetts business trust created by this
Declaration of Trust, as amended or restated from time to time.
12. "Trustees" refers to the individual trustees in their capacity
as trustees hereunder of the Trust and their successor or successors for
the time being in office as such trustees.
THIRD: The purpose or purposes for which the Trust is formed and the
business or objects to be transacted, carried on and promoted by it are
as follows:
1. To hold, invest or reinvest its funds, and in connection therewith to
hold part or all of its funds in cash, and to purchase or otherwise acquire,
hold for investment or otherwise, sell, sell short, assign, negotiate, transfer,
exchange or otherwise dispose of or turn to account or realize upon, securities
(which term "securities" shall for the purposes of this Declaration of Trust,
without limitation of the generality thereof, be deemed to include any stocks,
shares, bonds, financial futures contracts, indexes, debentures, structured
notes, mortgages or other obligations, and any certificates, receipts, warrants
or other instruments representing rights to receive, purchase or subscribe for
the same, or evidencing or representing any other rights or interests therein,
or in any property or assets) created or issued by any issuer (which term
"issuer" shall for the purposes of this Declaration of Trust, without limitation
of the generality thereof be deemed to include any persons, firms, associations,
corporations, syndicates, business trusts, partnerships, investment companies,
combinations, organizations, governments, or subdivisions thereof) and in
financial instruments (whether they are considered as securities or
commodities); and to exercise, as owner or holder of any securities or financial
instruments, all rights, powers and privileges in respect thereof; and to do any
and all acts and things for the preservation, protection, improvement and
enhancement in value of any or all such securities or financial instruments.
2. To borrow money and pledge assets in connection with any of the
objects or purposes of the Trust, and to issue notes or other obligations
-2-
<PAGE>
evidencing such borrowings, to the extent permitted by the 1940 Act and by the
Trust's fundamental investment policies under the 1940 Act.
3. To issue and sell its Shares in such Series and Classes and amounts and
on such terms and conditions, for such purposes and for such amount or kind of
consideration (including without limitation thereto, securities) now or
hereafter permitted by the laws of the Commonwealth of Massachusetts and by this
Declaration of Trust, as the Trustees may determine.
4. To purchase or otherwise acquire, hold, dispose of, resell, transfer,
reissue, redeem or cancel its Shares, or to classify or reclassify any unissued
Shares or any Shares previously issued and reacquired of any Series or Class
into one or more Series or Classes that may have been established and designated
from time to time, all without the vote or consent of the Shareholders of the
Trust, in any manner and to the extent now or hereafter permitted by this
Declaration of Trust.
5. To conduct its business in all its branches at one or more offices in
New York, Colorado and elsewhere in any part of the world, without restriction
or limit as to extent.
6. To carry out all or any of the foregoing objects and purposes as
principal or agent, and alone or with associates or to the extent now or
hereafter permitted by the laws of Massachusetts, as a member of, or as the
owner or holder of any stock of, or share of interest in, any issuer, and in
connection therewith or make or enter into such deeds or contracts with any
issuers and to do such acts and things and to exercise such powers, as a natural
person could lawfully make, enter into, do or exercise.
7. To do any and all such further acts and things and to exercise any and
all such further powers as may be necessary, incidental, relative, conducive,
appropriate or desirable for the accomplishment, carrying out or attainment of
all or any of the foregoing purposes or objects.
The foregoing objects and purposes shall, except as otherwise
expressly provided, be in no way limited or restricted by reference to, or
inference from, the terms of any other clause of this or any other Article of
this Declaration of Trust, and shall each be regarded as independent and
construed as powers as well as objects and purposes, and the enumeration of
specific purposes, objects and powers shall not be construed to limit or
restrict in any manner the meaning of general terms or the general powers of the
Trust now or hereafter conferred by the laws of the Commonwealth of
Massachusetts nor shall the expression of one thing be deemed to exclude
another, though it be of a similar or dissimilar nature, not expressed;
provided, however, that the Trust shall not carry on any business, or exercise
any powers, in any state, territory, district or country except to the extent
that the same may lawfully be carried on or exercised under the laws thereof.
-3-
<PAGE>
FOURTH:
1. The beneficial interest in the Trust shall be divided into Shares, all
without par value, but the Trustees shall have the authority from time to time,
without obtaining shareholder approval, to create one or more Series of Shares
in addition to the Series specifically established and designated in part 3 of
this Article FOURTH, and to divide the shares of any Series into three or more
Classes pursuant to Part 2 of this Article FOURTH, all as they deem necessary or
desirable, to establish and designate such Series and Classes, and to fix and
determine the relative rights and preferences as between the different Series of
Shares or Classes as to right of redemption and the price, terms and manner of
redemption, liabilities and expenses to be borne by any Series or Class, special
and relative rights as to dividends and other distributions and on liquidation,
sinking or purchase fund provisions, conversion on liquidation, conversion
rights, and conditions under which the several Series or Classes shall have
individual voting rights or no voting rights. Except as aforesaid, all Shares of
the different Series shall be identical.
(a) The number of authorized Shares and the number of Shares of each
Series and each Class of a Series that may be issued is unlimited, and the
Trustees may issue Shares of any Series or Class of any Series for such
consideration and on such terms as they may determine (or for no consideration
if pursuant to a Share dividend or split-up), all without action or approval of
the Shareholders. All Shares when so issued on the terms determined by the
Trustees shall be fully paid and non-assessable. The Trustees may classify or
reclassify any unissued Shares or any Shares previously issued and reacquired of
any Series into one or more Series or Classes of Series that may be established
and designated from time to time. The Trustees may hold as treasury Shares (of
the same or some other Series), reissue for such consideration and on such terms
as they may determine, or cancel, at their discretion from time to time, any
Shares of any Series reacquired by the Trust.
(b) The establishment and designation of any Series or any Class of
any Series in addition to that established and designated in part 3 of this
Article FOURTH shall be effective upon the execution by a majority of the
Trustees of an instrument setting forth such establishment and designation and
the relative rights and preferences of such Series or such Class of such Series
or as otherwise provided in such instrument. At any time that there are no
Shares outstanding of any particular Series previously established and
designated, the Trustees may by an instrument executed by a majority of their
number abolish that Series and the establishment and designation thereof. Each
instrument referred to in this paragraph shall be an amendment to this
Declaration of Trust, and the Trustees may make any such amendment without
shareholder approval.
(c) Any Trustee, officer or other agent of the Trust, and any
organization in which any such person is interested may acquire, own, hold and
dispose of Shares of any Series or Class of any Series of the Trust
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to the same extent as if such person were not a Trustee, officer or other agent
of the Trust; and the Trust may issue and sell or cause to be issued and sold
and may purchase Shares of any Series or Class of any Series from any such
person or any such organization subject only to the general limitations,
restrictions or other provisions applicable to the sale or purchase of Shares of
such Series or Class generally.
2. The Trustees shall have the authority from time to time, without
obtaining shareholder approval, to divide the Shares of any Series into three or
more Classes as they deem necessary or desirable, and to establish and designate
such Classes. In such event, each Class of a Series shall represent interests in
the designated Series of the Trust and have such voting, dividend, liquidation
and other rights as may be established and designated by the Trustees. Expenses
and liabilities related directly or indirectly to the Shares of a Class of a
Series may be borne solely by such Class (as shall be determined by the
Trustees) and, as provided in Article FIFTH, a Class of a Series may have
exclusive voting rights with respect to matters relating solely to such Class.
The bearing of expenses and liabilities solely by a Class of Shares of a Series
shall be appropriately reflected (in the manner determined by the Trustees) in
the net asset value, dividend and liquidation rights of the Shares of such Class
of a Series. The division of the Shares of a Series into Classes and the terms
and conditions pursuant to which the Shares of the Classes of a Series will be
issued must be made in compliance with the 1940 Act. No division of Shares of a
Series into Classes shall result in the creation of a Class of Shares having a
preference as to dividends or distributions or a preference in the event of any
liquidation, termination or winding up of the Trust, to the extent such a
preference is prohibited by Section 18 of the 1940 Act as to the Trust.
The relative rights and preferences of Class A shares, Class B shares,
Class C shares and Class Y shares shall be the same in all respects except that,
and unless and until the Board of Trustees shall determine otherwise: (i) when a
vote of Shareholders is required under this Declaration of Trust or when a
meeting of Shareholders is called by the Board of Trustees, the Shares of a
Class shall vote exclusively on matters that affect that Class only; (ii) the
expenses and liabilities related to a Class shall be borne solely by such Class
(as determined and allocated to such Class by the Trustees from time to time in
a manner consistent with parts 2 and 3 of Article FOURTH); and (iii) pursuant to
paragraph 10 of Article NINTH, the Shares of each Class shall have such other
rights and preferences as are set forth from time to time in the then effective
prospectus and/or statement of additional information relating to the Shares.
Dividends and distributions on the Class A, Class B, Class C or Class Y Shares
may differ from the dividends and distributions on any other such Class, and the
net asset value of Class A, Class B, Class C or Class Y Shares may differ from
the net asset value of any other such Class.
3. Without limiting the authority of the Trustees set forth in part
1 of this Article FOURTH to establish and designate any further Series,
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the Trustees hereby establish one Series of Shares having the same name as the
Trust, and said Shares shall be divided into four Classes, which shall be
designated Class A, Class B, Class C and Class Y. The Shares of that Series and
any Shares of any further Series or Classes that may from time to time be
established and designated by the Trustees shall (unless the Trustees otherwise
determine with respect to some further Series or Classes at the time of
establishing and designating the same) have the following relative rights and
preferences:
(a) Assets Belonging to Series. All consideration received by the
Trust for the issue or sale of Shares of a particular Series, together with all
assets in which such consideration is invested or reinvested, all income,
earnings, profits, and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments derived
from any reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that Series for all purposes, subject only to the rights
of creditors, and shall be so recorded upon the books of account of the Trust.
Such consideration, assets, income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any reinvestment of such
proceeds, in whatever form the same may be, together with any General Items
allocated to that Series as provided in the following sentence, are herein
referred to as "assets belonging to" that Series. In the event that there are
any assets, income, earnings, profits, and proceeds thereof, funds, or payments
which are not readily identifiable as belonging to any particular Series
(collectively "General Items"), the Trustees shall allocate such General Items
to and among any one or more of the Series established and designated from time
to time in such manner and on such basis as they, in their sole discretion, deem
fair and equitable; and any General Items so allocated to a particular Series
shall belong to that Series. Each such allocation by the Trustees shall be
conclusive and binding upon the shareholders of all Series for all purposes.
(b) (1) Liabilities Belonging to Series. The liabilities, expenses,
costs, charges and reserves attributable to each Series shall be charged and
allocated to the assets belonging to each particular Series. Any general
liabilities, expenses, costs, charges and reserves of the Trust which are not
identifiable as belonging to any particular Series shall be allocated and
charged by the Trustees to and among any one or more of the Series established
and designated from time to time in such manner and on such basis as the
Trustees in their sole discretion deem fair and equitable. The liabilities,
expenses, costs, charges and reserves allocated and so charged to each Series
are herein referred to as "liabilities belonging to" that Series. Each
allocation of liabilities, expenses, costs, charges and reserves by the Trustees
shall be conclusive and binding upon the shareholders of all Series for all
purposes.
(2) Liabilities Belonging to a Class. If a Series is divided
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into more than one Class, the liabilities, expenses, costs, charges and reserves
attributable to a Class shall be charged and allocated to the Class to which
such liabilities, expenses, costs, charges or reserves are attributable. Any
general liabilities, expenses, costs, charges or reserves belonging to the
Series which are not identifiable as belonging to any particular Class shall be
allocated and charged by the Trustees to and among any one or more of the
Classes established and designated from time to time in such manner and on such
basis as the Trustees in their sole discretion deem fair and equitable. The
liabilities, expenses, costs, charges and reserves allocated and so charged to
each Class are herein referred to as "liabilities belonging to" that Class. Each
allocation of liabilities, expenses, costs, charges and reserves by the Trustees
shall be conclusive and binding upon the holders of all Classes for all
purposes.
(c) Dividends. Dividends and distributions on Shares of a particular
Series or Class may be paid to the holders of Shares of that Series or Class,
with such frequency as the Trustees may determine, which may be daily or
otherwise pursuant to a standing resolution or resolutions adopted only once or
with such frequency as the Trustees may determine, from such of the income,
capital gains accrued or realized, and capital and surplus, from the assets
belonging to that Series, as the Trustees may determine, after providing for
actual and accrued liabilities belonging to such Series or Class. All dividends
and distributions on Shares of a particular Series or Class shall be distributed
pro rata to the Shareholders of such Series or Class in proportion to the number
of Shares of such Series or Class held by such Shareholders at the date and time
of record established for the payment of such dividends or distributions, except
that in connection with any dividend or distribution program or procedure the
Trustees may determine that no dividend or distribution shall be payable on
Shares as to which the Shareholder's purchase order and/or payment have not been
received by the time or times established by the Trustees under such program or
procedure. Such dividends and distributions may be made in cash or Shares or a
combination thereof as determined by the Trustees or pursuant to any program
that the Trustees may have in effect at the time for the election by each
Shareholder of the mode of the making of such dividend or distribution to that
Shareholder. Any such dividend or distribution paid in Shares will be paid at
the net asset value thereof as determined in accordance with paragraph 13 of
Article SEVENTH.
(d) Liquidation. In the event of the liquidation or dissolution of
the Trust, the Shareholders of each Series and all Classes of each Series that
have been established and designated shall be entitled to receive, as a Series
or Class, when and as declared by the Trustees, the excess of the assets
belonging to that Series over the liabilities belonging to that Series or Class.
The assets so distributable to the Shareholders of any particular Class and
Series shall be distributed among such Shareholders in proportion to the number
of Shares of such Class of that Series held by them and recorded on the books of
the Trust.
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(e) Transfer. All Shares of each particular Series or Class shall be
transferable, but transfers of Shares of a particular Class and Series will be
recorded on the Share transfer records of the Trust applicable to such Series or
Class of that Series only at such times as Shareholders shall have the right to
require the Trust to redeem Shares of such Series or Class of that Series and at
such other times as may be permitted by the Trustees.
(f) Equality. Each Share of a Series shall represent an equal
proportionate interest in the assets belonging to that Series (subject to the
liabilities belonging to such Series or any Class of that Series), and each
Share of any particular Series shall be equal to each other Share of that Series
and shares of each Class of a Series shall be equal to each other Share of such
Class; but the provisions of this sentence shall not restrict any distinctions
permissible under this Article FOURTH that may exist with respect to Shares of
the different Classes of a Series. The Trustees may from time to time divide or
combine the Shares of any particular Class or Series into a greater or lesser
number of Shares of that Class or Series without thereby changing the
proportionate beneficial interest in the assets belonging to that Series or
allocable to that Class in any way affecting the rights of Shares of any other
Class or Series.
(g) Fractions. Any fractional Share of any Class and Series, if any
such fractional Share is outstanding, shall carry proportionately all the rights
and obligations of a whole Share of that Class and Series, including those
rights and obligations with respect to voting, receipt of dividends and
distributions, redemption of Shares, and liquidation of the Trust.
(h) Conversion Rights. Subject to compliance with the requirements of
the 1940 Act, the Trustees shall have the authority to provide that (i) holders
of Shares of any Series shall have the right to exchange said Shares into Shares
of one or more other Series of Shares, (ii) holders of shares of any Class shall
have the right to exchange said Shares into Shares of one or more other Classes
of the same or a different Series, and/or (iii) the Trust shall have the right
to carry out exchanges of the aforesaid kind, in each case in accordance with
such requirements and procedures as may be established by the Trustees.
(i) Ownership of Shares. The ownership of Shares shall be recorded on
the books of the Trust or of a transfer or similar agent for the Trust, which
books shall be maintained separately for the Shares of each Class and Series
that has been established and designated. No certification certifying the
ownership of Shares need be issued except as the Trustees may otherwise
determine from time to time. The Trustees may make such rules as they consider
appropriate for the issuance of Share certificates, the use of facsimile
signatures, the transfer of Shares and similar matters. The record books of the
Trust as kept by the Trust or any transfer or similar agent, as the case may be,
shall be conclusive as to who are the Shareholders and as to the number of
Shares of each Class
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and Series held from time to time by each such Shareholder.
(j) Investments in the Trust. The Trustees may accept investments in
the Trust from such persons and on such terms and for such consideration, not
inconsistent with the provisions of the 1940 Act, as they from time to time
authorize. The Trustees may authorize any distributor, principal underwriter,
custodian, transfer agent or other person to accept orders for the purchase or
sale of Shares that conform to such authorized terms and to reject any purchase
or sale orders for Shares whether or not conforming to such authorized terms.
FIFTH: The following provisions are hereby adopted with respect to
voting Shares of the Trust and certain other rights:
1. The Shareholders shall have the power to vote (a) for the election of
Trustees when that issue is submitted to them, (b) with respect to the amendment
of this Declaration of Trust except where the Trustees are given authority to
amend the Declaration of Trust without shareholder approval, (c) to the same
extent as the shareholders of a Massachusetts business corporation, as to
whether or not a court action, proceeding or claim should be brought or
maintained derivatively or as a class action on behalf of the Trust or the
Shareholders, and (d) with respect to those matters relating to the Trust as may
be required by the 1940 Act or required by law, by this Declaration of Trust, or
the By-Laws of the Trust or any registration statement of the Trust filed with
the Commission or any State, or as the Trustees may consider desirable.
2. The Trust will not hold shareholder meetings unless required by the
1940 Act, the provisions of this Declaration of Trust, or any other applicable
law. The Trustees may call a meeting of shareholders from time to time.
3. Except as herein otherwise provided, at all meetings of Shareholders,
each Shareholder shall be entitled to one vote on each matter submitted to a
vote of the Shareholders of the affected Series for each Share standing in his
name on the books of the Trust on the date, fixed in accordance with the
By-Laws, for determination of Shareholders of the affected Series entitled to
vote at such meeting (except, if the Board so determines, for Shares redeemed
prior to the meeting), and each such Series shall vote separately ("Individual
Series Voting"); a Series shall be deemed to be affected when a vote of the
holders of that Series on a matter is required by the 1940 Act; provided,
however, that as to any matter with respect to which a vote of Shareholders is
required by the 1940 Act or by any applicable law that must be complied with,
such requirements as to a vote by Shareholders shall apply in lieu of Individual
Series Voting as described above. If the shares of a Series shall be divided
into Classes as provided in Article FOURTH, the shares of each Class shall have
identical voting rights except that the Trustees, in their discretion, may
provide a Class of a Series with exclusive voting rights with respect to matters
which relate solely to such Classes. If the Shares of any Series shall be
divided into Classes with a Class having
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exclusive voting rights with respect to certain matters, the quorum and voting
requirements described below with respect to action to be taken by the
Shareholders of the Class of such Series on such matters shall be applicable
only to the Shares of such Class. Any fractional Share shall carry
proportionately all the rights of a whole Share, including the right to vote and
the right to receive dividends. The presence in person or by proxy of the
holders of one-third of the Shares, or of the Shares of any Series or Class of
any Series, outstanding and entitled to vote thereat shall constitute a quorum
at any meeting of the Shareholders or of that Series or Class, respectively;
provided however, that if any action to be taken by the Shareholders or by a
Series or Class at a meeting requires an affirmative vote of a majority, or more
than a majority, of the shares outstanding and entitled to vote, then in such
event the presence in person or by proxy of the holders of a majority of the
shares outstanding and entitled to vote at such a meeting shall constitute a
quorum for all purposes. At a meeting at which is a quorum is present, a vote of
a majority of the quorum shall be sufficient to transact all business at the
meeting, except as otherwise provided in Article NINTH. If at any meeting of the
Shareholders there shall be less than a quorum present, the Shareholders or the
Trustees present at such meeting may, without further notice, adjourn the same
from time to time until a quorum shall attend, but no business shall be
transacted at any such adjourned meeting except such as might have been lawfully
transacted had the meeting not been adjourned.
4. Each Shareholder, upon request to the Trust in proper form determined
by the Trust, shall be entitled to require the Trust to redeem from the net
assets of that Series all or part of the Shares of such Series and Class
standing in the name of such Shareholder. The method of computing such net asset
value, the time at which such net asset value shall be computed and the time
within which the Trust shall make payment therefor, shall be determined as
hereinafter provided in Article SEVENTH of this Declaration of Trust.
Notwithstanding the foregoing, the Trustees, when permitted or required to do so
by the 1940 Act, may suspend the right of the Shareholders to require the Trust
to redeem Shares.
5. No Shareholder shall, as such holder, have any right to purchase or
subscribe for any Shares of the Trust which it may issue or sell, other than
such right, if any, as the Trustees, in their discretion, may determine.
6. All persons who shall acquire Shares shall acquire the same
subject to the provisions of the Declaration of Trust.
7. Cumulative voting for the election of Trustees shall not be
allowed.
SIXTH:
1. The persons who shall act as initial Trustees until the first
meeting or until their successors are duly chosen and qualify are the
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initial trustees executing this Declaration of Trust or any counterpart thereof.
However, the By-Laws of the Trust may fix the number of Trustees at a number
greater or lesser than the number of initial Trustees and may authorize the
Trustees to increase or decrease the number of Trustees, to fill any vacancies
on the Board which may occur for any reason including any vacancies created by
any such increase in the number of Trustees, to set and alter the terms of
office of the Trustees and to lengthen or lessen their own terms of office or
make their terms of office of indefinite duration, all subject to the 1940 Act.
Unless otherwise provided by the By-Laws of the Trust, the Trustees need not be
Shareholders.
2. A Trustee at any time may be removed either with or without cause by
resolution duly adopted by the affirmative vote of the holders of two-thirds of
the outstanding Shares, present in person or by proxy at any meeting of
Shareholders called for such purpose; such a meeting shall be called by the
Trustees when requested in writing to do so by the record holders of not less
than ten per centum of the outstanding Shares. A Trustee may also be removed by
the Board of Trustees as provided in the By-Laws of the Trust.
3. The Trustees shall make available a list of names and addresses of all
Shareholders as recorded on the books of the Trust, upon receipt of the request
in writing signed by not less than ten Shareholders (who have been shareholders
for at least six months) holding in the aggregate shares of the Trust valued at
not less than $25,000 at current offering price (as defined in the then
effective Prospectus and/or Statement of Additional Information relating to the
Shares under the Securities Act of 1933, as amended from time to time) or
holding not less than 1% in amount of the entire amount of Shares issued and
outstanding; such request must state that such Shareholders wish to communicate
with other Shareholders with a view to obtaining signatures to a request for a
meeting to take action pursuant to part 2 of this Article SIXTH and be
accompanied by a form of communication to the Shareholders. The Trustees may, in
their discretion, satisfy their obligation under this part 3 by either making
available the Shareholder list to such Shareholders at the principal offices of
the Trust, or at the offices of the Trust's transfer agent, during regular
business hours, or by mailing a copy of such communication and form of request,
at the expense of such requesting Shareholders, to all other Shareholders, and
the Trustees may also take such other action as may be permitted under Section
16(c) of the 1940 Act.
4. The Trust may at any time or from time to time apply to the Commission
for one or more exemptions from all or part of said Section 16(c) of the 1940
Act, and, if an exemptive order or orders are issued by the Commission, such
order or orders shall be deemed part of said Section 16(c) for the purposes of
parts 2 and 3 of this Article SIXTH.
SEVENTH: The following provisions are hereby adopted for the purpose
of defining, limiting and regulating the powers of the Trust, the Trustees
and the Shareholders.
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1. As soon as any Trustee is duly elected by the Shareholders or the
Trustees and shall have accepted this Trust, the Trust estate shall vest in the
new Trustee or Trustees, together with the continuing Trustees, without any
further act or conveyance, and he or she shall be deemed a Trustee hereunder.
2. The death, declination, resignation, retirement, removal, or incapacity
of the Trustees, or any one of them, shall not operate to annul or terminate the
Trust but the Trust shall continue in full force and effect pursuant to the
terms of this Declaration of Trust.
3. The assets of the Trust shall be held separate and apart from any
assets now or hereafter held in any capacity other than as Trustee hereunder by
the Trustees or any successor Trustees. All of the assets of the Trust shall at
all times be considered as vested in the Trustees. No Shareholder shall have, as
a holder of beneficial interest in the Trust, any authority, power or right
whatsoever to transact business for or on behalf of the Trust, or on behalf of
the Trustees, in connection with the property or assets of the Trust, or in any
part thereof.
4. The Trustees in all instances shall act as principals, and are and
shall be free from the control of the Shareholders. The Trustees shall have full
power and authority to do any and all acts and to make and execute, and to
authorize the officers and agents of the Trust to make and execute, any and all
contracts and instruments that they may consider necessary or appropriate in
connection with the management of the Trust. The Trustees shall not in any way
be bound or limited by present or future laws or customs in regard to Trust
investments, but shall have full authority and power to make any and all
investments which they, in their uncontrolled discretion, shall deem proper to
accomplish the purpose of this Trust. Subject to any applicable limitation in
this Declaration of Trust or by the By-Laws of the Trust, the Trustees shall
have power and authority:
(a) to adopt By-Laws not inconsistent with this Declaration of Trust
providing for the conduct of the business of the Trust and to amend and repeal
them to the extent that they do not reserve that right to the Shareholders;
(b) to elect and remove such officers and appoint and terminate such
officers as they consider appropriate with or without cause, and to appoint and
designate from among the Trustees such committees as the Trustees may determine,
and to terminate any such committee and remove any member of such committee;
(c) to employ as custodian of any assets of the Trust a bank or trust
company or any other entity qualified and eligible to act as a custodian,
subject to any conditions set forth in this Declaration of Trust or in the
By-Laws;
(d) to retain a transfer agent and shareholder servicing agent,
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or both;
(e) to provide for the distribution of Shares either through a
principal underwriter or the Trust itself or both;
(f) to set record dates in the manner provided for in the By-
Laws of the Trust;
(g) to delegate such authority as they consider desirable to any
officers of the Trust and to any agent, custodian or underwriter;
(h) to vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property held in Trust hereunder; and to
execute and deliver powers of attorney to such person or persons as the Trustees
shall deem proper, granting to such person or persons such power and discretion
with relation to securities or property as the Trustees shall deem proper;
(i) to exercise powers and rights of subscription or otherwise
which in any manner arise out of ownership of securities held in trust
hereunder;
(j) to hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form, either in its
own name or in the name of a custodian or a nominee or nominees, subject in
either case to proper safeguards according to the usual practice of
Massachusetts business trusts or investment companies;
(k) to consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of which is
held in the Trust; to consent to any contract, lease, mortgage, purchase, or
sale of property by such corporation or concern, and to pay calls or
subscriptions with respect to any security held in the Trust;
(l) to compromise, arbitrate, or otherwise adjust claims in favor of
or against the Trust or any matter in controversy including, but not limited to,
claims for taxes;
(m) to make, in the manner provided in the By-Laws,
distributions of income and of capital gains to Shareholders;
(n) to borrow money to the extent and in the manner permitted by
the 1940 Act and the Trust's fundamental policy thereunder as to
borrowing;
(o) to enter into investment advisory or management contracts,
subject to the 1940 Act, with any one or more corporations, partnerships,
trusts, associations or other persons;
(p) to change the name of the Trust or any Class or Series of
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the Trust as they consider appropriate without prior shareholder approval;
(q) to establish officers' and Trustees' fees or compensation and
fees or compensation for committees of the Trustees to be paid by the Trust or
each Series thereof in such manner and amount as the Trustees may determine;
(r) to invest all or substantially all of the Trust's assets in
another registered investment company;
(s) to determine whether a minimum and/or maximum value should apply
to accounts holding shares, to fix such values and establish the procedures to
cause the involuntary redemption of accounts that do not satisfy such criteria;
and
(t) to engage, employ or appoint any person or entities to perform
any act for the Trust or the Trustees and to authorize their compensation.
5. No one dealing with the Trustees shall be under any obligation to make
any inquiry concerning the authority of the Trustees, or to see to the
application of any payments made or property transferred to the Trustees or upon
their order.
6. (a) The Trustees shall have no power to bind any Shareholder personally
or to call upon any Shareholder for the payment of any sum of money or
assessment whatsoever other than such as the Shareholder may at any time
personally agree to pay by way of subscription to any Shares or otherwise. This
paragraph shall not limit the right of the Trustees to assert claims against any
shareholder based upon the acts or omissions of such shareholder or for any
other reason. There is hereby expressly disclaimed shareholder and Trustee
liability for the acts and obligations of the Trust. Every note, bond, contract
or other undertaking issued by or on behalf of the Trust or the Trustees
relating to the Trust shall include a notice and provision limiting the
obligation represented thereby to the Trust and its assets (but the omission of
such notice and provision shall not operate to impose any liability or
obligation on any Shareholder).
(b) Whenever this Declaration of Trust calls for or permits any
action to be taken by the Trustees hereunder, such action shall mean that taken
by the Board of Trustees by vote of the majority of a quorum of Trustees as set
forth from time to time in the By-Laws of the Trust or as required by the 1940
Act.
(c) The Trustees shall possess and exercise any and all such
additional powers as are reasonably implied from the powers herein contained
such as may be necessary or convenient in the conduct of any business or
enterprise of the Trust, to do and perform anything necessary, suitable, or
proper for the accomplishment of any of the purposes, or the
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attainment of any one or more of the objects, herein enumerated, or which shall
at any time appear conducive to or expedient for the protection or benefit of
the Trust, and to do and perform all other acts and things necessary or
incidental to the purposes herein before set forth, or that may be deemed
necessary by the Trustees.
(d) The Trustees shall have the power, to the extent not inconsistent
with the 1940 Act, to determine conclusively whether any moneys, securities, or
other properties of the Trust are, for the purposes of this Trust, to be
considered as capital or income and in what manner any expenses or disbursements
are to be borne as between capital and income whether or not in the absence of
this provision such moneys, securities, or other properties would be regarded as
capital or income and whether or not in the absence of this provision such
expenses or disbursements would ordinarily be charged to capital or to income.
7. The By-Laws of the Trust may divide the Trustees into classes and
prescribe the tenure of office of the several classes, but no class of Trustee
shall be elected for a period shorter than that from the time of the election
following the division into classes until the next meeting and thereafter for a
period shorter than the interval between meetings or for a period longer than
five years, and the term of office of at least one class shall expire each year.
8. The Shareholders shall have the right to inspect the records,
documents, accounts and books of the Trust, subject to reasonable regulations of
the Trustees, not contrary to Massachusetts law, as to whether and to what
extent, and at what times and places, and under what conditions and regulations,
such right shall be exercised.
9. Any officer elected or appointed by the Trustees or by the Shareholders
or otherwise, may be removed at any time, with or without cause, in such lawful
manner as may be provided in the By-Laws of the Trust.
10. The Trustees shall have power to hold their meetings, to have an
office or offices and, subject to the provisions of the laws of Massachusetts,
to keep the books of the Trust outside of said Commonwealth at such places as
may from time to time be designated by them. Action may be taken by the Trustees
without a meeting by unanimous written consent or by telephone or similar method
of communication.
11. Securities held by the Trust shall be voted in person or by proxy by
the President or a Vice-President, or such officer or officers of the Trust as
the Trustees shall designate for the purpose, or by a proxy or proxies thereunto
duly authorized by the Trustees, except as otherwise ordered by vote of the
holders of a majority of the Shares outstanding and entitled to vote in respect
thereto.
12. (a) Subject to the provisions of the 1940 Act, any Trustee,
officer or employee, individually, or any partnership of which any
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Trustee, officer or employee may be a member, or any corporation or association
of which any Trustee, officer or employee may be an officer, partner, director,
trustee, employee or stockholder, or otherwise may have an interest, may be a
party to, or may be pecuniarily or otherwise interested in, any contract or
transaction of the Trust, and in the absence of fraud no contract or other
transaction shall be thereby affected or invalidated; provided that in such case
a Trustee, officer or employee or a partnership, corporation or association of
which a Trustee, officer or employee is a member, officer, director, trustee,
employee or stockholder is so interested, such fact shall be disclosed or shall
have been known to the Trustees including those Trustees who are not so
interested and who are neither "interested" nor "affiliated" persons as those
terms are defined in the 1940 Act, or a majority thereof; and any Trustee who is
so interested, or who is also a director, officer, partner, trustee, employee or
stockholder of such other corporation or a member of such partnership or
association which is so interested, may be counted in determining the existence
of a quorum at any meeting of the Trustees which shall authorize any such
contract or transaction, and may vote thereat to authorize any such contract or
transaction, with like force and effect as if he were not so interested.
(b) Specifically, but without limitation of the foregoing, the Trust
may enter into a management or investment advisory contract or underwriting
contract and other contracts with, and may otherwise do business with any
manager or investment adviser for the Trust and/or principal underwriter of the
Shares of the Trust or any subsidiary or affiliate of any such manager or
investment adviser and/or principal underwriter and may permit any such firm or
corporation to enter into any contracts or other arrangements with any other
firm or corporation relating to the Trust notwithstanding that the Trustees of
the Trust may be composed in part of partners, directors, officers or employees
of any such firm or corporation, and officers of the Trust may have been or may
be or become partners, directors, officers or employees of any such firm or
corporation, and in the absence of fraud the Trust and any such firm or
corporation may deal freely with each other, and no such contract or transaction
between the Trust and any such firm or corporation shall be invalidated or in
any way affected thereby, nor shall any Trustee or officer of the Trust be
liable to the Trust or to any Shareholder or creditor thereof or to any other
person for any loss incurred by it or him solely because of the existence of any
such contract or transaction; provided that nothing herein shall protect any
director or officer of the Trust against any liability to the trust or to its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
(c) As used in this paragraph the following terms shall have the
meanings set forth below:
(i) the term "indemnitee" shall mean any present or former
Trustee, officer or employee of the Trust, any present or former Trustee,
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partner, Director or officer of another trust, partnership, corporation or
association whose securities are or were owned by the Trust or of which the
Trust is or was a creditor and who served or serves in such capacity at the
request of the Trust, and the heirs, executors, administrators, successors and
assigns of any of the foregoing; however, whenever conduct by an indemnitee is
referred to, the conduct shall be that of the original indemnitee rather than
that of the heir, executor, administrator, successor or assignee;
(ii) the term "covered proceeding" shall mean any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, to which an indemnitee is or was a party or is
threatened to be made a party by reason of the fact or facts under which he or
it is an indemnitee as defined above;
(iii) the term "disabling conduct" shall mean willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office in question;
(iv) the term "covered expenses" shall mean expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by an indemnitee in connection with a covered proceeding;
and
(v) the term "adjudication of liability" shall mean, as to any
covered proceeding and as to any indemnitee, an adverse determination as to the
indemnitee whether by judgment, order, settlement, conviction or upon a plea of
nolo contendere or its equivalent.
(d) The Trust shall not indemnify any indemnitee for any covered
expenses in any covered proceeding if there has been an adjudication of
liability against such indemnitee expressly based on a finding of disabling
conduct.
(e) Except as set forth in paragraph (d) above, the Trust shall
indemnify any indemnitee for covered expenses in any covered proceeding, whether
or not there is an adjudication of liability as to such indemnitee, such
indemnification by the Trust to be to the fullest extent now or hereafter
permitted by any applicable law unless the By-laws limit or restrict the
indemnification to which any indemnitee may be entitled. The Board of Trustees
may adopt by-law provisions to implement subparagraphs (c), (d) and (e) hereof.
(f) Nothing herein shall be deemed to affect the right of the Trust
and/or any indemnitee to acquire and pay for any insurance covering any or all
indemnitees to the extent permitted by applicable law or to affect any other
indemnification rights to which any indemnitee may be entitled to the extent
permitted by applicable law. Such rights to indemnification shall not, except as
otherwise provided by law, be deemed exclusive of any other rights to which such
indemnitee may be entitled under any statute, By-Law, contract or otherwise.
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13. The Trustees are empowered, in their absolute discretion, to establish
bases or times, or both, for determining the net asset value per Share of any
Class and Series in accordance with the 1940 Act and to authorize the voluntary
purchase by any Class and Series, either directly or through an agent, of Shares
of any Class and Series upon such terms and conditions and for such
consideration as the Trustees shall deem advisable in accordance with the 1940
Act.
14. Payment of the net asset value per Share of any Class and Series
properly surrendered to it for redemption shall be made by the Trust within
seven days, or as specified in any applicable law or regulation, after tender of
such stock or request for redemption to the Trust for such purpose together with
any additional documentation that may be reasonably required by the Trust or its
transfer agent to evidence the authority of the tenderor to make such request,
plus any period of time during which the right of the holders of the shares of
such Class of that Series to require the Trust to redeem such shares has been
suspended. Any such payment may be made in portfolio securities of such Class of
that Series and/or in cash, as the Trustees shall deem advisable, and no
Shareholder shall have a right, other than as determined by the Trustees, to
have Shares redeemed in kind.
15. The Trust shall have the right, at any time and without prior notice
to the Shareholder, to redeem Shares of the Class and Series held by such
Shareholder held in any account registered in the name of such Shareholder for
its current net asset value, if and to the extent that such redemption is
necessary to reimburse either that Series or Class of the Trust or the
distributor (i.e., principal underwriter) of the Shares for any loss either has
sustained by reason of the failure of such Shareholder to make timely and good
payment for Shares purchased or subscribed for by such Shareholder, regardless
of whether such Shareholder was a Shareholder at the time of such purchase or
subscription, subject to and upon such terms and conditions as the Trustees may
from time to time prescribe.
EIGHTH: The name "Oppenheimer" included in the name of the Trust and of
any Series shall be used pursuant to a royalty-free, non-exclusive license from
Oppenheimer Real Asset Management, Inc. ("ORAM"), and OppenheimerFunds, Inc.
("OFI"), incidental to and as part of any one or more advisory, management or
supervisory contracts which may be entered into by the Trust with ORAM and/or
OFI. Such license shall allow ORAM or OFI to inspect and subject to the control
of the Board of Trustees to control the nature and quality of services offered
by the Trust under such name. The license may be terminated by ORAM or OFI upon
termination of such advisory, management or supervisory contracts or without
cause upon 60 days' written notice, in which case neither the Trust nor any
Series or Class shall have any further right to use the name "Oppenheimer" in
its name or otherwise and the Trust, the Shareholders and its officers and
Trustees shall promptly take whatever action may be necessary to change its name
and the names of any Series or Classes accordingly.
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NINTH:
1. In case any Shareholder or former Shareholder shall be held to be
personally liable solely by reason of his being or having been a Shareholder and
not because of his acts or omissions or for some other reason, the Shareholder
or former Shareholder (or the Shareholders, heirs, executors, administrators or
other legal representatives or in the case of a corporation or other entity, its
corporate or other general successor) shall be entitled out of the Trust estate
to be held harmless from and indemnified against all loss and expense arising
from such liability. The Trust shall, upon request by the Shareholder, assume
the defense of any such claim made against any Shareholder for any act or
obligation of the Trust and satisfy any judgment thereon.
2. It is hereby expressly declared that a trust and not a partnership is
created hereby. No individual Trustee hereunder shall have any power to bind the
Trust, the Trust's officers or any Shareholder. All persons extending credit to,
doing business with, contracting with or having or asserting any claim against
the Trust or the Trustees shall look only to the assets of the Trust for payment
under any such credit, transaction, contract or claim; and neither the
Shareholders nor the Trustees, nor any of their agents, whether past, present or
future, shall be personally liable therefor; notice of such disclaimer shall be
given in each agreement, obligation or instrument entered into or executed by
the Trust or the Trustees. Nothing in this Declaration of Trust shall protect a
Trustee against any liability to which such Trustee would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of Trustee
hereunder.
3. The exercise by the Trustees of their powers and discretion hereunder
in good faith and with reasonable care under the circumstances then prevailing,
shall be binding upon everyone interested. Subject to the provisions of
paragraph 2 of this Article NINTH, the Trustees shall not be liable for errors
of judgment or mistakes of fact or law. The Trustees may take advice of counsel
or other experts with respect to the meaning and operations of this Declaration
of Trust, applicable laws, contracts, obligations, transactions or any other
business the Trust may enter into, and subject to the provisions of paragraph 2
of this Article NINTH, shall be under no liability for any act or omission in
accordance with such advice or for failing to follow such advice. The Trustees
shall not be required to give any bond as such, nor any surety if a bond is
required.
4. This Trust shall continue without limitation of time but subject to the
provisions of sub-sections (a), (b), (c) and (d) of this paragraph 4.
(a) The Trustees, with the favorable vote of the holders of a
majority of the outstanding voting securities, as defined in the 1940 Act, of
any one or more Series entitled to vote, may sell and convey the assets
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of that Series (which sale may be subject to the retention of assets for the
payment of liabilities and expenses) to another issuer for a consideration which
may be or include securities of such issuer. Upon making provision for the
payment of liabilities, by assumption by such issuer or otherwise, the Trustees
shall distribute the remaining proceeds ratably among the holders of the
outstanding Shares of the Series the assets of which have been so transferred.
(b) The Trustees, with the favorable vote of the holders of a majority of
the outstanding voting securities, as defined in the 1940 Act, of any one or
more Series entitled to vote, may at any time sell and convert into money all
the assets of that Series. Upon making provisions for the payment of all
outstanding obligations, taxes and other liabilities, accrued or contingent, of
that Series, the Trustees shall distribute the remaining assets of that Series
ratably among the holders of the outstanding Shares of that Series.
(c) The Trustees, with the favorable vote of the holders of a
majority of the outstanding voting securities, as defined in the 1940 Act, of
any one or more Series entitled to vote, may otherwise alter, convert or
transfer the assets of that Series or those Series.
(d) Upon completion of the distribution of the remaining proceeds or
the remaining assets as provided in sub-sections (a) and (b), and in subsection
(c) where applicable, the Series the assets of which have been so transferred
shall terminate, and if all the assets of the Trust have been so transferred,
the Trust shall terminate and the Trustees shall be discharged of any and all
further liabilities and duties hereunder and the right, title and interest of
all parties shall be cancelled and discharged.
5. The original or a copy of this instrument and of each restated
declaration of trust or instrument supplemental hereto shall be kept at the
office of the Trust where it may be inspected by any Shareholder. A copy of this
instrument and of each supplemental or restated declaration of trust shall be
filed with the Secretary of the Commonwealth of Massachusetts, as well as any
other governmental office where such filing may from time to time be required.
Anyone dealing with the Trust may rely on a certificate by an officer of the
Trust as to whether or not any such supplemental or restated declarations of
trust have been made and as to any matters in connection with the Trust
hereunder, and, with the same effect as if it were the original, may rely on a
copy certified by an officer of the Trust to be a copy of this instrument or of
any such supplemental or restated declaration of trust. In this instrument or in
any such supplemental or restated declaration of trust, references to this
instrument, and all expressions like "herein", "hereof" and "hereunder" shall be
deemed to refer to this instrument as amended or affected by any such
supplemental or restated declaration of trust. This instrument may be executed
in any number of counterparts, each of which shall be deemed an original.
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6. The Trust set forth in this instrument is created under and is to be
governed by and construed and administered according to the laws of the
Commonwealth of Massachusetts. The Trust shall be of the type commonly called a
Massachusetts business trust, and without limiting the provisions hereof, the
Trust may exercise all powers which are ordinarily exercised by such a trust.
7. The Board of Trustees is empowered to cause the redemption of the
Shares held in any account if the aggregate net asset value of such Shares
(taken at cost or value, as determined by the Board) has been reduced to $200 or
less upon such notice to the shareholder in question, with such permission to
increase the investment in question and upon such other terms and conditions as
may be fixed by the Board of Trustees in accordance with the 1940 Act.
8. In the event that any person advances the organizational expenses of
the Trust, such advances shall become an obligation of the Trust subject to such
terms and conditions as may be fixed by, and on a date fixed by, or determined
with criteria fixed by the Board of Trustees, to be amortized over a period or
periods to be fixed by the Board.
9. Whenever any action is taken under this Declaration of Trust including
action which is required or permitted by the 1940 Act or any other applicable
law, such action shall be deemed to have been properly taken if such action is
in accordance with the construction of the 1940 Act or such other applicable law
then in effect as expressed in "no action" letters of the staff of the
Commission or any release, rule, regulation or order under the 1940 Act or any
decision of a court of competent jurisdiction, notwithstanding that any of the
foregoing shall later be found to be invalid or otherwise reversed or modified
by any of the foregoing.
10. Any action which may be taken by the Board of Trustees under this
Declaration of Trust or its By-Laws may be taken by the description thereof in
the then effective prospectus and/or statement of additional information
relating to the Shares under the Securities Act of 1933 or in any proxy
statement of the Trust rather than by formal resolution of the Board.
11. Whenever under this Declaration of Trust, the Board of Trustees is
permitted or required to place a value on assets of the Trust, such action may
be delegated by the Board, and/or determined in accordance with a formula
determined by the Board, to the extent permitted by the 1940 Act.
12. If authorized by vote of the Trustees and, if a vote of Shareholders
is required under this Declaration of Trust, the favorable vote of the holders
of a "majority" of the outstanding voting securities, as defined in the 1940
Act, entitled to vote, or by any larger vote which may be required by applicable
law in any particular case, the Trustees may
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amend or otherwise supplement this instrument, by making a Restated Declaration
of Trust or a Declaration of Trust supplemental hereto, which thereafter shall
form a part hereof; any such Supplemental or Restated Declaration of Trust may
be executed by and on behalf of the Trust and the Trustees by an officer or
officers of the Trust.
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IN WITNESS WHEREOF, the undersigned have executed this instrument as of
the 27th day of August, 1996.
/s/ Robert G. Avis /s/ Charles Conrad, Jr.
- -------------------------- ---------------------------
Robert G. Avis, Trustee Charles Conrad, Jr., Trustee
One North Jefferson Avenue 19411 Merion Court
St. Louis, Missouri 63103 Huntington Beach, California 92648
/s/ William A. Baker /s/ Robert M. Kirchner
- -------------------------- ----------------------------
William A. Baker, Trustee Robert M. Kirchner, Trustee
197 Desert Lakes Drive 2800 S. University Boulevard
Palm Springs, California 92264 Denver, Colorado 80210
/s/ Ned M. Steel /s/ C. Howard Kast
- -------------------------- ----------------------------
Ned M. Steel, Trustee C. Howard Kast, Trustee
3236 S. Steele Street 2552 East Alameda
Denver, Colorado Denver, Colorado 80209
/s/ Raymond J. Kalinowski /s/ Jon S. Fossel
- -------------------------- -----------------------------
Raymond J. Kalinowski, Trustee Jon S. Fossel, Trustee
44 Portland Drive Box 44 - Mead Street
St. Louis, Missouri Waccabuc, New York 10597
/s/ James C. Swain /s/ Sam Freedman
- -------------------------- -----------------------------
James C. Swain, Trustee Sam Freedman
23554 Wayne's Way 4975 Lakeshore Drive
Golden, California 80401 Littleton, Colorado 80123
/s/ Bridget A. Macaskill
- -------------------------
Bridget A. Macaskill
200 Eas 69th Street, Apt. 32B
New York, New York 10021
ORGZN\735dot.996
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GENERAL DISTRIBUTOR'S AGREEMENT
BETWEEN
OPPENHEIMER REAL ASSET FUND
AND
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
Date: March 31, 1997
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
Two World Trade Center, Suite 3400
New York, NY 10048
Dear Sirs:
OPPENHEIMER REAL ASSET FUND, a Massachusetts business trust (the "Fund"),
is registered as an investment company under the Investment Company Act of 1940
(the "1940 Act"), and an indefinite number of one or more classes of its shares
of beneficial interest ("Shares") have been registered under the Securities Act
of 1933 (the "1933 Act") to be offered for sale to the public in a continuous
public offering in accordance with the terms and conditions set forth in the
Prospectus and Statement of Additional Information ("SAI") included in the
Fund's Registration Statement as it may be amended from time to time (the
"current Prospectus and/or SAI").
In this connection, the Fund desires that your firm (the "General
Distributor") act in a principal capacity as General Distributor for the sale
and distribution of Shares which have been registered as described above and of
any additional Shares which may become registered during the term of this
Agreement. You have advised the Fund that you are willing to act as such General
Distributor, and it is accordingly agreed by and between us as follows:
1. Appointment of the Distributor. The Fund hereby appoints you as the
sole General Distributor, pursuant to the aforesaid continuous public offering
of its Shares, and the Fund further agrees from and after the date of this
Agreement, that it will not, without your consent, sell or agree to sell any
Shares otherwise than through you, except (a) the Fund may itself sell shares
without sales charge as an investment to the officers, trustees or directors and
bona fide present and former full-time employees of the Fund, the Fund's
Investment Adviser and affiliates thereof, and to other investors who are
identified in the current Prospectus and/or SAI as having the privilege to buy
Shares at net asset value; (b) the Fund may issue shares in connection with a
merger, consolidation or acquisition of assets on such basis as may be
authorized or permitted under the 1940 Act; (c) the Fund may issue shares for
the reinvestment of dividends and other distributions of the Fund or of any
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other Fund if permitted by the current Prospectus and/or SAI; and (d) the Fund
may issue shares as underlying securities of a unit investment trust if such
unit investment trust has elected to use Shares as an underlying investment;
provided that in no event as to any of the foregoing exceptions shall Shares be
issued and sold at less than the then-existing net asset value.
2. Sale of Shares. You hereby accept such appointment and agree to use
your best efforts to sell Shares, provided, however, that when requested by the
Fund at any time because of market or other economic considerations or abnormal
circumstances of any kind, or when agreed to by mutual consent of the Fund and
the General Distributor, you will suspend such efforts. The Fund may also
withdraw the offering of Shares at any time when required by the provisions of
any statute, order, rule or regulation of any governmental body having
jurisdiction. It is understood that you do not undertake to sell all or any
specific number of Shares.
3. Sales Charge. Shares shall be sold by you at net asset value plus a
front-end sales charge not in excess of 8.5% of the offering price, but which
front-end sales charge shall be proportionately reduced or eliminated for larger
sales and under other circumstances, in each case on the basis set forth in the
Fund's current Prospectus and/or SAI. The redemption proceeds of shares offered
and sold at net asset value with or without a front-end sales charge may be
subject to a contingent deferred sales charge ("CDSC") under the circumstances
described in the current Prospectus and/or SAI. You may reallow such portion of
the front-end sales charge to dealers or cause payment (which may exceed the
front-end sales charge, if any) of commissions to brokers through which sales
are made, as you may determine, and you may pay such amounts to dealers and
brokers on sales of shares from your own resources (such dealers and brokers
shall collectively include all domestic or foreign institutions eligible to
offer and sell the Shares), and in the event the Fund has more than one class of
Shares outstanding, then you may impose a front-end sales charge and/or a CDSC
on Shares of one class that is different from the charges imposed on Shares of
the Fund's other class(es), in each case as set forth in the current Prospectus
and/or SAI, provided the front-end sales charge and CDSC to the ultimate
purchaser do not exceed the respective levels set forth for such category of
purchaser in the Fund's current Prospectus and/or SAI.
4. Purchase of Shares.
(a) As General Distributor, you shall have the right to accept or
reject orders for the purchase of Shares at your discretion.
Any consideration which you may receive in connection with a
rejected purchase order will be returned promptly.
(b) You agree promptly to issue or to cause the duly appointed
transfer or shareholder servicing agent of the Fund to
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issue as your agent confirmations of all accepted purchase
orders and to transmit a copy of such confirmations to the
Fund. The net asset value of all Shares which are the subject
of such confirmations, computed in accordance with the
applicable rules under the 1940 Act, shall be a liability of
the General Distributor to the Fund to be paid promptly after
receipt of payment from the originating dealer or broker (or
investor, in the case of direct purchases) and not later than
eleven business days after such confirmation even if you have
not actually received payment from the originating dealer or
broker or investor. In no event shall the General Distributor
make payment to the Fund later than permitted by applicable
rules of the National Association of Securities Dealers, Inc.
(c) If the originating dealer or broker shall fail to make
timely settlement of its purchase order in accordance with
applicable rules of the National Association of Securities
Dealers, Inc., or if a direct purchaser shall fail to make
good payment for shares in a timely manner, you shall have
the right to cancel such purchase order and, at your
account and risk, to hold responsible the originating
dealer or broker, or investor. You agree promptly to
reimburse the Fund for losses suffered by it that are
attributable to any such cancellation, or to errors on
your part in relation to the effective date of accepted
purchase orders, limited to the amount that such losses
exceed contemporaneous gains realized by the Fund for
either of such reasons with respect to other purchase
orders.
(d) In the case of a canceled purchase for the account of a
directly purchasing shareholder, the Fund agrees that if
such investor fails to make you whole for any loss you pay
to the Fund on such canceled purchase order, the Fund will
reimburse you for such loss to the extent of the aggregate
redemption proceeds of any other shares of the Fund owned
by such investor, on your demand that the Fund exercise
its right to claim such redemption proceeds. The Fund
shall register or cause to be registered all Shares sold
to you pursuant to the provisions hereof in such names and
amounts as you may request from time to time and the Fund
shall issue or cause to be issued certificates evidencing
such Shares for delivery to you or pursuant to your
direction if and to the extent that the shareholder
account in question contemplates the issuance of such
certificates. All Shares when so issued and paid for,
shall be fully paid and non-assessable by the Fund (which
shall not prevent the imposition of any CDSC that may
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apply) to the extent set forth in the current Prospectus
and/or SAI.
5. Repurchase of Shares.
(a) In connection with the repurchase of Shares, you are
appointed and shall act as Agent of the Fund. You are
authorized, for so long as you act as General Distributor
of the Fund, to repurchase, from authorized dealers,
certificated or uncertificated shares of the Fund
("Shares") on the basis of orders received from each
dealer ("authorized dealer") with which you have a dealer
agreement for the sale of Shares and permitting resales of
Shares to you, provided that such authorized dealer, at
the time of placing such resale order, shall represent (i)
if such Shares are represented by certificate(s), that
certificate(s) for the Shares to be repurchased have been
delivered to it by the registered owner with a request for
the redemption of such Shares executed in the manner and
with the signature guarantee required by the then-
currently effective prospectus of the Fund, or (ii) if
such Shares are uncertificated, that the registered
owner(s) has delivered to the dealer a request for the
redemption of such Shares executed in the manner and with
the signature guarantee required by the then-currently
effective prospectus of the Fund.
(b) You shall (a) have the right in your discretion to accept
or reject orders for the repurchase of Shares; (b)
promptly transmit confirmations of all accepted repurchase
orders; and (c) transmit a copy of such confirmation to
the Fund, or, if so directed, to any duly appointed
transfer or shareholder servicing agent of the Fund. In
your discretion, you may accept repurchase requests made
by a financially responsible dealer which provides you
with indemnification in form satisfactory to you in
consideration of your acceptance of such dealer's request
in lieu of the written redemption request of the owner of
the account; you agree that the Fund shall be a third
party beneficiary of such indemnification.
(c) Upon receipt by the Fund or its duly appointed transfer or
shareholder servicing agent of any certificate(s) (if any
has been issued) for repurchased Shares and a written
redemption request of the registered owner(s) of such
Shares executed in the manner and bearing the signature
guarantee required by the then-currently effective
Prospectus or SAI of the Fund, the Fund will pay or cause
its duly appointed transfer or shareholder servicing agent
promptly to pay to the originating authorized dealer the
redemption price of the repurchased Shares (other than
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<PAGE>
repurchased Shares subject to the provisions of part (d) of
Section 5 of this Agreement) next determined after your
receipt of the dealer's repurchase order.
(d) Notwithstanding the provisions of part (c) of Section 5 of
this Agreement, repurchase orders received from an
authorized dealer after the determination of the Fund's
redemption price on a regular business day will receive
that day's redemption price if the request to the dealer
by its customer to arrange such repurchase prior to the
determination of the Fund's redemption price that day
complies with the requirements governing such requests as
stated in the current Prospectus and/or SAI.
(e) You will make every reasonable effort and take all
reasonably available measures to assure the accurate
performance of all services to be performed by you
hereunder within the requirements of any statute, rule or
regulation pertaining to the redemption of shares of a
regulated investment company and any requirements set
forth in the then-current Prospectus and/or SAI of the
Fund. You shall correct any error or omission made by you
in the performance of your duties hereunder of which you
shall have received notice in writing and any necessary
substantiating data; and you shall hold the Fund harmless
from the effect of any errors or omissions which might
cause an over- or under-redemption of the Fund's Shares
and/or an excess or non-payment of dividends, capital
gains distributions, or other distributions.
(f) In the event an authorized dealer initiating a repurchase
order shall fail to make delivery or otherwise settle such
order in accordance with the rules of the National
Association of Securities Dealers, Inc., you shall have
the right to cancel such repurchase order and, at your
account and risk, to hold responsible the originating
dealer. In the event that any cancellation of a Share
repurchase order or any error in the timing of the
acceptance of a Share repurchase order shall result in a
gain or loss to the Fund, you agree promptly to reimburse
the Fund for any amount by which any loss shall exceed
then-existing gains so arising.
6. 1933 Act Registration. The Fund has delivered to you a copy of its
current Prospectus and SAI. The Fund agrees that it will use its best efforts to
continue the effectiveness of the Registration Statement under the 1933 Act. The
Fund further agrees to prepare and file any amendments to its Registration
Statement as may be necessary and any supplemental data in order to comply with
the 1933 Act. The Fund will furnish you at your expense with a reasonable number
of copies of the Prospectus and SAI and any amendments thereto for use in
connection with the sale of Shares.
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<PAGE>
7. 1940 Act Registration. The Fund has already registered under
the 1940 Act as an investment company, and it will use its best efforts
to maintain such registration and to comply with the requirements of the
1940 Act.
8. State Blue Sky Qualification. At your request, the Fund will take such
steps as may be necessary and feasible to qualify Shares for sale in states,
territories or dependencies of the United States, the District of Columbia, the
Commonwealth of Puerto Rico and in foreign countries, in accordance with the
laws thereof, and to renew or extend any such qualification; provided, however,
that the Fund shall not be required to qualify shares or to maintain the
qualification of shares in any jurisdiction where it shall deem such
qualification disadvantageous to the Fund.
9. Duties of Distributor. You agree that:
(a) Neither you nor any of your officers will take any long or
short position in the Shares, but this provision shall not
prevent you or your officers from acquiring Shares for
investment purposes only; and
(b) You shall furnish to the Fund any pertinent information
required to be inserted with respect to you as General
Distributor within the purview of the Securities Act of 1933
in any reports or registration required to be filed with any
governmental authority; and
(c) You will not make any representations inconsistent with
the information contained in the current Prospectus and/or
SAI; and
(d) You shall maintain such records as may be reasonably required
for the Fund or its transfer or shareholder servicing agent to
respond to shareholder requests or complaints, and to permit
the Fund to maintain proper accounting records, and you shall
make such records available to the Fund and its transfer agent
or shareholder servicing agent upon request; and
(e) In performing under this Agreement, you shall comply with all
requirements of the Fund's current Prospectus and/or SAI and
all applicable laws, rules and regulations with respect to the
purchase, sale and distribution of Shares.
10. Allocation of Costs. The Fund shall pay the cost of composition and
printing of sufficient copies of its Prospectus and SAI as shall be required for
periodic distribution to its shareholders and the expense of registering Shares
for sale under federal securities laws. You shall pay the expenses normally
attributable to the sale of Shares, other than as paid under the Fund's
distribution plans under Rule 12b-1 of the 1940 Act,
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including the cost of printing and mailing of the Prospectus (other than those
furnished to existing shareholders) and any sales literature used by you in the
public sale of the Shares and for registering such shares under state blue sky
laws pursuant to paragraph 8.
11. Duration. This Agreement shall take effect on the date first written
above, and shall supersede any and all prior General Distributor's Agreements by
and among the Fund and you. Unless earlier terminated pursuant to paragraph 12
hereof, this Agreement shall remain in effect for two years from the date of
execution hereof. This Agreement shall continue in effect from year to year
thereafter, provided that such continuance shall be specifically approved at
least annually: (a) by the Fund's Board of Trustees or by vote of a majority of
the voting securities of the Fund; and (b) by the vote of a majority of the
Trustees, who are not parties to this Agreement or "interested persons" (as
defined the 1940 Act) of any such person, cast in person at a meeting called for
the purpose of voting on such approval.
12. Termination. This Agreement may be terminated (a) by the General
Distributor at any time without penalty by giving sixty days' written notice
(which notice may be waived by the Fund); (b) by the Fund at any time without
penalty upon sixty days' written notice to the General Distributor (which notice
may be waived by the General Distributor); or (c) by mutual consent of the Fund
and the General Distributor, provided that such termination by the Fund shall be
directed or approved by the Board of Trustees of the Fund or by the vote of the
holders of a "majority" of the outstanding voting securities of the Fund. In the
event this Agreement is terminated by the Fund, the General Distributor shall be
entitled to be paid the CDSC under paragraph 3 hereof on the redemption proceeds
of Shares sold prior to the effective date of such termination.
13. Assignment. This Agreement may not be amended or changed except in
writing and shall be binding upon and shall enure to the benefit of the parties
hereto and their respective successors; however, this Agreement shall not be
assigned by either party and shall automatically terminate upon assignment.
14. Disclaimer of Shareholder Liability. The General Distributor
understands and agrees that the obligations of the Fund under this Agreement are
not binding upon any Trustee or shareholder of the Fund personally, but bind
only the Fund and the Fund's property; the General Distributor represents that
it has notice of the provisions of the Declaration of Trust of the Fund
disclaiming Trustee and shareholder liability for acts or obligations of the
Fund.
15. Section Headings. The heading of each section is for
descriptive purposes only, and such headings are not to be construed or
interpreted as part of this Agreement.
If the foregoing is in accordance with your understanding, so indicate by
signing in the space provided below.
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OPPENHEIMER REAL ASSET FUND
/s/ Bridget A. Macaskill
By: ____________________________
Bridget Macaskill, President
Accepted:
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
/s/ Andrew J. Donohue
By: _________________________________
Andrew J. Donohue, Vice President
OFMI\735
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OPPENHEIMER REAL ASSET FUND
CUSTODY AGREEMENT
Agreement made as of this 15th day of January, 1997, between OPPENHEIMER
REAL ASSET FUND, a business trust organized and exist ing under the laws of the
Commonwealth of Massachusetts, having its principal office and place of business
at 3410 South Galena Street, Denver, Colorado 80231 (hereinafter called the
"Fund"), and THE BANK OF NEW YORK, a New York corporation authorized to do a
banking business, having its principal office and place of business at 48 Wall
Street, New York, New York 10286 (hereinafter called the "Custodian").
W I T N E S S E T H
that for and in consideration of the mutual promises hereinafter set forth, the
Fund and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, shall
have the following meanings:
1. "Agreement" shall mean this Custody Agreement and all
Appendices and Certifications described in the Exhibits delivered
in connection herewith.
2. "Authorized Person" shall mean any person, whether or not such person
is an Officer or employee of the Fund, duly authorized by the Board of Trustees
of the Fund to give Oral Instructions and Written Instructions on behalf of the
Fund and listed in the Certificate annexed hereto as Appendix A or such other
Certificate as may be received by the Custodian from time to time, provided that
each person who is designated in any such Certificate as an "Officer of
OppenheimerFunds Services" shall be an Authorized Person only for purposes of
Articles XII and XIII hereof.
3. "Book-Entry System" shall mean the Federal
Reserve/Treasury book-entry system for United States and federal
agency securities, its successor or successors and its nominee or
nominees.
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4. "Call Option" shall mean an exchange traded Option with respect to
Securities other than Index, Futures Contracts, and Futures Contract Options
entitling the holder, upon timely exercise and payment of the exercise price, as
specified therein, to purchase from the writer thereof the specified underlying
instruments, currency, or Securities.
5. "Certificate" shall mean any notice, instruction, or other instrument
in writing, authorized or required by this Agreement to be given to the
Custodian which is actually received (irrespective of constructive receipt) by
the Custodian and signed on behalf of the Fund by any two Officers. The term
Certificate shall also include instructions by the Fund to the Custodian
communicated by a Terminal Link.
6. "Clearing Member" shall mean a registered broker-dealer
which is a clearing member under the rules of O.C.C. and a member
of a national securities exchange qualified to act as a custodian
for an investment company, or any broker-dealer reasonably believed
by the Custodian to be such a clearing member.
7. "Collateral Account" shall mean a segregated account so denominated
which is specifically allocated to a Series and pledged to the Custodian as
security for, and in consideration of, the Custodian's issuance of any Put
Option guarantee letter or similar document described in paragraph 8 of Article
V herein.
8. "Covered Call Option" shall mean an exchange traded Option entitling
the holder, upon timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified underlying
instruments, currency, or Securities (excluding Futures Contracts) which are
owned by the writer thereof.
9. "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission, its
successor or successors and its nominee or nominees. The term "Depository" shall
further mean and include any other person authorized to act as a depository
under the Investment Company Act of 1940, its successor or successors and its
nominee or nominees, specifically identified in a certified copy of a resolution
of the Fund's Board of Trustees specifically approving deposits therein by the
Custodian, including, without limitation, a Foreign Depository.
10. "Financial Futures Contract" shall mean the firm
commitment to buy or sell financial instruments on a U.S.
commodities exchange or board of trade at a specified future time
at an agreed upon price.
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11. "Foreign Subcustodian" shall mean an "Eligible Foreign Custodian" as
defined in Rule 17-5 which is appointed by the Custodian to perform or
coordinate the receipt, custody and delivery of Foreign Property of the Fund
outside the United States in a manner consistent with the provisions of this
Agreement and whose written contract is approved by the Board of Trustees of the
Fund in accordance with Rule 17f-5. References to the Custodian herein shall,
when appropriate, include reference to its Foreign Subcustodians.
12. "Foreign Depository" shall mean an entity organized under the laws of
a foreign country which operates a system outside the United States in general
use by foreign banks and securities brokers for the central or transnational
handling of securities or equivalent book-entries which is regulated by a
foreign government or agency thereof and which is an "Eligible Foreign
Custodian" as defined in Rule 17f-5.
13. "Foreign Securities" shall mean securities and/or short term paper as
defined in Rule 17f-5 under the Act, whether issued in registered or bearer
form.
14. "Foreign Property" shall mean Foreign Securities and
money of any currency which is held outside of the United States.
15. "Futures Contract" shall mean a Financial Futures
Contract and/or Index Futures Contracts.
16. "Futures Contract Option" shall mean an Option with
respect to a Futures Contract.
17. "Hybrid Instrument" shall mean a derivative security whose value is
derived from, or linked to, the value of another source, typically a commodity,
a futures contract, an index, or some other readily measurable economic
variable.
18. "Investment Company Act of 1940" shall mean the
Investment Company Act of 1940, as amended, and the rules and
regulations thereunder.
19. "Index Futures Contract" shall mean a bilateral agreement pursuant to
which the parties agree to take or make delivery of an amount of cash equal to a
specified dollar amount times the difference between the value of a particular
index at the close of the last business day of the contract and the price at
which the futures contract is originally struck.
20. "Index Option" shall mean an exchange traded Option
entitling the holder, upon timely exercise, to receive an amount of
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cash determined by reference to the difference between the exercise price and
the value of the index on the date of exercise.
21. "Margin Account" shall mean a segregated account in the name of a
broker, dealer, futures commission merchant, or a Clearing Member, or in the
name of the Fund for the benefit of a broker, dealer, futures commission
merchant, or Clearing Member, or otherwise, in accordance with an agreement
between the Fund, the Custodian and a broker, dealer, futures commission
merchant or a Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities and/or money of
the Fund shall be deposited and withdrawn from time to time in connection with
such transactions as the Fund may from time to time determine. Securities held
in the Book-Entry System or a Depository shall be deemed to have been deposited
in, or withdrawn from, a Margin Account upon the Custodian's effecting an
appropriate entry in its books and records.
22. "Money Market Security" shall mean all instruments and obligations
commonly known as a money market instruments, where the purchase and sale of
such securities normally requires settlement in federal funds on the same day as
such purchase or sale, including, without limitation, certain Reverse Repurchase
Agreements, debt obligations issued or guaranteed as to interest and/or
principal by the government of the United States or agencies or
instrumentalities thereof, any tax, bond or revenue anticipation note issued by
any state or municipal government or public authority, commercial paper,
certificates of deposit and bankers' acceptances, repurchase agreements with
respect to Securities and bank time deposits.
23. "Nominee" shall mean, in addition to the name of the registered
nominee of the Custodian, (i) a partnership or other entity of a Foreign
Subcustodian which is used solely for the assets of its customers other than the
Custodian and the Foreign Subcustodian, if any, by which it was appointed; or
(ii) the nominee of a Foreign Depository which is used for the securities and
other assets of its customers, members or participants.
24. "O.C.C." shall mean the Options Clearing Corporation, a clearing
agency registered under Section 17A of the Securities Exchange Act of 1934, its
successor or successors, and its nominee or nominees.
25. "Officers" shall mean the President, any Vice President, the
Secretary, the Treasurer, the Controller, any Assistant Secretary, any Assistant
Treasurer, and any other person or persons, whether or not any such other person
is an officer or employee of the Fund, but in each case only if duly authorized
by
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<PAGE>
the Board of Trustees of the Fund to execute any Certificate, instruction,
notice or other instrument on behalf of the Fund and listed in the Certificate
annexed hereto as Appendix B or such other Certificate as may be received by the
Custodian from time to time; provided that each person who is designated in any
such Certificate as holding the position of "Officer of OppenheimerFunds
Services" shall be an Officer only for purposes of Articles XII and XIII hereof.
26. "Option" shall mean a Call Option, Covered Call Option,
Index Option and/or a Put Option.
27. "Oral Instructions" shall mean verbal instructions actually received
(irrespective of constructive receipt) by the Custodian from an Authorized
Person or from a person reasonably believed by the Custodian to be an Authorized
Person.
28. "Put Option" shall mean an exchange traded Option with respect to
instruments, currency, or Securities other than Index Options, Futures
Contracts, and Futures Contract Options entitling the holder, upon timely
exercise and tender of the specified underlying instruments, currency, or
Securities, to sell such instruments, currency, or Securities to the writer
thereof for the exercise price.
29. "Repurchase Agreement" shall mean an agreement pursuant
to which the Fund buys Securities and agrees to resell such
Securities at a described or specified date and price.
30. "Reverse Repurchase Agreement" shall mean an agreement pursuant to
which the Fund sells Securities and agrees to repurchase such Securities at a
described or specified date and price.
31. "Rule 17f-5" shall mean Rule 17f-5 (Reg. ss.270.17f-5)
promulgated by the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended.
32. "Security" shall be deemed to include, without limitation, Money
Market Securities, Call Options, Put Options, Index Options, Index Futures
Contracts, Index Futures Contract Options, Financial Futures Contracts,
Financial Futures Contract Options, Hybrid Instruments, Reverse Repurchase
Agreements, over the counter Options on Securities, common stocks and other
securities having characteristics similar to common stocks, preferred stocks,
debt obligations issued by state or municipal governments and by public
authorities, (including, without limitation, general obligation bonds, revenue
bonds, industrial bonds and industrial development bonds), bonds, debentures,
notes,
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mortgages or other obligations, and any certificates, receipts, warrants or
other instruments representing rights to receive, purchase, sell or subscribe
for the same, or evidencing or representing any other rights or interest
therein, or rights to any property or assets.
33. "Senior Security Account" shall mean an account maintained and
specifically allocated to a Series under the terms of this Agreement as a
segregated account, by recordation or otherwise, within the custody account in
which certain Securities and/or other assets of the Fund specifically allocated
to such Series shall be deposited and withdrawn from time to time in accordance
with Certificates received by the Custodian in connection with such transactions
as the Fund may from time to time determine.
34. "Series" shall mean the various portfolios, if any, of the Fund as
described from time to time in the current and effective prospectus for the
Fund, except that if the Fund does not have more than one portfolio, "Series"
shall mean the Fund or be ignored where a requirement would be imposed on the
Fund or the Custodian which is unnecessary if there is only one portfolio.
35. "Shares" shall mean the shares of beneficial interest of
the Fund and its Series.
36. "Terminal Link" shall mean an electronic data transmission link
between the Fund and the Custodian requiring in connection with each use of the
Terminal Link the use of an authorization code provided by the Custodian and at
least two access codes established by the Fund, provided, that the Fund shall
have delivered to the Custodian a Certificate substantially in the form of
Appendix C.
37. "Transfer Agent" shall mean Oppenheimer Shareholder
Services, a division of OppenheimerFunds, Inc. ("OFI"), its
successors and assigns.
38. "Transfer Agent Account" shall mean any account in the name of the
Fund, or the Transfer Agent, as agent for the Fund, maintained with United
Missouri Bank or such other Bank designated by the Fund in a Certificate.
39. "Written Instructions" shall mean written communications actually
received (irrespective of constructive receipt) by the Custodian from an
Authorized Person or from a person reasonably believed by the Custodian to be an
Authorized Person by telex or any other such system whereby the receiver of such
communications
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<PAGE>
is able to verify by codes or otherwise with a reasonable degree of certainty
the identity of the sender of such communication.
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as custodian of
the Securities and moneys at any time owned or held by the Fund during the
period of this Agreement.
2. The Custodian hereby accepts appointment as such custodian and agrees
to perform the duties thereof as hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except for monies received and maintained in the Transfer Agent
Account, or as otherwise provided in paragraph 7 of this Article or in Article
VIII or XV, the Fund will deliver or cause to be delivered to the Custodian all
Securities and all moneys owned by it, at any time during the period of this
Agreement, and shall specify with respect to such Securities and money the
Series to which the same are specifically allocated, and the Custodian shall not
be responsible for any Securities or money not so delivered. Except for assets
held at DTC, the Custodian shall physically segregate, keep and maintain the
Securities of the Series separate and apart from each other Series and from
other assets held by the Custodian. Except as otherwise expressly provided in
this Agreement, the Custodian will not be responsible for any Securities and
moneys not actually received by it, unless the Custodian has been negligent or
has engaged in willful misconduct with respect thereto. The Custodian will be
entitled to reverse any credit of money made on the Fund's behalf where such
credits have been previously made and moneys are not finally collected, unless
the Custodian has been negligent or has engaged in willful misconduct with
respect thereto; provided that if such reversal is thirty (30) days or more
after the credit was issued, the Custodian will give five (5) days' prior notice
of such reversal. The Fund shall deliver to the Custodian a certified resolution
of the Board of Trustees of the Fund, substantially in the form of Exhibit A
hereto, approving, authorizing and instructing the Custodian on a continuous and
on-going basis to deposit in the Book-Entry System
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<PAGE>
all Securities eligible for deposit therein, regardless of the Series to which
the same are specifically allocated and to utilize the Book-Entry System to the
extent possible in connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and sales of Securities,
loans of Securities and deliveries and returns of Securities collateral. Prior
to a deposit of Securities specifically allocated to a Series in any Depository,
the Fund shall deliver to the Custodian a certified resolution of the Board of
Trustees of the Fund, substantially in the form of Exhibit B hereto, approving,
authorizing and instructing the Custodian on a continuous and ongoing basis
until instructed to the contrary by a Certificate to deposit in such Depository
all Securities specifically allocated to such Series eligible for deposit
therein, and to utilize such Depository to the extent possible with respect to
such Securities in connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and sales of Securities,
loans of Securities, and deliveries and returns of Securities collateral.
Securities and moneys deposited in either the Book-Entry System or a Depository
will be represented in accounts which include only assets held by the Custodian
for customers, including, but not limited to, accounts in which the Custodian
acts in a fiduciary or representative capacity and will be specifically
allocated on the Custodian's books to the separate account for the applicable
Series. Prior to the Custodian's accepting, utilizing and acting with respect to
Clearing Member confirmations for Options and transactions in Options for a
Series as provided in this Agreement, the Custodian shall have received a
certified resolution of the Fund's Board of Trustees, substantially in the form
of Exhibit C hereto, approving, authorizing and instructing the Custodian on a
continuous and on-going basis, until instructed to the contrary by a Certificate
to accept, utilize and act in accordance with such confirmations as provided in
this Agreement with respect to such Series. All Securities are to be held or
disposed of by the Custodian for, and subject at all times to the instructions
of, the Fund pursuant to the terms of this Agreement. The Custodian shall have
no power or authority to assign, hypothecate, pledge or otherwise dispose of any
Securities except as provided by the terms of this Agreement, and shall have the
sole power to release and deliver Securities held pursuant to this Agreement.
2. The Custodian shall establish and maintain separate accounts, in the
name of each Series, and shall credit to the separate account for each Series
all moneys received by it for the account of the Fund with respect to such
Series. Money credited to a separate account for a Series shall be subject only
to drafts, orders, or charges of the Custodian pursuant to this Agreement and
shall be disbursed by the Custodian only:
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(a) As hereinafter provided;
(b) Pursuant to Certificates or Resolutions of the Fund's
Board of Trustees certified by an Officer and by the Secretary or Assistant
Secretary of the Fund setting forth the name and address of the person to whom
the payment is to be made, the Series account from which payment is to be made,
the purpose for which payment is to be made, and declaring such purpose to be a
proper corporate purpose; provided, however, that amounts representing
dividends, distributions, or redemptions proceeds with respect to Shares shall
be paid only to the Transfer Agent Account;
(c) In payment of the fees and in reimbursement of
the expenses and liabilities of the Custodian attributable to such
Series and authorized by this Agreement; or
(d) Pursuant to Certificates to pay interest, taxes,
management fees or operating expenses (including, without limitation thereto,
Board of Trustees' fees and expenses, and fees for legal accounting and auditing
services), which Certificates set forth the name and address of the person to
whom payment is to be made, state the purpose of such payment and designate the
Series for whose account the payment is to be made.
3. Promptly after the close of business on each day, the Custodian shall
furnish the Fund with confirmations and a summary, on a per Series basis, of all
transfers to or from the account of the Fund for a Series, either hereunder or
with any co-custodian or subcustodian appointed in accordance with this
Agreement during said day. Where Securities are transferred to the account of
the Fund for a Series but held in a Depository, the Custodian shall upon such
transfer also by book-entry or otherwise identify such Securities as belonging
to such Series in a fungible bulk of Securities registered in the name of the
Custodian (or its nominee) or shown on the Custodian's account on the books of
the Book-Entry System or the Depository. At least monthly and from time to time,
the Custodian shall furnish the Fund with a detailed statement, on a per Series
basis, of the Securities and moneys held under this Agreement for the Fund.
4. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, all Securities held by the Custodian hereunder, which are issued
or issuable only in bearer form, except such Securities as are held in the
Book-Entry System, shall be held by the Custodian in that form; all other
Securities held hereunder may be registered in the name of the Fund, in the name
of any duly appointed registered nominee of the Custodian as the Custodian may
from time to time determine, or in the name of the Book-Entry
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System or a Depository or their successor or successors, or their nominee or
nominees. The Fund agrees to furnish to the Custodian appropriate instruments to
enable the Custodian to hold or deliver in proper form for transfer, or to
register in the name of its registered nominee or in the name of the Book-Entry
System or a Depository any Securities which it may hold hereunder and which may
from time to time be registered in the name of the Fund. The Custodian shall
hold all such Securities specifically allocated to a Series which are not held
in the Book-Entry System or in a Depository in a separate account in the name of
such Series physically segregated at all times from those of any other person or
persons.
5. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or through
the use of the Book-Entry System or a Depository with respect to Securities held
hereunder and therein deposited, shall with respect to all Securities held for
the Fund hereunder in accordance with preceding paragraph 4:
(a) Promptly collect all income, dividends and
distributions due or payable;
(b) Promptly give notice to the Fund and promptly present for
payment and collect the amount of money or other consideration payable upon such
Securities which are called, but only if either (i) the Custodian receives a
written notice of such call, or (ii) notice of such call appears in one or more
of the publications listed in Appendix D annexed hereto, which may be amended at
any time by the Custodian without the prior consent of the Fund, provided the
Custodian gives prior notice of such amendment to the Fund;
(c) Promptly present for payment and collect for
the Fund's account the amount payable upon all Securities which
mature;
(d) Promptly surrender Securities in temporary form
in exchange for definitive Securities;
(e) Promptly execute, as custodian, any necessary declarations
or certificates of ownership under the Federal Income Tax Laws or the laws or
regulations of any other taxing authority now or hereafter in effect;
(f) Hold directly, or through the Book-Entry System or the
Depository with respect to Securities therein deposited, for the account of a
Series, all rights and similar securities issued
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with respect to any Securities held by the Custodian for such
Series hereunder; and
(g) Promptly deliver to the Fund all notices, proxies, proxy
soliciting materials, consents and other written information (including, without
limitation, notices of tender offers and exchange offers, pendency of calls,
maturities of Securities and expiration of rights) relating to Securities held
pursuant to this Agreement which are actually received by the Custodian, such
proxies and other similar materials to be executed by the registered holder (if
Securities are registered otherwise than in the name of the Fund), but without
indicating the manner in which proxies or consents are to be voted.
6. Upon receipt of a Certificate and not otherwise, the
Custodian, directly or through the use of the Book-Entry System or
the Depository, shall:
(a) Promptly execute and deliver to such persons as may be
designated in such Certificate proxies, consents, authorizations, and any other
instruments whereby the authority of the Fund as owner of any Securities held
hereunder for the Series specified in such Certificate may be exercised;
(b) Promptly deliver any Securities held hereunder for the
Series specified in such Certificate in exchange for other Securities or cash
issued or paid in connection with the liquidation, reorganization, refinancing,
merger, consolidation or recapitalization of any corporation, or the exercise of
any right, warrant or conversion privilege and receive and hold hereunder
specifically allocated to such Series any cash or other Securities received in
exchange;
(c) Promptly deliver any Securities held hereunder for the
Series specified in such Certificate to any protective committee, reorganization
committee or other person in connection with the reorganization, refinancing,
merger, consolidation, recapitalization or sale of assets of any corporation,
and receive and hold hereunder specifically allocated to such Series in exchange
therefor such certificates of deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such delivery or such Securities as
may be issued upon such delivery; and
(d) Promptly present for payment and collect the amount
payable upon Securities which may be called as specified in the Certificate.
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7. Notwithstanding any provision elsewhere contained herein, the Custodian
shall not be required to obtain possession of any instrument or certificate
representing any Futures Contract, any Option, or any Futures Contract Option
until after it shall have determined, or shall have received a Certificate from
the Fund stating, that any such instruments or certificates are available. The
Fund shall deliver to the Custodian such a Certificate no later than the
business day preceding the availability of any such instrument or certificate.
Prior to such availability, the Custodian shall comply with Section 17(f) of the
Investment Company Act of 1940 in connection with the purchase, sale,
settlement, closing out or writing of Futures Contracts, Options, or Futures
Contract Options by making payments or deliveries specified in Certificates in
connection with any such purchase, sale, writing, settlement or closing out upon
its receipt from a broker, dealer, or futures commission merchant of a statement
or confirmation reasonably believed by the Custodian to be in the form
customarily used by brokers, dealers, or future commission merchants with
respect to such Futures Contracts, Options, or Futures Contract Options, as the
case may be, confirming that such Security is held by such broker, dealer or
futures commission merchant, in book-entry form or otherwise in the name the
Custodian (or any nominee of the Custodian) as custodian for the Fund; provided,
however, that notwithstanding the foregoing, payments to or deliveries from the
Margin Account and payments with respect to Securities to which a Margin Account
relates, shall be made in accordance with the terms and conditions of the Margin
Account Agreement. Whenever any such instruments or certificates are available,
the Custodian shall, notwithstanding any provision in this Agreement to the
contrary, make payment for any Futures Contract, Option, or Futures Contract
Option for which such instruments or such certificates are available only
against the delivery to the Custodian of such instrument or such certificate,
and deliver any Futures Contract, Option or Futures Contract Option for which
such instruments or such certificates are available only against receipt by the
Custodian of payment therefor. Any such instrument or certificate delivered to
the Custodian shall be held by the Custodian hereunder in accordance with, and
subject to, the provisions of this Agreement.
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ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS,
FUTURES CONTRACT OPTIONS, REPURCHASE AGREEMENTS,
REVERSE REPURCHASE AGREEMENTS AND SHORT SALES
1. Promptly after each execution of a purchase of Securities by the Fund,
other than a purchase of an Option, a Futures Contract, a Futures Contract
Option, a Repurchase Agreement, a Reverse Repurchase Agreement or a Short Sale,
the Fund shall deliver to the Custodian (i) with respect to each purchase of
Securities which are not Money Market Securities, a Certificate, and (ii) with
respect to each purchase of Money Market Securities, a Certificate, oral
Instructions or Written Instructions, specifying with respect to each such
purchase: (a) the Series to which such Securities are to be specifically
allocated; (b) the name of the issuer and the title of the Securities; (c) the
number of shares or the principal amount purchased and accrued interest, if any;
(d) the date of purchase and settlement; (e) the purchase price per unit; (f)
the total amount payable upon such purchase; (g) the name of the person from
whom or the broker through whom the purchase was made, and the name of the
clearing broker, if any; and (h) the name of the broker or other party to whom
payment is to be made. Custodian shall, upon receipt of such Securities
purchased by or for the Fund, pay to the broker specified in the Certificate out
of the moneys held for the account of such Series the total amount payable upon
such purchase, provided that the same conforms to the total amount payable as
set forth in such Certificate, oral Instructions or Written Instructions.
2. Promptly after each execution of a sale of Securities by the Fund,
other than a sale of any Option, Futures Contract, Futures Contract Option,
Repurchase Agreement, Reverse Repurchase Agreement or Short Sale, the Fund shall
deliver such to the Custodian (i) with respect to each sale of Securities which
are not Money Market Securities, a Certificate, and (ii) with respect to each
sale of Money Market Securities, a Certificate, Oral Instructions or Written
Instructions, specifying with respect to each such sale: (a) the Series to which
such Securities were specifically allocated; (b) the name of the issuer and the
title of the Security; (c) the number of shares or principal amount sold, and
accrued interest, if any; (d) the date of sale and settlement; (e) the sale
price per unit; (f) the total amount payable to the Fund upon such sale; (g) the
name of the broker through whom or the person to whom the sale was made, and the
name of the clearing broker, if any; and (h) the name of the broker to whom the
Securities are to be delivered. On the settlement date, the
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Custodian shall deliver the Securities specifically allocated to such Series to
the broker in accordance with generally accepted street practices and as
specified in the Certificate upon receipt of the total amount payable to the
Fund upon such sale, provided that the same conforms to the total amount payable
as set forth in such Certificate, oral Instructions or Written Instructions.
ARTICLE V
OPTIONS
1. Promptly after each execution of a purchase of any Option by the Fund
other than a closing purchase transaction, the Fund shall deliver to the
Custodian a Certificate specifying with respect to each Option purchased: (a)
the Series to which such Option is specifically allocated; (b) the type of
Option (put or call); (c) the instrument, currency, or Security underlying such
Option and the number of Options, or the name of the in the case of an Index
Option, the index to which such Option relates and the number of Index Options
purchased; (d) the expiration date; (e) the exercise price; (f) the dates of
purchase and settlement; (g) the total amount payable by the Fund in connection
with such purchase; and (h) the name of the Clearing Member through whom such
Option was purchased. The Custodian shall pay, upon receipt of a Clearing
Member's written statement confirming the purchase of such Option held by such
Clearing Member for the account of the Custodian (or any duly appointed and
registered nominee of the Custodian) as Custodian for the Fund, out of moneys
held for the account of the Series to which such Option is to be specifically
allocated, the total amount payable upon such purchase to the Clearing Member
through whom the purchase was made, provided that the same conforms to the
amount payable as set forth in such Certificate.
2. Promptly after the execution of a sale of any Option purchased by the
Fund, other than a closing sale transaction, pursuant to paragraph 1 hereof, the
Fund shall deliver to the Custodian a Certificate specifying with respect to
each such sale: (a) the Series to which such Option was specifically allocated;
(b) the type of Option (put or call); (c) the instrument, currency, or Security
underlying such Option and the number of Options, or the name of the issuer and
the title and number of shares subject to such Option or, in the case of a Index
Option, the index to which such Option relates and the number of Index Options
sold; (d) the date of sale; (e) the sale price; (f) the date of settlement; (g)
the total amount payable to the Fund upon such sale; and (h) the name of the
Clearing Member through whom the sale was made. The Custodian shall consent to
the delivery of the Option sold by the
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Clearing Member which previously supplied the confirmation described in
preceding paragraph of this Article with respect to such Option upon receipt by
the Custodian of the total amount payable to the Fund, provided that the same
conforms to the total amount payable as set forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian
a Certificate specifying with respect to such Call Option: (a) the Series to
which such Call Option was specifically allocated; (b) the name of the issuer
and the title and number of shares subject to the Call Option; (c) the
expiration date; (d) the date of exercise and settlement; (e) the exercise price
per share; (f) the total amount to be paid by the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Call Option was exercised.
The Custodian shall, upon receipt of the Securities underlying the Call Option
which was exercised, pay out of the moneys held for the account of the Series to
which such Call Option was specifically allocated the total amount payable to
the Clearing Member through whom the Call Option was exercised, provided that
the same conforms to the total amount payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian
a Certificate specifying with respect to such Put Option: (a) the Series to
which such Put Option was specifically allocated; (b) the name of the issuer and
the title and number of shares subject to the Put Option; (c) the expiration
date; (d) the date of exercise and settlement; (e) the exercise price per share;
(f) the total amount to be paid to the Fund upon such exercise; and (g) the name
of the Clearing Member through whom such Put Option was exercised. The Custodian
shall, upon receipt of the amount payable upon the exercise of the Put Option,
deliver or direct a Depository to deliver the Securities specifically allocated
to such Series, provided the same conforms to the amount payable to the Fund as
set forth in such Certificate.
5. Promptly after the exercise by the Fund of any Index Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to such Index Option: (a) the
Series to which such Index Option was specifically allocated; (b) the type of
Index Option (put or call) (c) the number of Options being exercised; (d) the
index to which such Option relates; (e) the expiration date; (f) the exercise
price; (g) the total amount to be received by the Fund in connection with such
exercise; and (h) the Clearing Member from whom such payment is to be received.
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6. Whenever the Fund writes a Covered Call Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Covered
Call Option: (a) the Series for which such Covered Call Option was written; (b)
the name of the issuer and the title and number of shares for which the Covered
Call Option was written and which underlie the same; (c) the expiration date;
(d) the exercise price; (e) the premium to be received by the Fund; (f) the date
such Covered Call Option was written; and (g) the name of the Clearing Member
through whom the premium is to be received. The Custodian shall deliver or cause
to be delivered, upon receipt of the premium specified in the Certificate with
respect to such Covered Call Option, such receipts as are required in accordance
with the customs prevailing among Clearing Members dealing in Covered Call
Options and shall impose, or direct a Depository to impose, upon the underlying
Securities specified in the Certificate specifically allocated to such Series
such restrictions as may be required by such receipts. Notwithstanding the
foregoing, the Custodian has the right, upon prior written notification to the
Fund, at any time to refuse to issue any receipts for Securities in the
possession of the Custodian and not deposited with a Depository underlying a
Covered Call Option.
7. Whenever a Covered Call Option written by the Fund and described in the
preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate instructing the Custodian to deliver, or
to direct the Depository to deliver, the Securities subject to such Covered Call
Option and specifying: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares subject
to the Covered Call Option; (c) the Clearing Member to whom the underlying
Securities are to be delivered; and (d) the total amount payable to the Fund
upon such delivery. Upon the return and/or cancellation of any receipts
delivered pursuant to paragraph 6 of this Article, the Custodian shall deliver,
or direct a Depository to deliver, the underlying Securities as specified in the
Certificate upon payment of the amount to be received as set forth in such
Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall promptly deliver
to the Custodian a Certificate specifying with respect to such Put Option: (a)
the Series for which such Put Option was written; (b) the name of the issuer and
the title and number of shares for which the Put Option is written and which
underlie the same; (c) the expiration date; (d) the exercise price; (e) the
premium to be received by the Fund; (f) the date such Put Option is written; (g)
the name of the Clearing Member through whom the premium is to be received and
to whom a Put Option guarantee letter is to be delivered; (h) the amount of
cash, and/or the amount and kind of Securities, if any, specifically allocated
to
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such Series to be deposited in the Senior Security Account for such Series; and
(i) the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be deposited into the Collateral Account for such
Series. The Custodian shall, after making the deposits into the Collateral
Account specified in the Certificate, issue a Put Option guarantee letter
substantially in the form utilized by the Custodian on the date hereof, and
deliver the same to the Clearing Member specified in the Certificate upon
receipt of the premium specified in said Certificate. Notwithstanding the
foregoing, the Custodian shall be under no obligation to issue any Put Option
guarantee letter or similar document if it is unable to make any of the
representations contained therein.
9. Whenever a Put Option written by the Fund and described in the
preceding paragraph is exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Put Option was
written; (b) the name of the issuer and title and number of shares subject to
the Put Option; (c) the Clearing Member from whom the underlying Securities are
to be received; (d) the total amount payable by the Fund upon such delivery; (e)
the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be withdrawn from the Collateral Account for such
Series and (f) the amount of cash and/or the amount and kind of Securities,
specifically allocated to such series, if any, to be withdrawn from the Senior
Security Account. Upon the return and/or cancellation of any Put Option
guarantee letter or similar document issued by the Custodian in connection with
such Put Option, the Custodian shall pay out of the moneys held for the account
of the series to which such Put Option was specifically allocated the total
amount payable to the Clearing Member specified in the Certificate as set forth
in such Certificate, upon delivery of such Securities, and shall make the
withdrawals specified in such Certificate.
10. Whenever the Fund writes an Index Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Index
Option: (a) the Series for which such Index Option was written; (b) whether such
Index Option is a put or a call; (c) the number of Options written; (d) the
index to which such Option relates; (e) the expiration date; (f) the exercise
price; (g) the Clearing Member through whom such Option was written; (h) the
premium to be received by the Fund; (i) the amount of cash and/or the amount and
kind of Securities, if any, specifically allocated to such Series to be
deposited in the Senior Security Account for such Series; (j) the amount of cash
and/or the amount and kind of Securities, if any, specifically allocated to such
Series to be deposited in the Collateral Account for such Series; and (k) the
amount of cash and/or the amount and kind of
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Securities, if any, specifically allocated to such Series to be deposited in a
Margin Account, and the name in which such account is to be or has been
established. The Custodian shall, upon receipt of the premium specified in the
Certificate, make the deposits, if any, into the Senior Security Account
specified in the Certificate, and either (1) deliver such receipts, if any,
which the Custodian has specifically agreed to issue, which are in accordance
with the customs prevailing among Clearing Members in Index Options and make the
deposits into the Collateral Account specified in the Certificate, or (2) make
the deposits into the Margin Account specified in the Certificate.
11. Whenever an Index Option written by the Fund and described in the
preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Index
Option: (a) the Series for which such Index Option was written; (b) such
information as may be necessary to identify the Index Option being exercised;
(c) the Clearing Member through whom such Index Option is being exercised; (d)
the total amount payable upon such exercise, and whether such amount is to be
paid by or to the Fund; (e) the amount of cash and/or amount and kind of
Securities, if any, to be withdrawn from the Margin Account; and (f) the amount
of cash and/or amount and kind of Securities, if any, to be withdrawn from the
Senior Security Account for such Series; and the amount of cash and/or the
amount and kind of Securities, if any, to be withdrawn from the Collateral
Account for such Series. Upon the return and/or cancellation of the receipt, if
any, delivered pursuant to the preceding paragraph of this Article, the
Custodian shall pay out of the moneys held for the account of the Series to
which such Stock Index Option was specifically allocated to the Clearing Member
specified in the Certificate the total amount payable, if any, as specified
therein.
12. Promptly after the execution of a purchase or sale by the Fund of any
Option identical to a previously written Option described in paragraphs, 6, 8 or
10 of this Article in a transaction expressly designated as a "Closing Purchase
Transaction" or a "Closing Sale Transaction", the Fund shall promptly deliver to
the Custodian a Certificate specifying with respect to the Option being
purchased: (a) that the transaction is a Closing Purchase Transaction or a
Closing Sale Transaction; (b) the Series for which the Option was written; (c)
the instrument, currency, or Security subject to the Option, or, in the case of
an Index Option, the index to which such Option relates and the number of
Options held; (d) the exercise price; (e) the premium to be paid by or the
amount to be paid to the Fund; (f) the expiration date; (g) the type of Option
(put or call); (h) the date of such purchase or sale; (i) the name of the
Clearing Member to whom the premium is
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to be paid or from whom the amount is to be received; and (j) the amount of cash
and/or the amount and kind of Securities, if any, to be withdrawn from the
Collateral Account, a specified Margin Account, or the Senior Security Account
for such Series. Upon the Custodian's payment of the premium or receipt of the
amount, as the case may be, specified in the Certificate and the return and/or
cancellation of any receipt issued pursuant to paragraphs 6, 8 or 10 of this
Article with respect to the Option being liquidated through the Closing Purchase
Transaction or the Closing Sale Transaction, the Custodian shall remove, or
direct a Depository to remove, the previously imposed restrictions on the
Securities underlying the Call Option.
13. Upon the expiration, exercise or consummation of a Closing Purchase
Transaction with respect to any Option purchased or written by the Fund and
described in this Article, the Custodian shall delete such Option from the
statements delivered to the Fund pursuant to paragraph 3 Article III herein, and
upon the return and/or cancellation of any receipts issued by the Custodian,
shall make such withdrawals from the Collateral Account, and the Margin Account
and/or the Senior Security Account as may be specified in a Certificate received
in connection with such expiration, exercise, or consummation.
14. Securities acquired by the Fund through the exercise of an Option
described in this Article shall be subject to Article IV hereof.
ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the Fund shall
deliver to the Custodian a Certificate specifying with respect to such Futures
Contract, (or with respect to any number of identical Futures Contract (s)): (a)
the Series for which the Futures Contract is being entered; (b) the category of
Futures Contract (the name of the underlying index or financial instrument); (c)
the number of identical Futures Contracts entered into; (d) the delivery or
settlement date of the Futures Contract(s); (e) the date the Futures Contract(s)
was (were) entered into and the maturity date; (f) whether the Fund is buying
(going long) or selling (going short) such Futures Contract(s); (g) the amount
of cash and/or the amount and kind of Securities, if any, to be deposited in the
Senior Security Account for such Series; (h) the name of the broker, dealer, or
futures commission merchant through whom the Futures Contract was entered into;
and
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(i) the amount of fee or commission, if any, to be paid and the name of the
broker, dealer, or futures commission merchant to whom such amount is to be
paid. The Custodian shall make the deposits, if any, to the Margin Account in
accordance with the terms and conditions of the Margin Account Agreement. The
Custodian shall make payment out of the moneys specifically allocated to such
Series of the fee or commission, if any, specified in the Certificate and
deposit in the Senior Security Account for such Series the amount of cash and/or
the amount and kind of Securities specified in said Certificate.
2. (a) Any variation margin payment or similar payment required to be made
by the Fund to a broker, dealer, or futures commission merchant with respect to
an outstanding Futures Contract shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment from a
broker, dealer, or futures commission merchant to the Fund with respect to an
outstanding Futures Contract shall be received and dealt with by the Custodian
in accordance with the terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder is retained
by the Fund until delivery or settlement is made on such Futures Contract, the
Fund shall deliver to the Custodian prior to the delivery or settlement date a
Certificate specifying: (a) the Futures Contract and the Series to which the
same relates; (b) with respect to an Index Futures Contract, the total cash
settlement amount to be paid or received, and with respect to a Financial
Futures Contract, the Securities and/or amount of cash to be delivered or
received; (c) the broker, dealer, or futures commission merchant to or from whom
payment or delivery is to be made or received; and (d) the amount of cash and/or
Securities to be withdrawn from the Senior Security Account for such Series. The
Custodian shall make the payment or delivery specified in the Certificate, and
delete such Futures Contract from the statements delivered to the Fund pursuant
to paragraph 3 of Article III herein.
4. Whenever the Fund shall enter into a Futures Contract to offset a
Futures Contract held by the Custodian hereunder, the Fund shall deliver to the
Custodian a Certificate specifying: (a) the items of information required in a
Certificate described in paragraph 1 of this Article, and (b) the Futures
Contract being offset. The Custodian shall make payment out of the money
specifically allocated to such Series of the fee or commission, if any,
specified in the Certificate and delete the Futures Contract being offset from
the statements delivered to the Fund pursuant to
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paragraph 3 of Article III herein, and make such withdrawals from the Senior
Security Account for such Series as may be specified in the Certificate. The
withdrawals, if any, to be made from the Margin Account shall be made by the
Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the execution of a purchase of any Futures Contract
Option by the Fund, the Fund shall deliver to the Custodian a Certificate
specifying with respect to such Futures Contract Option: (a) the Series to which
such Option is specifically allocated; (b) the type of Futures Contract Option
(put or call); (c) the type of Futures Contract and such other information as
may be necessary to identify the Futures Contract underlying the Futures
Contract Option purchased; (d) the expiration date; (e) the exercise price; (f)
the dates of purchase and settlement; (g) the amount of premium to be paid by
the Fund upon such purchase; (h) the name of the broker or futures commission
merchant through whom such Option was purchased; and (i) the name of the broker,
or futures commission merchant, to whom payment is to be made. The Custodian
shall pay out of the moneys specifically allocated to such Series the total
amount to be paid upon such purchase to the broker or futures commissions
merchant through whom the purchase was made, provided that the same conforms to
the amount set forth in such Certificate.
2. Promptly after the execution of a sale of any Futures Contract Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to
the Custodian a Certificate specifying with respect to each such sale: (a)
Series to which such Futures Contract Option was specifically allocated; (b) the
type of Future Contract Option (put or call); (c) the type of Futures Contract
and such other information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund upon
such sale; and (h) the name of the broker of futures commission merchant through
whom the sale was made. The Custodian shall consent to the cancellation of the
Futures Contract Option being closed against payment to the Custodian of the
total amount payable to the Fund, provided the same conforms to the total amount
payable as set forth in such Certificate.
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3. Whenever a Futures Contract Option purchased by the Fund pursuant to
paragraph 1 is exercised by the Fund, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Futures
Contract Option was specifically allocated; (b) the particular Futures Contract
Option (put or call) being exercised; (c) the type of Futures Contract
underlying the Futures Contract Option; (d) the date of exercise; (e) the name
of the broker or futures commission merchant through whom the Futures Contract
Option is exercised; (f) the net total amount, if any, payable by the Fund; (g)
the amount, if any, to be received by the Fund; and (h) the amount of cash
and/or the amount and kind of Securities to be deposited in the Senior Security
Account for such Series. The Custodian shall make, out of the moneys and
Securities specifically allocated to such Series, the payments of money, if any,
and the deposits of Securities, if any, into the Senior Security Account as
specified in the Certificate. The deposits, if any, to be made to the Margin
Account shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Futures Contract Option: (a) the Series for which such Futures Contract Option
was written; (b) the type of Futures Contract Option (put or call); (c) the type
of Futures Contract and such other information as may be necessary to identify
the Futures Contract underlying the Futures Contract Option; (d) the expiration
date; (e) the exercise price; (f) the premium to be received by the Fund; (g)
the name of the broker or futures commission merchant through whom the premium
is to be received; and (h) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in the Senior Security Account for such
Series. The Custodian shall, upon receipt of the premium specified in the
Certificate, make out of the moneys and Securities specifically allocated to
such Series the deposits into the Senior Security Account, if any, as specified
in the Certificate. The deposits, if any, to be made to the Margin Account shall
be made by the Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
5. Whenever a Futures Contract Option written by the Fund which is a call
is exercised, the Fund shall promptly deliver to the Custodian a Certificate
specifying: (a) the Series to which such Futures Contract Option was
specifically allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying the Futures Contract Option; (d) the
name of the broker or futures commission merchant through whom such Futures
Contract Option was exercised; (e) the net total amount, if any, payable to the
Fund upon such exercise; (f) the net total
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amount, if any, payable by the Fund upon such exercise; and (g) the amount of
cash and/or the amount and kind of Securities to be deposited in the Senior
Security Account for such Series. The Custodian shall, upon its receipt of the
net total amount payable to the Fund, if any, specified in such Certificate make
the payments, if any, and the deposits, if any, into the Senior Security Account
as specified in the Certificate. The deposits, if any, to be made to the Margin
Account shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
6. Whenever a Futures Contract Option which is written by the Fund and
which is a put is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Option was specifically
allocated; (b) the particular Futures Contract Option exercised; (c) the type of
Futures Contract underlying such Futures Contract Option; (d) the name of the
broker or futures commission merchant through whom such Futures Contract Option
is exercised; (e) the net total amount, if any, payable to the Fund upon such
exercise; (f) the net total amount, if any, payable by the Fund upon such
exercise; and (g) the amount and kind of Securities and/or cash to be withdrawn
from or deposited in, the Senior Security Account for such Series, if any. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in the Certificate, make out of the moneys and Securities
specifically allocated to such Series, the payments, if any, and the deposits,
if any, into the Senior Security Account as specified in the Certificate. The
deposits to and/or withdrawals from the Margin Account, if any, shall be made by
the Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
7. Promptly after the execution by the Fund of a purchase of any Futures
Contract Option identical to a previously written Futures Contract Option
described in this Article in order to liquidate its position as a writer of such
Futures Contract Option, the Fund shall deliver to the Custodian a Certificate
specifying with respect to the Futures Contract Option being purchased: (a) the
Series to which such Option is specifically allocated; (b) that the transaction
is a closing transaction; (c) the type of Future Contract and such other
information as may be necessary to identify the Futures Contract underlying the
Futures Option Contract; (d) the exercise price; (e) the premium to be paid by
the Fund; (f) the expiration date; (g) the name of the broker or futures
commission merchant to whom the premium is to be paid; and (h) the amount of
cash and/or the amount and kind of Securities, if any, to be withdrawn from the
Senior Security Account for such Series. The Custodian shall effect the
withdrawals from the Senior Security Account specified in the Certificate. The
withdrawals, if any, to
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be made from the Margin Account shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a closing transaction
with respect to, any Futures Contract Option written or purchased by the Fund
and described in this Article, the Custodian shall (a) delete such Futures
Contract Option from the statements delivered to the Fund pursuant to paragraph
3 of Article III herein and (b) make such withdrawals from and/or in the case of
an exercise such deposits into the Senior Security Account as may be specified
in a Certificate. The deposits to and/or withdrawals from the Margin Account, if
any, shall be made by the Custodian in accordance with the terms and conditions
of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the exercise of a
Futures Contract Option described in this Article shall be subject to Article VI
hereof.
ARTICLE VIII
SHORT SALES
1. Promptly after the execution of any short sales of Securities by any
Series of the Fund, the Fund shall deliver to the Custodian a Certificate
specifying: (a) the Series for which such short sale was made; (b) the name of
the issuer-and the title of the Security; (c) the number of shares or principal
amount sold, and accrued interest or dividends, if any; (d) the dates of the
sale and settlement; (e) the sale price per unit; (f) the total amount credited
to the Fund upon such sale, if any, (g) the amount of cash and/or the amount and
kind of Securities, if any, which are to be deposited in a Margin Account and
the name in which such Margin Account has been or is to be established; (h) the
amount of cash and/or the amount and kind of Securities, if any, to be deposited
in a Senior Security Account, and (i) the name of the broker through whom such
short sale was made. The Custodian shall upon its receipt of a statement from
such broker confirming such sale and that the total amount credited to the Fund
upon such sale, if any, as specified in the Certificate is held by such broker
for the account of the Custodian (or any nominee of the Custodian) as custodian
of the Fund, issue a receipt or make the deposits into the Margin Account and
the Senior Security Account specified in the Certificate.
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2. Promptly after the execution of a purchase to close-out any short sale
of Securities, the Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to each such closing out: (a) the Series for which such
transaction is being made; (b) the name of the issuer and the title of the
Security; (c) the number of shares or the principal amount, and accrued interest
or dividends, if any, required to effect such closing-out to be delivered to the
broker; (d) the dates of closing-out and settlement; (e) the purchase price per
unit; (f) the net total amount payable to the Fund upon such closing-out; (g)
the net total amount payable to the broker upon such closing-out; (h) the amount
of cash and the amount and kind of Securities to be withdrawn, if any, from the
Margin Account; (i) the amount of cash and/or the amount and kind of Securities,
if any, to be withdrawn from the Senior Security Account; and (j) the name of
the broker through whom the Fund is effecting such closing-out. The Custodian
shall, upon receipt of the net total amount payable to the Fund upon such
closing-out, and the return and/or cancellation of the receipts, if any, issued
by the Custodian with respect to the short sale being closed-out, pay out of the
moneys held for the account of the Fund to the broker the net total amount
payable to the broker, and make the withdrawals from the Margin Account and the
Senior Security Account, as the same are specified in the Certificate.
ARTICLE IX
REPURCHASE AND REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Repurchase Agreement or a Reverse
Repurchase Agreement with respect to Securities and money held by the Custodian
hereunder, the Fund shall deliver to the Custodian a Certificate, or in the
event such Repurchase Agreement or Reverse Repurchase Agreement is a Money
Market Security, a Certificate, Oral Instructions, or Written Instructions
specifying: (a) the Series for which the Repurchase Agreement or Reverse
Repurchase Agreement is entered; (b) the total amount payable to or by the Fund
in connection with such Repurchase Agreement or Reverse Repurchase Agreement and
specifically allocated to such Series; (c) the broker, dealer, or financial
institution with whom the Repurchase Agreement or Reverse Repurchase Agreement
is entered; (d) the amount and kind of Securities to be delivered or received by
the Fund to or from such broker, dealer, or financial institution; (e) the date
of such Repurchase Agreement or Reverse Repurchase Agreement; and (f) the amount
of cash and/or the amount and kind of Securities, if any, specifically allocated
to such Series to be deposited in a Senior Security Account for such Series in
connection with such Reverse Repurchase Agreement. The
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Custodian shall, upon receipt of the total amount payable to or by the Fund
specified in the Certificate, Oral Instructions, or Written Instructions make or
accept the delivery to or from the broker, dealer, or financial institution and
the deposits, if any, to the Senior Security Account, specified in such
Certificate, Oral Instructions, or Written Instructions.
2. Upon the termination of a Repurchase Agreement or a Reverse Repurchase
Agreement described in preceding paragraph 1 of this Article, the Fund shall
promptly deliver a Certificate or, in the event such Repurchase Agreement or
Reverse Repurchase Agreement is a Money Market Security, a Certificate, Oral
Instructions, or Written Instructions to the Custodian specifying: (a) the
Repurchase Agreement or Reverse Repurchase Agreement being terminated and the
Series for which same was entered; (b) the total amount payable to or by the
Fund in connection with such termination; (c) the amount and kind of Securities
to be received or delivered by the Fund and specifically allocated to such
Series in connection with such termination; (d) the date of termination; (e) the
name of the broker, dealer, or financial institution with whom the Repurchase
Agreement or Reverse Repurchase Agreement is to be terminated; and (f) the
amount of cash and/or the amount and kind of Securities, if any, to be withdrawn
from the Senior Securities Account for such Series. The Custodian shall, upon
receipt or delivery of the amount and kind of Securities or cash to be received
or delivered by the Fund specified in the Certificate, Oral Instructions, or
Written Instructions, make or receive the payment to or from the broker, dealer,
or financial institution and make the withdrawals, if any, from the Senior
Security Account, specified in such Certificate, Oral Instructions, or Written
Instructions.
3. The Certificates, Oral Instructions, or Written Instructions described
in paragraphs 1 and 2 of this Article may with respect to any particular
Repurchase Agreement or Reverse Repurchase Agreement be combined and delivered
to the Custodian at the time of entering into such Repurchase Agreement or
Reverse Repurchase Agreement.
ARTICLE X
LOANS OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities
specifically allocated to a Series held by the Custodian hereunder,
the Fund shall deliver or cause to be delivered to the Custodian a
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Certificate specifying with respect to each such loan: (a) the Series to which
the loaned Securities are specifically allocated; (b) the name of the issuer and
the title of the Securities, (c) the number of shares or the principal amount
loaned, (d) the date of loan and delivery, (e) the total amount to be delivered
to the Custodian against the loan of the Securities, including the amount of
cash collateral and the premium, if any, separately identified, and (f) the name
of the broker, dealer, or financial institution to which the loan was made. The
Custodian shall deliver the Securities thus designated to the broker, dealer or
financial institution to which the loan was made upon receipt of the total
amount designated in the Certificate as to be delivered against the loan of
Securities. The Custodian may accept payment in connection with a delivery
otherwise than through the Book-Entry System or a Depository only in the form of
a certified or bank cashier's check payable to the order of the Fund or the
Custodian drawn on New York Clearing House funds.
2. In connection with each termination of a loan of Securities by the
Fund, the Fund shall deliver or cause to be delivered to the Custodian a
Certificate specifying with respect to each such loan termination and return of
Securities: (a) the Series to which the loaned Securities are specifically
allocated; (b) the name of the issuer and the title of the Securities to be
returned, (c) the number of shares or the principal amount to be returned, (d)
the date of termination, (e) the total amount to be delivered by the Custodian
(including the cash collateral for such Securities minus any offsetting credits
as described in said Certificate), and (f) the name of the broker, dealer, or
financial institution from which the Securities will be returned. The Custodian
shall receive all Securities returned from the broker, dealer, or financial
institution to which such Securities were loaned and upon receipt thereof shall
pay, out of the moneys held for the account of the Fund, the total amount
payable upon such return of Securities as set forth in the Certificate.
ARTICLE XI
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall establish a Senior Security Account and from time
to time make such deposits thereto, or withdrawals therefrom, as specified in a
Certificate. Such Certificate shall specify the Series for which such deposit or
withdrawal is to be made and the amount of cash and/or the amount and kind of
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Securities specifically allocated to such Series to be deposited in, or
withdrawn from, such Senior Security Account for such Series. In the event that
the Fund fails to specify in a Certificate the Series, the name of the issuer,
the title and the number of shares or the principal amount of any particular
Securities to be deposited by the Custodian into, or withdrawn from, a Senior
Securities Account, the Custodian shall be under no obligation to make any such
deposit or withdrawal and shall promptly notify the Fund that no such deposit
has been made.
2. The Custodian shall make deliveries or payments from a Margin Account
to the broker, dealer, futures commission merchant or Clearing Member in whose
name, or for whose benefit, the account was established as specified in the
Margin Account Agreement.
3. Amounts received by the Custodian as payments or distributions with
respect to Securities deposited in any Margin Account shall be dealt with in
accordance with the terms and conditions of the Margin Account Agreement.
4. The Custodian shall to the extent permitted by the Fund's Declaration
of Trust, investment restrictions and the Investment Company Act of 1940 have a
continuing lien and security interest in and to any property at any time held by
the Custodian in any Collateral Account described herein. In accordance with
applicable law the Custodian may enforce its lien and realize on any such
property whenever the Custodian has made payment or delivery pursuant to any Put
Option guarantee letter or similar document or any receipt issued hereunder by
the Custodian; provided, however, that the Custodian shall not be required to
issue any Put Option guarantee letter unless it shall have received an opinion
of counsel to the Fund or its investment adviser that the issuance of such
letters is authorized by the Fund and that the Custodian's continuing lien and
security interest is valid, enforceable and not limited by the Declaration of
Trust, any investment restrictions or the Investment Company Act of 1940. In the
event the Custodian should realize on any such property net proceeds which are
less than the Custodian's obligations under any Put Option guarantee letter or
similar document or any receipt, such deficiency shall be a debt owed the
Custodian by the Fund within the scope of Article XIV herein.
5. On each business day the Custodian shall furnish the Fund with a
statement with respect to each Margin Account in which money or Securities are
held specifying as of the close of business on the previous business day: (a)
the name of the Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The Custodian shall make
available upon
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request to any broker, dealer, or futures commission merchant specified in the
name of a Margin Account a copy of the statement furnished the Fund with respect
to such Margin Account.
6. The Custodian shall establish a Collateral Account and from time to
time shall make such deposits thereto as may be specified in a Certificate.
Promptly after the close of business on each business day in which cash and/or
Securities are maintained in a Collateral Account for any Series, the Custodian
shall furnish the Fund with a statement with respect to such Collateral Account
specifying the amount of cash and/or the amount and kind of Securities held
therein. No later than the close of business next succeeding the delivery to the
Fund of such statement, the Fund shall furnish to the Custodian a Certificate or
Written Instructions specifying the then market value of the Securities
described in such statement. In the event such then market value is indicated to
be less than the Custodian's obligation with respect to any outstanding Put
Option guarantee letter or similar document, the Fund shall promptly specify in
a Certificate the additional cash and/or Securities to be deposited in such
Collateral Account to eliminate such deficiency.
ARTICLE XII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the resolution of the
Board of Trustees of the Fund, certified by the Secretary or any Assistant
Secretary, either (i) setting forth with respect to the Series specified therein
the date of the declaration of a dividend or distribution, the date of payment
thereof, the record date as of which shareholders entitled to payment shall be
determined, the amount payable per Share of such Series to the shareholders of
record as of that date and the total amount payable to the Transfer Agent
Account and any sub-dividend agent or co- dividend agent of the Fund on the
payment date, or (ii) authorizing with respect to the Series specified therein
and the declaration of dividends and distributions thereon the Custodian to rely
on Oral Instructions, Written Instructions, or a Certificate setting forth the
date of the declaration of such dividend or distribution, the date of payment
thereof, the record date as of which shareholders entitled to payment shall be
determined, the amount payable per Share of such Series to the shareholders of
record as of that date and the total amount payable to the Transfer Agent
Account on the payment date.
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2. Upon the payment date specified in such resolution, Oral Instructions,
Written Instructions, or Certificate, as the case may be, the Custodian shall
pay to the Transfer Agent Account out of the moneys held for the account of the
Series specified therein the total amount payable to the Transfer Agent Account
and with respect to such Series.
ARTICLE XIII
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver or cause to
be delivered, to the Custodian a Certificate duly specifying:
(a) The Series, the number of Shares sold, trade
date, and price; and
(b) The amount of money to be received by the Custodian for
the sale of such Shares and specifically allocated to the separate account in
the name of such Series.
2. Upon receipt of such money from the Fund's General Distributor, the
Custodian shall credit such money to the separate account in the name of the
Series for which such money was received.
3. Upon issuance of any Shares of any Series the Custodian shall pay, out
of the money held for the account of such Series, all original issue or other
taxes required to be paid by the Fund in connection with such issuance upon the
receipt of a Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund desires the Custodian
to make payment out of the money held by the Custodian hereunder in connection
with a redemption of any Shares, it shall furnish, or cause to be furnished, to
the Custodian a Certificate specifying:
(a) The number and Series of Shares redeemed; and
(b) The amount to be paid for such Shares.
5. Upon receipt of an advice from an Authorized Person
setting forth the Series and number of Shares received by the
Transfer Agent for redemption and that such Shares are in good form
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for redemption, the Custodian shall make payment to the Transfer Agent Account
out of the moneys held in the separate account in the name of the Series the
total amount specified in the Certificate issued pursuant to the foregoing
paragraph 4 of this Article.
ARTICLE XIV
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian should in its sole discretion advance funds on behalf
of any Series which results in an overdraft because the moneys held by the
Custodian in the separate account for such Series shall be insufficient to pay
the total amount payable upon a purchase of Securities specifically allocated to
such Series, as set forth in a Certificate, Oral Instructions, or Written
Instructions or which results in an overdraft in the separate account of such
Series for some other reason, or if the Fund is for any other reason indebted to
the Custodian with respect to a Series, (except a borrowing for investment or
for temporary or emergency purposes using Securities as collateral pursuant to a
separate agreement and subject to the provisions of paragraph 2 of this
Article), such overdraft or indebtedness shall be deemed to be a loan made by
the Custodian to the Fund for such Series payable on demand and shall bear
interest from the date incurred at a rate per annum (based on a 360-day year for
the actual number of days involved) equal to the Federal Funds Rate plus 1/2%,
such rate to be adjusted on the effective date of any change in such Federal
Funds Rate but in no event to be less than 6% per annum. In addition, unless the
Fund has given a Certificate that the Custodian shall not impose a lien and
security interest to secure such overdrafts (in which event it shall not do so),
the Custodian shall have a continuing lien and security interest in the
aggregate amount of such overdrafts and indebtedness as may from time to time
exist in and to any property specifically allocated to such Series at any time
held by it for the benefit of such Series or in which the Fund may have an
interest which is then in the Custodian's possession or control or in possession
or control of any third party acting in the Custodian's behalf. The Fund
authorizes the Custodian, in its sole discretion, at any time to charge any such
overdraft or indebtedness together with interest due thereon against any money
balance in an account standing in the name of such Series' credit on the
Custodian's books. In addition, the Fund hereby covenants that on each Business
Day on which either it intends to enter a Reverse Repurchase Agreement and/or
otherwise borrow from a third party, or which next succeeds a Business Day on
which at the close of business the Fund had outstanding a Reverse Repurchase
Agreement
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or such a borrowing, it shall prior to 9 a.m., New York City time, advise the
Custodian, in writing, of each such borrowing, shall specify the Series to which
the same relates, and shall not incur any indebtedness, including pursuant to
any Reverse Repurchase Agreement, not so specified other than from the
Custodian.
2. The Fund will cause to be delivered to the Custodian by any bank
(including, if the borrowing is pursuant to a separate agreement, the Custodian)
from which it borrows money for investment or for temporary or emergency
purposes using Securities held by the Custodian hereunder as collateral for such
borrowings, a notice or undertaking in the form currently employed by any such
bank setting forth the amount which such bank will loan to the Fund against
delivery of a stated amount of collateral. The Fund shall promptly deliver to
the Custodian a Certificate specifying with respect to each such borrowing: (a)
the Series to which such borrowing relates; (b) the name of the bank, (c) the
amount and terms of the borrowing, which may be set forth by incorporating by
reference an attached promissory note, duly endorsed by the Fund, or other loan
agreement, (d) the time and date, if known, on which the loan is to be entered
into, (e) the date on which the loan becomes due and payable, (f) the total
amount payable to the Fund on the borrowing date, (g) the market value of
Securities to be delivered as collateral for such loan, including the name of
the issuer, the title and the number of shares or the principal amount of any
particular Securities, and (h) a statement specifying whether such loan is for
investment purposes or for temporary or emergency purposes and that such loan is
in conformance with the Investment Company Act of 1940 and the Fund's prospectus
and Statement of Additional Information. The Custodian shall deliver on the
borrowing date specified in a Certificate the specified collateral and the
executed promissory note, if any, against delivery by the lending bank of the
total amount of the loan payable, provided that the same conforms to the total
amount payable as set forth in the Certificate. The Custodian may, at the option
of the lending bank, keep such collateral in its possession, but such collateral
shall be subject to all rights therein given the lending bank by virtue of any
promissory note or loan agreement. The Custodian shall deliver such Securities
as additional collateral as may be specified in a Certificate to collateralize
further any transaction described in this paragraph. The Fund shall cause all
Securities released from collateral status to be returned directly to the
Custodian, and the Custodian shall receive from time to time such return of
collateral as may be tendered to it. In the event that the Fund fails to specify
in a Certificate the Series, the name of the issuer, the title and number of
shares or the principal amount of any particular Securities to be delivered as
collateral by the Custodian, to any
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such bank, the Custodian shall not be under any obligation to
deliver any Securities.
ARTICLE XV
CUSTODY OF ASSETS OUTSIDE THE U.S.
1. The Custodian is authorized and instructed to employ, as its agent, as
subcustodians for the securities and other assets of the Fund maintained outside
of the United States the Foreign Subcustodians and Foreign Depositories
designated on Schedule A hereto. Except as provided in Schedule A, the Custodian
shall employ no other Foreign Custodian or Foreign Depository. The Custodian and
the Fund may amend Schedule A hereto from time to time to agree to designate any
additional Foreign Subcustodian or Foreign Depository with which the Custodian
has an agreement for such entity to act as the Custodian's agent, as
subcustodian, and which the Custodian in its absolute discretion proposes to
utilize to hold any of the Fund's Foreign Property. Upon receipt of a
Certificate or Written Instructions from the Fund, the Custodian shall cease the
employment of any one or more of such subcustodians for maintaining custody of
the Fund's assets and such custodian shall be deemed deleted from Schedule A.
2. The Custodian shall limit the securities and other assets maintained in
the custody of the Foreign Subcustodians to: (a) "foreign securities," as
defined in paragraph (c)(1) of Rule 17f-5 under the Investment Company Act of
1940, and (b) cash and cash equivalents in such amounts as the Fund may
determine to be reasonably necessary to effect the foreign securities
transactions of the Fund.
3. The Custodian shall identify on its books as belonging to the Fund, the
Foreign Securities held by each Foreign Subcustodian.
4. Each agreement pursuant to which the Custodian employs a Foreign
Subcustodian shall be substantially in the form reviewed and approved by the
Fund and will not be amended in a way that materially affects the Fund without
the Fund's prior written consent and shall:
(a) require that such institution establish custody account(s) for
the Custodian on behalf of the Fund and physically segregate in each such
account securities and other assets of the fund, and, in the event that such
institution deposits the securities of the Fund in a Foreign Depository, that it
shall
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identify on its books as belonging to the Fund or the Custodian, as
agent for the Fund, the securities so deposited;
(b) provide that:
(1) the assets of the Fund will not be subject to any right,
charge, security interest, lien or claim of any kind in favor of the Foreign
Subcustodian or its creditors, except a claim of payment for their safe custody
or administration;
(2) beneficial ownership for the assets of the Fund will be
freely transferable without the payment of money or value other than for custody
or administration;
(3) adequate records will be maintained identifying
the assets as belonging to the Fund;
(4) the independent public accountants for the Fund will be
given access to the books and records of the Foreign Subcustodian relating to
its actions under its agreement with the Custodian or confirmation of the
contents of those records;
(5) the Fund will receive periodic reports with respect to the
safekeeping of the Fund's assets, including, but not necessarily limited to,
notification of any transfer to or from the custody account(s); and
(6) assets of the Fund held by the Foreign Subcustodian will
be subject only to the instructions of the Custodian or its agents.
(c) Require the institution to exercise reasonable care in the
performance of its duties and to indemnify, and hold harmless, the Custodian
from and against any loss, damage, cost, expense, liability or claim arising out
of or in connection with the institution's performance of such obligations, with
the exception of any such losses, damages, costs, expenses, liabilities or
claims arising as a result of an act of God. At the election of the Fund, it
shall be entitled to be subrogated to the rights of the Custodian with respect
to any claims against a Foreign Subcustodian as a consequence of any such loss,
damage, cost, expense, liability or claim of or to the Fund, if and to the
extent that the Fund has not been made whole for any such loss, damage, cost,
expense, liability or claim.
5. Upon receipt of a Certificate or Written Instructions,
which may be continuing instructions when deemed appropriate by the
parties, the Custodian shall on behalf of the Fund make or cause
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its Foreign Subcustodian to transfer, exchange or deliver securities owned by
the Fund, except to the extent explicitly prohibited therein. Upon receipt of a
Certificate or Written Instructions, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall on behalf of the fund pay
out or cause its Foreign Subcustodians to pay out monies of the Fund. The
Custodian shall use all means reasonably available to it, including, if
specifically authorized by the Fund in a Certificate, any necessary litigation
at the cost and expense of the Fund (except as to matters for which the
Custodian is responsible hereunder) to require or compel each Foreign
Subcustodian or Foreign Depository to perform the services required of it by the
agreement between it and the Custodian authorized pursuant to this Agreement.
6. The Custodian shall maintain all books and records as shall be
necessary to enable the Custodian readily to perform the services required of it
hereunder with respect to the Fund's Foreign Properties. The Custodians shall
supply to the Fund from time to time, as mutually agreed upon, statements in
respect of the Foreign Securities and other Foreign Properties of the Fund held
by Foreign Subcustodians, directly or through Foreign Depositories, including
but not limited to an identification of entities having possession of the Fund's
Foreign Securities and other assets, an advice or other notification of any
transfers of securities to or from each custodial account maintained for the
Fund or the Custodian on behalf of the Fund indicating, as to securities
acquired for the Fund, the identity of the entity having physical possession of
such securities. The Custodian shall promptly and faithfully transmit all
reports and information received pertaining to the Foreign Property of the Fund,
including, without limitation, notices or reports of corporate action, proxies
and proxy soliciting materials.
7. Upon request of the Fund, the Custodian shall use reasonable efforts to
arrange for the independent accountants of the Fund to be afforded access to the
books and records of any Foreign Subcustodian, or confirmation of the contents
thereof, insofar as such books and records relate to the Foreign Property of the
Fund or the performance of such Foreign Subcustodian under its agreement with
the Custodian; provided that any litigation to afford such access shall be at
the sole cost and expense of the Fund.
8. The Custodian recognizes that employment of a Foreign Subcustodian or
Foreign Depository for the Fund's Foreign Securities and Foreign Property is
permitted by Section 17(f) of the Investment Company Act of 1940 only upon
compliance with Section (a) of Rule 17f-5 promulgated thereunder. With respect
to
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the Foreign Subcustodians and Foreign Depositories identified on Schedule A, the
Custodian represents that it has furnished the Fund with certain materials
prepared by the Custodian and with such other information in the possession of
the Custodian as the Fund advised the Custodian was reasonably necessary to
assist the Board of Trustees of the Fund in making the determinations required
of the Board of Trustees by Rule 17f-5, including, without limitation,
consideration of the matters set forth in the Notes to Rule 17f-5. If the
Custodian recommends any additional Foreign Subcustodian or Foreign Depository,
the Custodian shall supply information similar in kind and scope to that
furnished pursuant to the preceding sentence. Further, the Custodian shall
furnish annually to the Fund, at such time as the Fund and Custodian shall
mutually agree, information concerning each Foreign Subcustodian and Foreign
Depository then identified on Schedule A similar in kind and scope to that
furnished pursuant to the preceding two sentences.
9. The Custodian's employment of any Foreign Subcustodian or Foreign
Depository shall constitute a representation that the Custodian believes in good
faith that such Foreign Subcustodian or Foreign Depository provides a level of
safeguards for maintaining the Fund's assets not materially different from that
provided by the Custodian in maintaining the Fund's securities in the United
States. In addition, the Custodian shall monitor the financial condition and
general operational performance of the Foreign Subcustodians and Foreign
Depositories and shall promptly inform the Fund in the event that the Custodian
has actual knowledge of a material adverse change in the financial condition
thereof or that there appears to be a substantial likelihood that the
shareholders' equity of any Foreign Subcustodian will decline below $200 million
(U.S. dollars or the equivalent thereof) or that its shareholders' equity has
declined below $200 million , or that the Foreign Subcustodian or Foreign
Depository has breached the agreement between it and the Custodian in a way that
the Custodian believes adversely affects the Fund. Further, the Custodian shall
advise the Fund if it believes that there is a material adverse change in the
operating environment of any Foreign Subcustodian or Foreign Depository.
ARTICLE XVI
CONCERNING THE CUSTODIAN
1. The Custodian shall use reasonable care in the performance of its
duties hereunder, and, except as hereinafter provided, neither the Custodian nor
its nominee shall be liable for any loss or damage, including counsel fees,
resulting from its action or omission to act or otherwise, either hereunder or
under
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any Margin Account Agreement, except for any such loss or damage arising out of
its own negligence, bad faith, or willful misconduct or that of the
subcustodians or co-custodians appointed by the Custodian or of the officers,
employees, or agents of any of them. The Custodian may, with respect to
questions of law arising hereunder or under any Margin Account Agreement, apply
for and obtain the advice and opinion of counsel to the Fund, at the expense of
the Fund, or of its own counsel, at its own expense, and shall be fully
protected with respect to anything done or omitted by it in good faith in
conformity with such advice or opinion. The Custodian shall be liable to the
Fund for any loss or damage resulting from the use of the Book-Entry System or
any Depository arising by reason of any negligence, bad faith or willful
misconduct on the part of the Custodian or any of its employees or agents.
2. Notwithstanding the foregoing, the Custodian shall be
under no obligation to inquire into, and shall not be liable for:
(a) The validity (but not the authenticity) of the issue of any
Securities purchased, sold, or written by or for the Fund, the legality of the
purchase, sale or writing thereof, or the propriety of the amount paid or
received therefor, as specified in a Certificate, Oral Instructions, or Written
Instructions;
(b) The legality of the sale or redemption of any
Shares, or the propriety of the amount to be received or paid
therefor, as specified in a Certificate;
(c) The legality of the declaration or payment of any
dividend by the Fund, as specified in a resolution, Certificate,
Oral Instructions, or Written Instructions;
(d) The legality of any borrowing by the Fund using
Securities as collateral;
(e) The legality of any loan of portfolio Securities, nor shall the
Custodian be under any duty or obligation to see to it that the cash collateral
delivered to it by a broker, dealer, or financial institution or held by it at
any time as a result of such loan of portfolio Securities of the Fund is
adequate collateral for the Fund against any loss it might sustain as a result
of such loan, except that this subparagraph shall not excuse any liability the
Custodian may have for failing to act in accordance with Article X hereof or any
Certificate, Oral Instructions or Written Instructions given in accordance with
this Agreement. The Custodian specifically, but not by way of limitation, shall
not be under any duty or obligation periodically to check or notify the Fund
that the amount of such cash collateral held by it for the
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<PAGE>
Fund is sufficient collateral for the Fund, but such duty or obligation shall be
the sole responsibility of the Fund. In addition, the Custodian shall be under
no duty or obligation to see that any broker, dealer or financial institution to
which portfolio Securities of the Fund are lent pursuant to Article X of this
Agreement makes payment to it of any dividends or interest which are payable to
or for the account of the Fund during the period of such loan or at the
termination of such loan, provided, however, that the Custodian shall promptly
notify the Fund in the event that such dividends or interest are not paid and
received when due; or
(f) The sufficiency or value of any amounts of money and/or
Securities held in any Margin Account, Senior Security Account or Collateral
Account in connection with transactions by the Fund, except that this
subparagraph shall not excuse any liability the Custodian may have for failing
to establish, maintain, make deposits to or withdrawals from such accounts in
accordance with this Agreement. In addition, the Custodian shall be under no
duty or obligation to see that any broker, dealer, futures commission merchant
or Clearing Member makes payment to the Fund of any variation margin payment or
similar payment which the Fund may be entitled to receive from such broker,
dealer, futures commission merchant or Clearing Member, to see that any payment
received by the Custodian from any broker, dealer, futures commission merchant
or Clearing Member is the amount the Fund is entitled to receive, or to notify
the Fund of the Custodian's receipt or non-receipt of any such payment.
3. The Custodian shall not be liable for, or considered to be the
Custodian of, any money, whether or not represented by any check, draft, or
other instrument for the payment of money, received by it on behalf of the Fund
until the Custodian actually receives such money directly or by the final
crediting of the account representing the Fund's interest at the Book-Entry
System or the Depository.
4. With respect to Securities held in a Depository, except as otherwise
provided in paragraph 5(b) of Article III hereof, the Custodian shall have no
responsibility and shall not be liable for ascertaining or acting upon any
calls, conversions, exchange offers, tenders, interest rate changes or similar
matters relating to such Securities, unless the Custodian shall have actually
received timely notice from the Depository in which such Securities are held. In
no event shall the Custodian have any responsibility or liability for the
failure of a Depository to collect, or for the late collection or late crediting
by a Depository of any amount payable upon Securities deposited in a Depository
which may mature or be redeemed, retired, called or otherwise become payable.
However, upon receipt of a Certificate from the Fund of an overdue
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<PAGE>
amount on Securities held in a Depository the Custodian shall make a claim
against the Depository on behalf of the Fund, except that the Custodian shall
not be under any obligation to appear in, prosecute or defend any action suit or
proceeding in respect to any Securities held by a Depository which in its
opinion may involve it in expense or liability, unless indemnity satisfactory to
it against all expense and liability be furnished as often as may be required,
or alternatively, the Fund shall be subrogated to the rights of the Custodian
with respect to such claim against the Depository should it so request in a
Certificate. This paragraph shall not, however, excuse any failure by the
Custodian to act in accordance with a Certificate, Oral Instructions, or Written
Instructions given in accordance with this Agreement.
5. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount due the Fund from the Transfer Agent of the
Fund nor to take any action to effect payment or distribution by the Transfer
Agent of the Fund of any amount paid by the Custodian to the Transfer Agent of
the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount if the Securities upon which such amount is
payable are in default, or if payment is refused after the Custodian has timely
and properly, in accordance with this Agreement, made due demand or
presentation, unless and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of reimbursement of
its costs and expenses in connection with any such action, but the Custodian
shall have such a duty if the Securities were not in default on the payable date
and the Custodian failed to timely and properly make such demand for payment and
such failure is the reason for the non-receipt of payment.
7. The Custodian may, with the prior approval of the Board of Trustees of
the Fund, appoint one or more banking institutions as subcustodian or
subcustodians, or as co-Custodian or co- Custodians, of Securities and moneys at
any time owned by the Fund, upon such terms and conditions as may be approved in
a Certificate or contained in an agreement executed by the Custodian, the Fund
and the appointed institution; provided, however, that appointment of any
foreign banking institution or depository shall be subject to the provisions of
Article XV hereof.
8. The Custodian agrees to indemnify the Fund against and
save the Fund harmless from all liability, claims, losses and
demands whatsoever, including attorney's fees, howsoever arising or
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<PAGE>
incurred because of the negligence, bad faith or willful misconduct of any
subcustodian of the Securities and moneys owned by the Fund.
9. The Custodian shall not be under any duty or obligation (a) to
ascertain whether any Securities at any time delivered to, or held by it, for
the account of the Fund and specifically allocated to a Series are such as
properly may be held by the Fund or such Series under the provisions of its then
current prospectus, or (b) to ascertain whether any transactions by the Fund,
whether or not involving the Custodian, are such transactions as may properly be
engaged in by the Fund.
10. The Custodian shall be entitled to receive and the Fund agrees to pay
to the Custodian all reasonable out-of-pocket expenses and such compensation as
may be agreed upon in writing from time to time between the Custodian and the
Fund. The Custodian may charge such compensation, and any such expenses with
respect to a Series incurred by the Custodian in the performance of its duties
under this Agreement against any money specifically allocated to such Series.
The Custodian shall also be entitled to charge against any money held by it for
the account of a Series the amount of any loss, damage, liability or expense,
including counsel fees, for which it shall be entitled to reimbursement under
the provisions of this Agreement attributable to, or arising out of, its serving
as Custodian for such Series. The expenses for which the Custodian shall be
entitled to reimbursement hereunder shall include, but are not limited to, the
expenses of subcustodians and foreign branches of the Custodian incurred in
settling outside of New York City transactions involving the purchase and sale
of Securities of the Fund. Notwithstanding the foregoing or anything else
contained in this Agreement to the contrary, the Custodian shall, prior to
effecting any charge for compensation, expenses, or any overdraft or
indebtedness or interest thereon, submit an invoice therefor to the Fund.
11. The Custodian shall be entitled to rely upon any Certificate, notice
or other instrument in writing, Oral Instructions, or Written Instructions
received by the Custodian and reasonably believed by the Custodian to be
genuine. The Fund agrees to forward to the Custodian a Certificate or facsimile
thereof confirming Oral Instructions or Written Instructions in such manner so
that such Certificate or facsimile thereof is received by the Custodian, whether
by hand delivery, telecopier or other similar device, or otherwise, by the close
of business of the same day that such Oral Instructions or Written Instructions
are given to the Custodian. The Fund agrees that the fact that such confirming
instructions are not received by the Custodian shall in no way affect the
validity of the transactions or enforceability of the transactions thereby
authorized by the Fund. The Fund agrees
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<PAGE>
that the Custodian shall incur no liability to the Fund in acting upon Oral
Instructions or Written Instructions given to the Custodian hereunder concerning
such transactions provided such instructions reasonably appear to have been
received from an Authorized Person.
12. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably believed by the
Custodian to be given in accordance with the terms and conditions of any Margin
Account Agreement. Without limiting the generality of the foregoing, the
Custodian shall be under no duty to inquire into, and shall not be liable for,
the accuracy of any statements or representations contained in any such
instrument or other notice including, without limitation, any specification of
any amount to be paid to a broker, dealer, futures commission merchant or
Clearing Member. This paragraph shall not excuse any failure by the Custodian to
have acted in accordance with any Margin Agreement it has executed or any
Certificate, Oral Instructions, or Written Instructions given in accordance with
this Agreement.
13. The books and records pertaining to the Fund, as described in Appendix
E hereto, which are in the possession of the Custodian shall be the property of
the Fund. Such books and records shall be prepared and maintained by the
Custodian as required by the Investment Company Act of 1940, as amended, and
other applicable Securities laws and rules and regulations. The Fund, or the
Fund's authorized representatives, shall have access to such books and records
during the Custodian's normal business hours. Upon the reasonable request of the
Fund, copies of any such books and records shall be provided by the Custodian to
the Fund or the Fund's authorized representative, and the Fund shall reimburse
the Custodian its expenses of providing such copies. Upon reasonable request of
the Fund, the Custodian shall provide in hard copy or on micro-film, whichever
the Custodian elects, any records included in any such delivery which are
maintained by the Custodian on a computer disc, or are similarly maintained, and
the Fund shall reimburse the Custodian for its expenses of providing such hard
copy or micro-film.
14. The Custodian shall provide the Fund with any report obtained by the
Custodian on the system of internal accounting control of the Book-Entry system,
each Depository or O.C.C., and with such reports on its own systems of internal
accounting control as the Fund may reasonably request from time to time.
15. The Custodian shall furnish upon request annually to the
Fund a letter prepared by the Custodian's accountants with respect
to the Custodian's internal systems and controls in the form
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generally provided by the Custodian to other investment companies for which the
Custodian acts as custodian.
16. The Fund agrees to indemnify the Custodian against and save the
Custodian harmless from all liability, claims, losses and demands whatsoever,
including attorney's fees, howsoever arising out of, or related to, the
Custodian's performance of its obligations under this Agreement, except for any
such liability, claim, loss and demand arising out of the negligence, bad faith,
or willful misconduct of the Custodian, any co-Custodian or subcustodian
appointed by the Custodian, or that of the officers, employees, or agents of any
of them.
17. Subject to the foregoing provisions of this Agreement, the Custodian
shall deliver and receive Securities, and receipts with respect to such
Securities, and shall make and receive payments only in accordance with the
customs prevailing from time to time among brokers or dealers in such Securities
and, except as may otherwise be provided by this Agreement or as may be in
accordance with such customs, shall make payment for Securities only against
delivery thereof and deliveries of Securities only against payment therefor.
18. The Custodian will comply with the procedures, guidelines or
restrictions ("Procedures") adopted by the Fund from time to time for particular
types of investments or transactions, e.g., Repurchase Agreements and Reverse
Repurchase Agreements, provided that the Custodian has received from the Fund a
copy of such Procedures. If within ten days after receipt of any such
Procedures, the Custodian determines in good faith that it is unreasonable for
it to comply with any new procedures, guidelines or restrictions set forth
therein, it may within such ten day period send notice to the Fund that it does
not intend to comply with those new procedures, guidelines or restrictions which
it identifies with particularity in such notice, in which event the Custodian
shall not be required to comply with such identified procedures, guidelines or
restrictions; provided, however, that, anything to the contrary set forth herein
or in any other agreement with the Fund, if the Custodian identifies procedures,
guidelines or restrictions with which it does not intend to comply, the Fund
shall be entitled to terminate this Agreement without cost or penalty to the
Fund upon thirty days' written notice.
19. Whenever the Custodian has the authority to deduct monies from the
account for a series without a Certificate, it shall notify the Fund within one
business day of such deduction and the reason for it. Whenever the Custodian has
the authority to sell Securities or any other property of the Fund on behalf of
any
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<PAGE>
Series without a Certificate, the Custodian will notify the Fund of its
intention to do so and afford the Fund the reasonable opportunity to select
which Securities or other property it wishes to sell on behalf of such Series.
If the Fund does not promptly sell sufficient Securities or Deposited Property
on behalf of the Series, then, after notice, the Custodian may proceed with the
intended sale.
20. The Custodian shall have no duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth or
referred to in this Agreement, and no covenant or obligation shall be implied in
this Agreement against the Custodian.
ARTICLE XVII
TERMINATION
1. Except as provided in paragraph 3 of this Article, this Agreement shall
continue until terminated by either the Custodian giving to the Fund, or the
Fund giving to the Custodian, a notice in writing specifying the date of such
termination, which date shall be not less than 60 days after the date of the
giving of such notice. In the event such notice or a notice pursuant to
paragraph 3 of this Article is given by the Fund, it shall be accompanied by a
copy of a resolution of the Board of Trustees of the Fund, certified by an
Officer and the Secretary or an Assistant Secretary of the Fund, electing to
terminate this Agreement and designating a successor custodian or custodians,
each of which shall be eligible to serve as a custodian for the Securities of a
management investment company under the Investment Company Act of 1940. In the
event such notice is given by the Custodian, the Fund shall, on or before the
termination date, deliver to the Custodian a copy of a resolution of the Board
of Trustees of the Fund, certified by the Secretary or any Assistant Secretary,
designating a successor custodian or custodians. In the absence of such
designation by the Fund, the Custodian may designate a successor custodian which
shall be a bank or trust company eligible to serve as a custodian for Securities
of a management investment company under the Investment Company Act of 1940 and
which is acceptable to the Fund. Upon the date set forth in such notice this
Agreement shall terminate, and the Custodian shall upon receipt of a notice of
acceptance by the successor custodian on that date deliver directly to the
successor custodian all Securities and moneys then owned by the Fund and held by
it as Custodian, after deducting all fees, expenses and other amounts for the
payment or reimbursement of which it shall then be entitled.
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<PAGE>
2. If a successor custodian is not designated by the Fund or the Custodian
in accordance with the preceding paragraph, the Fund shall upon the date
specified in the notice of termination of this Agreement and upon the delivery
by the Custodian of all Securities (other than Securities held in the Book-Entry
System which cannot be delivered to the Fund) and moneys then owned by the Fund
be deemed to be its own custodian and the Custodian shall thereby be relieved of
all duties and responsibilities pursuant to this Agreement arising thereafter,
other than the duty with respect to Securities held in the Book Entry System
which cannot be delivered to the Fund to hold such Securities hereunder in
accordance with this Agreement.
3. Notwithstanding the foregoing, the Fund may terminate this Agreement
upon the date specified in a written notice in the event of the "Bankruptcy" of
The Bank of New York. As used in this sub-paragraph, the term "Bankruptcy" shall
mean The Bank of New York's making a general assignment, arrangement or
composition with or for the benefit of its creditors, or instituting or having
instituted against it a proceeding seeking a judgment of insolvency or
bankruptcy or the entry of a order for relief under any applicable bankruptcy
law or any other relief under any bankruptcy or insolvency law or other similar
law affecting creditors rights, or if a petition is presented for the winding up
or liquidation of the party or a resolution is passed for its winding up or
liquidation, or it seeks, or becomes subject to, the appointment of an
administrator, receiver, trustee, custodian or other similar official for it or
for all or substantially all of its assets or its taking any action in
furtherance of, or indicating its consent to approval of, or acquiescence in,
any of the foregoing.
ARTICLE XVIII
TERMINAL LINK
1. At no time and under no circumstances shall the Fund be obligated to
have or utilize the Terminal Link, and the provisions of this Article shall
apply if, but only if, the Fund in its sole and absolute discretion elects to
utilize the Terminal Link to transmit Certificates to the Custodian.
2. The Terminal Link shall be utilized only for the purpose of the Fund
providing Certificates to the Custodian and the Custodian providing notices to
the Fund and only after the Fund shall have established access codes and
internal safekeeping procedures to safeguard and protect the confidentiality and
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availability of such access codes. Each use of the Terminal Link by the Fund
shall constitute a representation and warranty that at least two officers have
each utilized an access code that such internal safekeeping procedures have been
established by the Fund, and that such use does not contravene the Investment
Company Act of 1940 and the rules and regulations thereunder.
3. Each party shall obtain and maintain at its own cost and expense all
equipment and services, including, but not limited to communications services,
necessary for it to utilize the Terminal Link, and the other party shall not be
responsible for the reliability or availability of any such equipment or
services, except that the Custodian shall not pay any communications costs of
any line leased by the Fund, even if such line is also used by the Custodian.
4. The Fund acknowledges that any data bases made available as part of, or
through the Terminal Link and any proprietary data, software, processes,
information and documentation (other than any such which are or become part of
the public domain or are legally required to be made available to the public)
(collectively, the "Information"), are the exclusive and confidential property
of the Custodian. The Fund shall, and shall cause others to which it discloses
the Information, to keep the Information confidential by using the same care and
discretion it uses with respect to its own confidential property and trade
secrets, and shall neither make nor permit any disclosure without the express
prior written consent of the Custodian.
5. Upon termination of this Agreement for any reason, each Fund shall
return to the Custodian any and all copies of the Information which are in the
Fund's possession or under its control, or which the Fund distributed to third
parties. The provisions of this Article shall not affect the copyright status of
any of the Information which may be copyrighted and shall apply to all
Information whether or not copyrighted.
6. The Custodian reserves the right to modify the Terminal Link from time
to time without notice to the Fund, except that the Custodian shall give the
Fund notice not less than 75 days in advance of any modification which would
materially adversely affect the Fund's operation, and the Fund agrees not to
modify or attempt to modify the Terminal Link without the Custodian's prior
written consent. The Fund acknowledges that any software provided by the
Custodian as part of the Terminal Link is the property of the Custodian and,
accordingly, the Fund agrees that any modifications to the same, whether by the
Fund or the Custodian and whether with or without the Custodian's consent, shall
become the property of the Custodian.
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<PAGE>
7. Neither the Custodian nor any manufacturers and suppliers it utilizes
or the Fund utilizes in connection with the Terminal Link makes any warranties
or representations, express or implied, in fact or in law, including but not
limited to warranties of merchantability and fitness for a particular purpose.
8. Each party will cause its officers and employees to treat the
authorization codes and the access codes applicable to Terminal Link with
extreme care, and irrevocably authorizes the other to act in accordance with and
rely on Certificates and notices received by it through the Terminal Link. Each
party acknowledges that it is its responsibility to assure that only its
authorized persons use the Terminal Link on its behalf, and that a party shall
not be responsible nor liable for use of the Terminal Link on behalf of the
other party by unauthorized persons of such other party.
9. Notwithstanding anything else in this Agreement to the contrary,
neither party shall have any liability to the other for any losses, damages,
injuries, claims, costs or expenses arising as a result of a delay, omission or
error in the transmission of a Certificate or notice by use of the Terminal Link
except for money damages for those suffered as the result of the negligence, bad
faith or willful misconduct of such party or its officers, employees or agents
in an amount not exceeding for any incident $100,000; provided, however, that a
party shall have no liability under this Section 9 if the other party fails to
comply with the provisions of Section 11.
10. Without limiting the generality of the foregoing, in no event shall
either party or any manufacturer or supplier of its computer equipment, software
or services relating to the Terminal Link be responsible for any special,
indirect, incidental or consequential damages which the other party may incur or
experience by reason of its use of the Terminal Link even if such party,
manufacturer or supplier has been advised of the possibility of such damages,
nor with respect to the use of the Terminal Link shall either party or any such
manufacturer or supplier be liable for acts of God, or with respect to the
following to the extent beyond such person's reasonable control: machine or
computer breakdown or malfunction, interruption or malfunction of communication
facilities, labor difficulties or any other similar or dissimilar cause.
11. The Fund shall notify the Custodian of any errors, omissions or
interruptions in, or delay or unavailability of, the Terminal Link as promptly
as practicable, and in any event within 24 hours after the earliest of (i)
discovery thereof, and (ii) in the case of any error, the date of actual receipt
of the earliest
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notice which reflects such error, it being agreed that discovery and receipt of
notice may only occur on a business day. The Custodian shall promptly advise the
Fund whenever the Custodian learns of any errors, omissions or interruption in,
or delay or unavailability of, the Terminal Link.
12. Each party shall, as soon as practicable after its receipt of a
Certificate or a notice transmitted by the Terminal Link, verify to the other
party by use of the Terminal Link its receipt of such Certificate or notice, and
in the absence of such verification the party to which the Certificate or notice
is sent shall not be liable for any failure to act in accordance with such
Certificate or notice and the sending party may not claim that such Certificate
or notice was received by the other party.
ARTICLE XIX
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of the
present Officers of the Fund under its seal, setting forth the names and the
signatures of the present Authorized Persons. The Fund agrees to furnish to the
Custodian a new Certificate in similar form in the event that any such present
Authorized Person ceases to be an Authorized Person or in the event that other
or additional Authorized Persons are elected or appointed. Until such new
Certificate shall be received, the Custodian shall be entitled to rely and to
act upon Oral Instructions, Written Instructions, or signatures of the present
Authorized Persons as set forth in the last delivered Certificate to the extent
provided by this Agreement.
2. Annexed hereto as Appendix B is a Certificate signed by two of the
present Officers of the Fund under its seal, setting forth the names and the
signatures of the present Officers of the Fund. The Fund agrees to furnish to
the Custodian a new Certificate in similar form in the event any such present
officer ceases to be an officer of the Fund, or in the event that other or
additional officers are elected or appointed. Until such new Certificate shall
be received, the Custodian shall be entitled to rely and to act upon the
signatures of the officers as set forth in the last delivered Certificate to the
extent provided by this Agreement.
3. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Custodian, other than
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any Certificate or Written Instructions, shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its offices at 90
Washington Street, New York, New York 10286, or at such other place as the
Custodian may from time to time designate in writing.
4. Any notice or other instrument in writing, authorized or rehired by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its office at the address for the
Fund first above written, or at such other place as the Fund may from time to
time designate in writing.
5. This Agreement constitutes the entire agreement between the parties,
replaces all prior agreements and may not be amended or modified in any manner
except by a written agreement executed by both parties with the same formality
as this Agreement and approved by a resolution of the Board of Trustees of the
Fund, except that Appendices A and B may be amended unilaterally by the Fund
without such an approving resolution.
6. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of the Custodian, or by the Custodian or The Bank of New York without the
written consent of the Fund, authorized or approved by a resolution of the
Fund's Board of Trustees. For purposes of this paragraph, no merger,
consolidation, or amalgamation of the Custodian, The Bank of New York, or the
Fund shall be deemed to constitute an assignment of this Agreement.
7. This Agreement shall be construed in accordance with the laws of the
State of New York without giving effect to conflict of laws principles thereof.
Each party hereby consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any dispute arising
hereunder and hereby waives its right to trial by jury.
8. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
9. A copy of the Declaration of Trust of the Fund is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed on behalf of the Board of Trustees of the Fund as
Trustees and not individually and that the obligations of the instrument are not
binding upon any of
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the Trustees or shareholders individually but are binding upon the assets and
property of the Fund; provided, however, that the Declaration of Trust of the
Fund provides that the assets of a particular series of the Fund shall under no
circumstances be charges with liabilities attributable to any other series of
the Fund and that all persons extending credit to, or contracting with or having
any claim against a particular series of the Fund shall look only to the assets
of that particular series for payment of such credit, contract or claim.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective Officers, thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
Oppenheimer Real Asset Fund
By: /s/ Andrew J. Donohue
------------------------
Andrew J. Donohue, Vice President
[SEAL]
Attest:
/s/ Robert G. Zack
- -----------------------------------
Robert G. Zack, Assistant Secretary
THE BANK OF NEW YORK
[SEAL] By: /s/ Jorge Ramos
---------------
Jorge Ramos
Attest:
- -----------------------
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APPENDIX A
I, Andrew J. Donohue, Vice President, and I, Robert G. Zack,
Assistant Secretary, of Oppenheimer Real Asset Fund, a
Massachusetts business trust (the "Fund") do hereby certify that:
The following individuals have been duly authorized by the Board of
Trustees of the Fund in conformity with the Fund's Declaration of Trust and
By-Laws to give Oral instructions and Written Instructions on behalf of the
Fund, except that those persons designated as being an "Officer of
OppenheimerFunds Services" shall be an Authorized Person only for purposes of
Articles XII and XIII. The signatures set forth opposite their respective names
are their true and correct signatures.
<TABLE>
<CAPTION>
Name Position Signature
<S> <C> <C>
George C. Bowen Treasurer /s/ George C. Bowen
--------------------
Andrew J. Donohue Executive Vice President/s/ Andrew J. Donohue
---------------------
OFI
Robert G. Zack Assistant Secretary /s/ Robert G. Zack
---------------------
Russell Read Vice President OFI /s/ Russell Read
---------------------
Mark J.P. Anson Vice President ORAMI /s/ Mark J.P. Anson
--------------------
Katherine P. Feld Vice President and /s/ Katherine P. Feld
Secretary ORAMI ______________________
Mitchell J. LindauVice President of OFI /s/ Mitchell J. Lindauer
------------------------
Robert Bishop Assistant Treasurer /s/ Robert Bishop
-------------------------
Scott Farrar Assistant Treasurer /s/ Scott Farrar
-------------------------
Paul Burke Controller OFI /s/ Paul Burke
-------------------------
Craig Kinnunen Controller OFI /s/ Craig Kinnunen
-------------------------
Kim Harbage Controller OFI /s/ Kim Harbage
-------------------------
Kevin Baum Securities Coordin/s/ Kevin Baum
-------------------------
OFI
</TABLE>
<PAGE>
IN WITNESS WHEREOF, I hereunto set my hand in the seal of Oppenheimer Real Asset
Fund, as of the 15th day of January, 1997.
/s/ Andrew J. Donohue
---------------------------
Andrew J. Donohue
Vice President
/s/ Robert G. Zack
------------------
Robert G. Zack
Assistant Secretary
<PAGE>
APPENDIX B
I, Andrew J. Donohue, Vice President, and I, Robert G. Zack,
Assistant Secretary, of Oppenheimer Real Asset Fund, a
Massachusetts business trust (the "Fund"), do hereby certify that:
The following individuals for whom a position other than "Officer of
OppenheimerFunds Services" is specified serve in the following positions with
the Fund and each has been duly elected or appointed by the Board of Trustees of
the Fund to each such position and qualified therefor in conformity with the
Fund's Declaration of Trust and By-Laws. With respect to the following
individuals for whom a position of "Officer of OppenheimerFunds Services" is
specified, each such individual has been designated by a resolution of the Board
of Trustees of the Fund to be an Officer for purposes of the Fund's Custody
Agreement with The Bank of New York, but only for purposes of Articles XII and
XIII thereof and a certified copy of such resolution is attached hereto. The
signatures of each individual below set forth opposite their respective names
are their true and correct signatures:
<TABLE>
<CAPTION>
Name Position Signature
<S> <C> <C>
George C. Bowen Treasurer /s/ George C. Bowen
--------------------
Andrew J. Donohue Executive Vice President/s/ Andrew J. Donohue
---------------------
OFI
Robert G. Zack Assistant Secretary /s/ Robert G. Zack
---------------------
Russell Read Vice President OFI /s/ Russell Read
---------------------
Mark J.P. Anson Vice President ORAMI /s/ Mark J.P. Anson
--------------------
Katherine P. Feld Vice President and /s/ Katherine P. Feld
Secretary ORAMI ______________________
Mitchell J. LindauVice President of OFI /s/ Mitchell J. Lindauer
------------------------
Robert Bishop Assistant Treasurer /s/ Robert Bishop
-------------------------
Scott Farrar Assistant Treasurer /s/ Scott Farrar
-------------------------
Paul Burke Controller OFI /s/ Paul Burke
-------------------------
<PAGE>
Craig Kinnunen Controller OFI /s/ Craig Kinnunen
-------------------------
Kim Harbage Controller OFI /s/ Kim Harbage
-------------------------
Kevin Baum Securities Coordin/s/ Kevin Baum
-------------------------
OFI
</TABLE>
IN WITNESS WHEREOF, I hereunto set my hand in the seal of Oppenheimer Real Asset
Fund, as of the 15th day of January, 1997.
/s/ Andrew J. Donohue
-----------------------
Andrew J. Donohue
Vice President
/s/ Robert G. Zack
--------------------
Robert G. Zack
Assistant Secretary
<PAGE>
APPENDIX C
The undersigned, Robert G. Zack, hereby certifies that she is the duly
elected and acting Assistant Secretary of Oppenheimer Real Asset Fund (the
"Fund"), further certifies that the following resolutions were adopted by the
Board of Trustees of the Fund at a meeting duly held on February 25, 1997 at
which a quorum was at all times present and that such resolutions have not been
modified or rescinded and are in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Fund (the "Custody
Agreement") is authorized and instructed on a continuous and ongoing basis
to act in accordance with, and to rely on instructions by the Fund to the
Custodian communicated by a Terminal Link as defined in the Custody
Agreement.
RESOLVED, that the Fund shall establish access codes and grant use of such
access codes only to officers of the Fund as defined in the Custody
Agreement, and shall establish internal safekeeping procedures to
safeguard and protect the confidentiality and availability of such access
codes.
RESOLVED, that Officers of the Fund as defined in the Custody Agreement
shall, following the establishment of such access codes and such internal
safekeeping procedures, advise the Custodian that the same have been
established by delivering a Certificate, as defined in the Custody
Agreement, and the Custodian shall be entitled to rely upon such advise.
IN WITNESS WHEREOF, I hereunto set my hand in the seal of Oppenheimer Real Asset
Fund, as of the 25th day of February, 1997.
/s/ Robert G. Zack
--------------------------
Robert G. Zack
Assistant Secretary
<PAGE>
APPENDIX D
I, Jorge Ramos, an Assistant Vice President with The Bank of New York do
hereby designate the following publications:
The Bond Buyer Depository Trust Company Notices Financial Daily Card Service JJ
Kenney Municipal Bond Service London Financial Times New York Times Standard &
Poor's Called Bond Record Wall Street Journal
IN WITNESS WHEREOF, I hereunto set my hand in the seal of The Bank of New York,
as of the ____ day of __________, 1997.
/s/ Jorge Ramos
------------------------
Jorge Ramos, Vice President
<PAGE>
APPENDIX E
The following books and records pertaining to Oppenheimer Real Asset Fund
shall be prepared and maintained by the Custodian and shall be the property of
the Fund:
None
<PAGE>
EXHIBIT A
CERTIFICATION
The undersigned, Robert G. Zack, hereby certifies that she is the duly
elected and acting Assistant Secretary of Oppenheimer Real Asset Fund, a
Massachusetts business trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of the Fund at a
meeting duly held on February 25, 1997, at which a quorum was at all times
present and that such resolution has not been modified or rescinded and is in
full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund (the
"Custody Agreement") is authorized and instructed on a continuous
and ongoing basis to deposit in the Book-Entry System, as defined in
the Custody Agreement, all Securities eligible for deposit therein,
regardless of the Series to which the same are specifically
allocated, and to utilize the Book-Entry System to the extent
possible in connection with its performance thereunder, including,
without limitation, in connection with settlements of purchases and
sales of Securities, loans of Securities, and deliveries and returns
of Securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
Oppenheimer Real Asset Fund, as of the 25th day of February, 1997.
/s/ Robert G. Zack
-------------------
Robert G. Zack
Assistant Secretary
<PAGE>
EXHIBIT B
CERTIFICATION
The undersigned, Robert G. Zack, hereby certifies that she is the duly
elected and acting Assistant Secretary of Oppenheimer Real Asset Fund, a
Massachusetts business trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of the Fund at a
meeting duly held on February 25, 1997, at which a quorum was at all times
present and that such resolution has not been modified or rescinded and is in
full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund (the
"Custody Agreement") is authorized and instructed on a continuous
and ongoing basis until such time as it receives a Certificate, as
defined in the Custody Agreement, to the contrary to deposit in The
Depository Trust Company ("DTC") as a "Depository" as defined in the
Custody Agreement, all Securities eligible for deposit therein,
regardless of the Series to which the same are specifically
allocated, and to utilize DTC to the extent possible in connection
with its performance thereunder, including, without limitation, in
connection with settlements of purchases and sales of Securities,
loans of Securities, and deliveries and returns of Securities
collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
Oppenheimer Real Asset Fund, as of the 25th day of February, 1997.
/s/ Robert G. Zack
--------------------------
Robert G. Zack
Assistant Secretary
<PAGE>
EXHIBIT B-1
CERTIFICATION
The undersigned, Robert G. Zack, hereby certifies that she is the duly
elected and acting Assistant Secretary of Oppenheimer Real Asset Fund, a
Massachusetts business trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of the Fund at a
meeting duly held on February 25, 1997, at which a quorum was at all times
present and that such resolution has not been modified or rescinded and is in
full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund (the
"Custody Agreement") is authorized and instructed on a continuous
and ongoing basis until such time as it receives a Certificate, as
defined in the Custody Agreement, to the contrary to deposit in the
Participants Trust Company as a Depository, as defined in the
Custody Agreement, all Securities eligible for deposit therein,
regardless of the Series to which the same are specifically
allocated, and to utilize the Participants Trust Company to the
extent possible in connection with its performance thereunder,
including, without limitation, in connection with settlements of
purchases and sales of Securities, loans of Securities, and
deliveries and return of Securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
Oppenheimer Real Asset Fund, as of the 25th day of February, 1997.
/s/ Robert G. Zack
-------------------
Robert G. Zack
Assistant Secretary
<PAGE>
EXHIBIT C
CERTIFICATION
The undersigned, Robert G. Zack, hereby certifies that she is duly elected
and acting Assistant Secretary of Oppenheimer Real Asset Fund, a Massachusetts
business trust (the "Fund") and further certifies that the following resolution
was adopted by the Board of Trustees of the Fund at a meeting duly held on
February 25, 1997, at which a quorum was at all times present and that such
resolution has not been modified or rescinded and is in full force and effect as
of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund (the
"Custody Agreement") is authorized and instructed on a continuous
and ongoing basis until such time as it receives a Certificate, as
defined in the Custody Agreement, to the contrary, to accept,
utilize and act with respect to Clearing Member confirmations for
Options and transactions in Options, regardless of the Series to
which the same are specifically allocated, as such terms are defined
in the Custody Agreement, as provided in the Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
Oppenheimer Real Asset Fund, as of the 25th day of February, 1997.
/s/ Robert G. Zack
-------------------
Robert G. Zack
Assistant Secretary
CUSTODY\735
<PAGE>
EXHIBIT D
[FORM OF FOREIGN SUBCUSTODIAN AGREEMENT]
<PAGE>
Appendix A
Article I.2
Appendix B
Article I.24
Appendix C
Article I.35
Apendix D
Article III.5(b)
Appendix E
Article XVI.13
Exhibit A
Exhibit B
Exhibit B-1
Exhibit C
Exhibit D
Schedule A
Article XV.1
CUSTODY\735
February 5, 1997
Oppenheimer Real Asset Fund
3410 South Galena Street
Denver, Colorado 80231
Gentlemen:
In connection with the proposed public offering of Class A, Class B, Class C and
Class Y shares of beneficial interest of Oppenheimer Real Asset Fund (the
"Fund"), we have examined such records and documents as we deem necessary for
the purpose of this opinion.
The Fund is a voluntary unincorporated association duly organized and validly
existing under the laws of the Commonwealth of Massachusetts. As of the date of
this letter, it is our opinion that the indefinite number of shares of the Fund
covered by the Registration Statement for the Fund on Form N-1A, when issued and
paid for in accordance with the terms of the offering, as set forth in the
Prospectus and Statement of Additional Information forming a part of the
Registration Statement, will be, when such Registration Statement shall have
become effective, legally issued, fully paid and non-assessable by the Fund,
subject to the matters set forth in the next paragraph.
Under Massachusetts law, shareholders of the Fund may, under certain
circumstances, be held personally liable as partners for the obligations of the
Fund. The Declaration of Trust does, however, contain an express disclaimer of
shareholder liability for acts or obligations of the Fund and requires that
notice of such disclaimer be given in each agreement, obligation, or instrument
entered into or executed by the Fund or the Trustees. The Declaration of Trust
provides for indemnification out of the Fund's property of any shareholder held
personally liable for the obligations of the Fund. The Declaration of Trust also
provides that the Fund shall, upon request, assume the defense of any claim
1
<PAGE>
made against any shareholder for any act or obligation of the Fund
and satisfy any judgment thereon.
We hereby consent to the filing of this opinion as an Exhibit to such
Registration Statement and to the reference to Counsel in such Prospectus and/or
Statement of Additional Information. We also consent to the filing of this
opinion with the authorities administering the securities laws of any
jurisdiction in connection with the offer and sale of its shares under such
laws.
Very truly yours,
MYER, SWANSON, ADAMS & WOLF, P.C.
By /s/ Allan B. Adams
Allan B. Adams
OPINION\735.1
2
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, NY 10022-9100
September 10, 1997
Oppenheimer Real Asset Fund
6803 South Tuscon Way
Englewood, CO 80112
Gentlemen & Ladies:
We hereby consent to the reference to our firm as Special
Counsel in Post-Effective Amendment No. 1 to the Registration Statement on
Form N-1A of Oppenheimer Real Asset Fund (File Nos. 333-14087; 811-7857).
Very truly yours,
/s/Kramer, Levin, Naftalis & Frankel
Kramer, Levin, Naftalis & Frankel
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 1 to
Registration Statement No. 333-14887 of Oppenheimer Real Asset Fund
of our report dated January 16, 1997 appearing in the Statement of
Additional Information, which is a part of such Registration
Statement.
/s/Deloitte & Touche LLP
- --------------------------
DELOITTE & TOUCHE LLP
Denver, Colorado
September 16, 1997
SERVICE PLAN AND AGREEMENT
BETWEEN
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
AND
OPPENHEIMER REAL ASSET FUND
FOR CLASS A SHARES
SERVICE PLAN AND AGREEMENT (the "Plan") dated the 18th day of March, 1997, by
and between OPPENHEIMER REAL ASSET FUND (the "Fund") and
OPPENHEIMERFUNDS
DISTRIBUTOR, INC.
(the "Distributor").
1. The Plan. This Plan is the Fund's written service plan for its Class A Shares
described in the Fund's registration statement as of the date this Plan takes
effect, contemplated by and to comply with Rule 2830 of the NASD Conduct Rules,
pursuant to which the Fund will reimburse the Distributor for a portion of its
costs incurred in connection with the that hold Class A Shares (the "Shares") of
such series and class of the Fund. The Fund may be deemed to be acting as
distributor of securities of which it is the issuer, pursuant to Rule 12b- 1
under the Investment Company Act of 1940 (the "1940 Act"), according to the
terms of this Plan. The Distributor is authorized under the Plan to pay
"Recipients," as hereinafter defined, for rendering services and for the
maintenance of Accounts. Such Recipients are intended to have certain rights as
third-party beneficiaries under this Plan.
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other institution
which: (i) has rendered services in connection with the personal service
and maintenance of Accounts; (ii) shall furnish the Distributor (on behalf
of the Fund) with such information as the Distributor shall reasonably
request to answer such questions as may arise concerning such service; and
(iii) has been selected by the Distributor to receive payments under the
Plan. Notwithstanding the foregoing, a majority of the Fund's Board of
Trustees (the "Board") who are not "interested persons" (as defined in the
1940 Act) and who have no direct or indirect financial interest in the
operation of this Plan or in any agreements relating to this Plan (the
"Independent Trustees") may remove any broker, dealer, bank or other
institution as a Recipient, whereupon such entity's rights as a
third-party beneficiary hereof shall terminate.
(b) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned
beneficially or of record by: (i) such Recipient, or (ii) such customers,
clients and/or accounts as to which such Recipient is a fiduciary or
custodian or co-fiduciary or co-custodian (collectively, the "Customers"),
but in no event shall any such Shares be deemed owned by more than one
Recipient for purposes of this Plan. In the event that two entities would
otherwise qualify as Recipients as to the same Shares, the Recipient which
is the dealer of record on the Fund's books shall be deemed the Recipient
as to such Shares for purposes of this Plan.
-1-
<PAGE>
3. Payments.
(a) Under the Plan, the Fund will make payments to the Distributor, within
forty-five (45) days of the end of each calendar quarter, in the amount of
the lesser of: (i) .0625% (.25% on an annual basis) of the average during
the calendar quarter of the aggregate net asset value of the Shares,
computed as of the close of each business day, or (ii) the Distributor's
actual expenses under the Plan for that quarter of the type approved by
the Board. The Distributor will use such fee received from the Fund in its
entirety to reimburse itself for payments to Recipients and for its other
expenditures and costs of the type approved by the Board incurred in
connection with the personal service and maintenance of Accounts
including, but not limited to, the services described in the following
paragraph. The Distributor may make Plan payments to any "affiliated
person" (as defined in the 1940 Act) of the Distributor if such affiliated
person qualifies as a Recipient.
The services to be rendered by the Distributor and Recipients in
connection with the personal service and the maintenance of Accounts may
include, but shall not be limited to, the following: answering routine
inquiries from the Recipient's customers concerning the Fund, providing
such customers with information on their investment in shares, assisting
in the establishment and maintenance of accounts or sub-accounts in the
Fund, making the Fund's investment plans and dividend payment options
available, and providing such other information and customer liaison
services and the maintenance of Accounts as the Distributor or the Fund
may reasonably request. It may be presumed that a Recipient has provided
services qualifying for compensation under the Plan if it has Qualified
Holdings of Shares to entitle it to payments under the Plan. In the event
that either the Distributor or the Board should have reason to believe
that, notwithstanding the level of Qualified Holdings, a Recipient may not
be rendering appropriate services, then the Distributor, at the request of
the Board, shall require the Recipient to provide a written report or
other information to verify that said Recipient is providing appropriate
services in this regard. If the Distributor still is not satisfied, it may
take appropriate steps to terminate the Recipient's status as such under
the Plan, whereupon such entity's rights as a third-party beneficiary
hereunder shall terminate.
Payments received by the Distributor from the Fund under the Plan
will not be used to pay any interest expense, carrying charges or other
financial costs, or allocation of overhead by the Distributor, or for any
other purpose other than for the payments described in this Section 3. The
amount payable to the Distributor each quarter will be reduced to the
extent that reimbursement payments otherwise permissible under the Plan
have not been authorized by the Board of Trustees for that quarter. Any
unreimbursed expenses incurred for any quarter by the Distributor may not
be recovered in later periods.
(b) The Distributor shall make payments to any Recipient quarterly, within
forty-five (45) days of the end of each calendar quarter, at a rate not to
exceed .0625% (.25% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of the Shares computed as of the
close of each business day, of Qualified Holdings owned beneficially or of
record by the Recipient or by its Customers. However, no such payments
shall be made to any Recipient for any such quarter in which its Qualified
Holdings do not equal or exceed, at the end of such quarter, the minimum
amount ("Minimum Qualified Holdings"), if any, to be set from time to time
by a majority of the Independent Trustees. A majority of the Independent
Trustees may at any time or from time to time increase or decrease and
thereafter adjust the rate of fees to be paid to the Distributor or to any
Recipient, but not to exceed the rate set forth above, and/or increase or
decrease the number of shares constituting
-2-
<PAGE>
Minimum Qualified Holdings. The Distributor shall notify all Recipients of
the Minimum Qualified Holdings and the rate of payments hereunder
applicable to Recipients, and shall provide each Recipient with written
notice within thirty (30) days after any change in these provisions.
Inclusion of such provisions or a change in such provisions in a revised
current prospectus shall constitute sufficient notice.
(c) Under the Plan, payments may be made to Recipients: (i) by Oppenheimer Real
Asset Management, Inc. from its own resources (which may include profits
derived from the advisory fee it receives from the Fund), or (ii) by the
Distributor (a subsidiary of OppenheimerFunds, Inc.), from its own
resources or from its borrowings.
4. Selection and Nomination of Trustees. While this Plan is in effect, the
selection or replacement of Independent Trustees and the nomination of those
persons to be Trustees of the Fund who are not "interested persons" of the Fund
shall be committed to the discretion of the Independent Trustees. Nothing herein
shall prevent the Independent Trustees from soliciting the views or the
involvement of others in such selection or nomination if the final decision on
any such selection and nomination is approved by a majority of the incumbent
Independent Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Fund shall
provide at least quarterly a written report to the Fund's Board for its review,
detailing the amount of all payments made pursuant to this Plan, the identity of
the Recipient of each such payment, and the purposes for which the payments were
made. The report shall state whether all provisions of Section 3 of this Plan
have been complied with. The Distributor shall annually certify to the Board the
amount of its total expenses incurred that year with respect to the personal
service and maintenance of Accounts in conjunction with the Board's annual
review of the continuation of the Plan.
6. Related Agreements. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by vote of a majority of the Independent
Trustees or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding voting securities of the Class, on not more than
sixty days written notice to any other party to the agreement; (ii) such
agreement shall automatically terminate in the event of its "assignment" (as
defined in the 1940 Act); (iii) it shall go into effect when approved by a vote
of the Board and its Independent Trustees cast in person at a meeting called for
the purpose of voting on such agreement; and (iv) it shall, unless terminated as
herein provided, continue in effect from year to year only so long as such
continuance is specifically approved at least annually by the Board and its
Independent Trustees cast in person at a meeting called for the purpose of
voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan has been
approved by a vote of the Independent Trustees cast in person at a meeting
called on August 27, 1996 for the purpose of voting on this Plan, and shall take
effect on the date that the Fund's Registration Statement is declared effective
by the Securities and Exchange Commission. Unless terminated as hereinafter
provided, it shall continue in effect for one year from such date of
effectiveness and from year to year thereafter or as the Board may otherwise
determine only so long as such continuance is specifically approved at least
annually by the Board and its Independent Trustees cast in person at a meeting
called for the purpose of voting on such continuance. This Plan may be
terminated at any time by vote of a majority of the Independent Trustees or by
the vote of the holders of a "majority" (as defined in the 1940 Act) of the
Fund's outstanding voting securities of the Class.
-3-
<PAGE>
This Plan may not be amended to increase materially the amount of payments to be
made without approval of the Class A Shareholders, in the manner described
above, and all material amendments must be approved by a vote of the Board and
of the Independent Trustees.
8. Disclaimer of Shareholder and Trustee Liability. The Distributor understands
that the obligations of the Fund under this Plan are not binding upon any
Trustee or shareholder of the Fund personally, but bind only the Fund and the
Fund's property. The Distributor represents that it has notice of the provisions
of the Declaration of Trust of the Fund disclaiming shareholder and Trustee
liability for acts or obligations of the Fund.
OPPENHEIMER REAL ASSET FUND
/s/ Bridget Macaskill
By: _______________________________
Bridget Macaskill, President
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
/s/ Andrew J. Donohue
By: __________________________________
Andrew J. Donohue, Vice President
OFMI\735A
-4-
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
With
OppenheimerFunds Distributor, Inc.
For Class B Shares of
Oppenheimer Real Asset Fund
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the 18th day
of
March, 1997, by and between Oppenheimer Real Asset Fund (the "Fund") and
OppenheimerFunds Distributor, Inc. (the "Distributor").
1. The Plan. This Plan is the Fund's written distribution and service plan for
Class B shares of the Fund (the "Shares"), contemplated by Rule 12b-1 as it may
be amended from time to time (the "Rule") under the Investment Company Act of
1940 (the "1940 Act"), pursuant to which the Fund will compensate the
Distributor for its services in connection with the distribution of Shares, and
the personal service and maintenance of shareholder accounts that hold Shares
("Accounts"). The Fund may act as distributor of securities of which it is the
issuer, pursuant to the Rule, according to the terms of this Plan. The terms and
provisions of this Plan shall be interpreted and defined in a manner consistent
with the provisions and definitions contained in (i) the 1940 Act, (ii) the
Rule, (iii) Rule 2830 of the Conduct Rules of the National Association of
Securities Dealers, Inc., or any amendment or successor to such rule (the "NASD
Conduct Rules") and (iv) any conditions pertaining either to
distribution-related expenses or to a plan of distribution to which the Fund is
subject under any order on which the Fund relies, issued at any time by the U.S.
Securities and Exchange Commission ("SEC").
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other person or
entity which: (i) has rendered assistance (whether direct, administrative or
both) in the distribution of Shares or has provided administrative support
services with respect to Shares held by Customers (defined below) of the
Recipient; (ii) shall furnish the Distributor (on behalf of the Fund) with such
information as the Distributor shall reasonably request to answer such questions
as may arise concerning the sale of Shares; and (iii) has been selected by the
Distributor to receive payments under the Plan.
(b) "Independent Trustees" shall mean the members of the Fund's Board of
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Fund and who have no direct or indirect financial interest in the operation of
this Plan or in any agreement relating to this Plan.
(c) "Customers" shall mean such brokerage or other customers or investment
advisory or other clients of a Recipient, and/or accounts as to which such
Recipient provides administrative support services or is a custodian or other
fiduciary.
(d) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned
beneficially or of record by: (i) such Recipient, or (ii) such Recipient's
Customers, but in no event shall any such Shares be deemed owned by more than
one Recipient for purposes of this Plan. In the event
- 1 -
<PAGE>
that more than one person or entity would otherwise qualify as Recipients as to
the same Shares, the Recipient which is the dealer of record on the Fund's books
as determined by the Distributor shall be deemed the Recipient as to such Shares
for purposes of this Plan.
3. Payments for Distribution Assistance and Administrative Support Services.
(a) Payments to the Distributor. In consideration of the payments made by
the Fund to the Distributor under this Plan, the Distributor shall provide
administrative support services and distribution assistance services to the
Fund. Such services include distribution assistance and administrative support
services rendered in connection with Shares acquired (1) by purchase, (2) in
exchange for shares of another investment company for which the Distributor
serves as distributor or sub-distributor, or (3) pursuant to a plan of
reorganization to which the Fund is a party. If the Board believes that the
Distributor may not be rendering appropriate distribution assistance or
administrative support services in connection with the sale of Shares, then the
Distributor, at the request of the Board, shall provide the Board with a written
report or other information to verify that the Distributor is providing
appropriate services in this regard. For such services, the Fund will make the
following payments to the Distributor:
(i) Administrative Support Services Fees. Within forty-five (45)
days of the end of each calendar quarter, the Fund will make payments in the
aggregate amount of 0.0625% (0.25% on an annual basis) of the average during
that calendar quarter of the aggregate net asset value of the Shares computed as
of the close of each business day (the "Service Fee"). Such Service Fee payments
received from the Fund will compensate the Distributor for providing
administrative support services with respect to Accounts. The administrative
support services in connection with Accounts may include, but shall not be
limited to, the administrative support services that a Recipient may render as
described in Section 3(b)(ii) below.
(ii) Distribution Assistance Fees (Asset-Based Sales Charge). Within
ten (10) days of the end of each month, the Fund will make payments in the
aggregate amount of 0.0625% (0.75% on an annual basis) of the average during the
month of the aggregate net asset value of Shares computed as of the close of
each business day (the "Asset-Based Sales Charge") outstanding for no more than
six years (the "Maximum Holding Period"). Such Asset-Based Sales Charge payments
received from the Fund will compensate the Distributor for providing
distribution assistance in connection with the sale of Shares.
The distribution assistance to be rendered by the Distributor in
connection with the Shares may include, but shall not be limited to, the
following: (i) paying sales commissions to any broker, dealer, bank or other
person or entity that sells Shares, and\or paying such persons "Advance Service
Fee Payments" (as defined below) in advance of, and\or in amounts greater than,
the amount provided for in Section 3(b) of this Agreement; (ii) paying
compensation to and expenses of personnel of the Distributor who support
distribution of Shares by Recipients; (iii) obtaining financing or providing
such financing from its own resources, or from an affiliate, for the interest
and other borrowing costs of the Distributor's unreimbursed expenses incurred in
rendering distribution assistance and administrative support services to the
Fund; and (iv) paying other direct
- 2 -
<PAGE>
distribution costs, including without limitation the costs of sales literature,
advertising and prospectuses (other than those prospectuses furnished to current
holders of the Fund's shares ("Shareholders")) and state "blue sky" registration
expenses.
(b) Payments to Recipients. The Distributor is authorized under the Plan
to pay Recipients (1) distribution assistance fees for rendering distribution
assistance in connection with the sale of Shares and/or (2) service fees for
rendering administrative support services with respect to Accounts. However, no
such payments shall be made to any Recipient for any such quarter in which its
Qualified Holdings do not equal or exceed, at the end of such quarter, the
minimum amount ("Minimum Qualified Holdings"), if any, that may be set from time
to time by a majority of the Independent Trustees. All fee payments made by the
Distributor hereunder are subject to reduction or chargeback so that the
aggregate service fee payments and Advance Service Fee Payments do not exceed
the limits on payments to Recipients that are, or may be, imposed by the NASD
Conduct Rules. The Distributor may make Plan payments to any "affiliated person"
(as defined in the 1940 Act) of the Distributor if such affiliated person
qualifies as a Recipient or retain such payments if the Distributor qualifies as
a Recipient.
(i) Service Fee. In consideration of the administrative support
services provided by a Recipient during a calendar quarter, the Distributor
shall make service fee payments to that Recipient quarterly, within forty-five
(45) days of the end of each calendar quarter, at a rate not to exceed 0.0625%
(0.25% on an annual basis) of the average during the calendar quarter of the
aggregate net asset value of Shares, computed as of the close of each business
day, constituting Qualified Holdings owned beneficially or of record by the
Recipient or by its Customers for a period of more than the minimum period (the
"Minimum Holding Period"), if any, that may be set from time to time by a
majority of the Independent Trustees.
Alternatively, the Distributor may, at its sole option, make the
following service fee payments to any Recipient quarterly, within forty-five
(45) days of the end of each calendar quarter: (i) "Advance Service Fee
Payments" at a rate not to exceed 0.25% of the average during the calendar
quarter of the aggregate net asset value of Shares, computed as of the close of
business on the day such Shares are sold, constituting Qualified Holdings, sold
by the Recipient during that quarter and owned beneficially or of record by the
Recipient or by its Customers, plus (ii) service fee payments at a rate not to
exceed 0.0625% (0.25% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of Shares, computed as of the close of
each business day, constituting Qualified Holdings owned beneficially or of
record by the Recipient or by its Customers for a period of more than one (1)
year. At the Distributor's sole option, the Advance Service Fee Payments may be
made more often than quarterly, and sooner than the end of the calendar quarter.
In the event Shares are redeemed less than one year after the date such Shares
were sold, the Recipient is obligated to and will repay the Distributor on
demand a pro rata portion of such Advance Service Fee Payments, based on the
ratio of the time such Shares were held to one (1) year.
The administrative support services to be rendered by Recipients in
connection with the Accounts may include, but shall not be limited to, the
following: answering routine inquiries
- 3 -
<PAGE>
concerning the Fund, assisting in the establishment and maintenance of accounts
or sub-accounts in the Fund and processing Share redemption transactions, making
the Fund's investment plans and dividend payment options available, and
providing such other information and services in connection with the rendering
of personal services and/or the maintenance of Accounts, as the Distributor or
the Fund may reasonably request.
(ii) Distribution Assistance Fees: (Asset-Based Sales Charge) Payments. In
its sole discretion and irrespective of whichever alternative method of making
service fee payments to Recipients is selected by the Distributor, in addition
the Distributor may make distribution service fee payments to a Recipient
quarterly, within forty-five (45) days after the end of each calendar quarter,
at a rate not to exceed 0.1875% (0.075% on an annual basis) of the average
during the calendar quarter of the aggregate net asset value of shares computed
as of the close of each business day constituting Qualified Holdings owned
beneficially or of record by the Recipient or its Customers for no more than six
years and for any minimum period that the Distributor may establish. Such
payments shall be made only to Recipients that are registered with the SEC as a
broker-dealer or are exempt from registration.
The distribution assistance to be rendered by the Recipients in
connection with the sale of Shares may include, but shall not be limited to, the
following: distributing sales literature and prospectuses other than those
furnished to current Shareholders, providing compensation to and expenses of
personnel of the Recipient who support the distribution of Shares by the
Recipient, and providing such other information and services in connection with
the distribution of Shares as the Distributor or the Fund may reasonably
request.
(c) A majority of the Independent Trustees may at any time or from time to
time increase or decrease the rate of fees to be paid to the Distributor or to
any Recipient, but not to exceed the rates set forth above, and/or direct the
Distributor to increase or decrease (the "Maximum Holding Period"), any Minimum
Holding Period or any Minimum Qualified Holdings. The Distributor shall notify
all Recipients of any Minimum Qualified Holdings, Maximum Holding Period and
Minimum Holding Period, if any, that are established and the rate of payments
hereunder applicable to Recipients, and shall provide each Recipient with
written notice within thirty (30) days after any change in these provisions.
Inclusion of such provisions or a change in such provisions in a revised current
prospectus shall constitute sufficient notice.
(d) The Service Fee and the Asset-Based Sales Charge on Shares are subject
to reduction or elimination under the limits to which the Distributor is, or may
become, subject under of the NASD Conduct Rules.
(e) Under the Plan, payments may be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include profits
derived from the advisory fee it receives from the Fund), or (ii) by the
Distributor (a subsidiary of OFI), from its own resources, from Asset-Based
Sales Charge payments or from the proceeds of its borrowings.
- 4 -
<PAGE>
(f) Recipients are intended to have certain rights as third-party
beneficiaries under this Plan, subject to the limitations set forth below. It
may be presumed that a Recipient has provided distribution assistance or
administrative support services qualifying for payment under the Plan if it has
Qualified Holdings of Shares that entitle it to payments under the Plan. In the
event that either the Distributor or the Board should have reason to believe
that, notwithstanding the level of Qualified Holdings, a Recipient may not be
rendering appropriate distribution assistance in connection with the sale of
Shares or administrative support services for Accounts, then the Distributor, at
the request of the Board, shall require the Recipient to provide a written
report or other information to verify that said Recipient is providing
appropriate distribution assistance and/or services in this regard. If the
Distributor or the Board of Trustees still is not satisfied after the receipt of
such report, either may take appropriate steps to terminate the Recipient's
status as such under the Plan, whereupon such Recipient's rights as a
third-party beneficiary hereunder shall terminate. Additionally, in their
discretion, a majority of the Fund's Independent Trustees at any time may remove
any broker, dealer, bank or other person or entity as a Recipient, where upon
such person's or entity's rights as a third-party beneficiary hereof shall
terminate. Notwithstanding any other provision of this Plan, this Plan does not
obligate or in any way make the Fund liable to make any payment whatsoever to
any person or entity other than directly to the Distributor.
4. Selection and Nomination of Trustees. While this Plan is in effect, the
selection and nomination of persons to be Trustees of the Fund who are not
"interested persons" of the Fund ("Disinterested Trustees") shall be committed
to the discretion of the incumbent Disinterested Trustees. Nothing herein shall
prevent the incumbent Disinterested Trustees from soliciting the views or the
involvement of others in such selection or nominations as long as the final
decision on any such selection and nomination is approved by a majority of the
incumbent Disinterested Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Fund shall
provide written reports to the Fund's Board for its review, detailing services
rendered in connection with the distribution of the Shares, the amount of all
payments made under this Plan and the purpose for which the payments were made.
The reports shall be provided quarterly, and shall state whether all provisions
of Section 3 of this Plan have been complied with.
6. Related Agreements. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by a vote of a majority of the Independent
Trustees or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding Class B voting shares; (ii) such termination
shall be on not more than sixty days' written notice to any other party to the
agreement; (iii) such agreement shall automatically terminate in the event of
its "assignment" (as defined in the 1940 Act); (iv) such agreement shall go into
effect when approved by a vote of the Board and its Independent Trustees cast in
person at a meeting called for the purpose of voting on such agreement; and (v)
such agreement shall, unless terminated as herein provided, continue in effect
from year to year only so long as such continuance is specifically approved at
least annually by a vote of the Board and its Independent Trustees cast in
person at a meeting called for the purpose of voting on such continuance.
- 5 -
<PAGE>
7. Effectiveness, Continuation, Termination and Amendment. This Plan has been
approved by a vote of the Board and its Independent Trustees cast in person at a
meeting called on August 27, 1996 for the purpose of voting on this Plan, and
shall take effect on the date that the Fund's Registration Statement is declared
effective by the Securities and Exchange Commission. Unless terminated as
hereinafter provided, it shall continue in effect for one year from such date of
effectiveness and from year to year thereafter or as the Board may otherwise
determine only so long as such continuance is specifically approved at least
annually by a vote of the Board and its Independent Trustees cast in person at a
meeting called for the purpose of voting on such continuance.
This Plan may not be amended to increase materially the amount of payments
to be made without approval of the Class C Shareholders, in the manner described
above, and all material amendments must be approved by a vote of the Board and
of the Independent Trustees.
This Plan may be terminated at any time by vote of a majority of the
Independent Trustees or by the vote of the holders of a "majority" (as defined
in the 1940 Act) of the Fund's outstanding voting securities of the Class. In
the event of such termination, the Board and its Independent Trustees shall
determine whether the Distributor is entitled to payment from the Fund of all or
a portion of the Service Fee and/or the Asset-Based Sales Charge in respect of
Shares sold prior to the effective date of such termination.
8. Disclaimer of Shareholder and Trustee Liability. The Distributor understands
that the obligations of the Fund under this Plan are not binding upon any
Trustee or shareholder of the Fund personally, but bind only the Fund and the
Fund's property. The Distributor represents that it has notice of the provisions
of the Declaration of Trust of the Fund disclaiming shareholder and Trustee
liability for acts or obligations of the Fund.
OPPENHEIMER REAL ASSET FUND
/s/ Bridget A. Macaskill
By: _________________________________
Bridget A. Macaskill, President
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
/s/ Andrew J. Donohue
By: _________________________________
Andrew J. Donohue, Vice President
OFMI\735B.WPD
- 6 -
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
with
OppenheimerFunds Distributor, Inc.
For Class C Shares of
Oppenheimer Real Asset Fund
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the 18th day
of
March, 1997, by and between Oppenheimer Real Asset Fund (the "Fund") and
OppenheimerFunds Distributor, Inc. (the "Distributor").
1. The Plan. This Plan is the Fund's written distribution and service plan for
Class C shares of the Fund (the "Shares"), contemplated by Rule 12b-1 as it may
be amended from time to time (the "Rule") under the Investment Company Act of
1940 (the "1940 Act"), pursuant to which the Fund will compensate the
Distributor for its services in connection with the distribution of Shares, and
the personal service and maintenance of shareholder accounts that hold Shares
("Accounts"). The Fund may act as distributor of securities of which it is the
issuer, pursuant to the Rule, according to the terms of this Plan. The terms and
provisions of this Plan shall be interpreted and defined in a manner consistent
with the provisions and definitions contained in (i) the 1940 Act, (ii) the
Rule, (iii) Rule 2830 of the Conduct Rules of the National Association of
Securities Dealers, Inc., or any applicable amendment or successor to such rule
(the "NASD Conduct Rules") and (iv) any conditions pertaining either to
distribution-related expenses or to a plan of distribution to which the Fund is
subject under any order on which the Fund relies, issued at any time by the U.S.
Securities and Exchange Commission ("SEC").
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other person or
entity which: (i) has rendered assistance (whether direct, administrative or
both) in the distribution of Shares or has provided administrative support
services with respect to Shares held by Customers (defined below) of the
Recipient; (ii) shall furnish the Distributor (on behalf of the Fund) with such
information as the Distributor shall reasonably request to answer such questions
as may arise concerning the sale of Shares; and (iii) has been selected by the
Distributor to receive payments under the Plan.
(b) "Independent Trustees" shall mean the members of the Fund's Board of
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Fund and who have no direct or indirect financial interest in the operation of
this Plan or in any agreement relating to this Plan.
(c) "Customers" shall mean such brokerage or other customers or investment
advisory or other clients of a Recipient, and/or accounts as to which such
Recipient provides administrative support services or is a custodian or other
fiduciary.
(d) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned
beneficially or of record by: (i) such Recipient, or (ii) such Recipient's
Customers, but in no event shall any
- 1 -
<PAGE>
such Shares be deemed owned by more than one Recipient for purposes of this
Plan. In the event that more than one person or entity would otherwise qualify
as Recipients as to the same Shares, the Recipient which is the dealer of record
on the Fund's books as determined by the Distributor shall be deemed the
Recipient as to such Shares for purposes of this Plan.
3. Payments for Distribution Assistance and Administrative Support Services.
(a) Payments to the Distributor. In consideration of the payments made by
the Fund to the Distributor under this Plan, the Distributor shall provide
administrative support services and distribution services to the Fund. Such
services include distribution assistance and administrative support services
rendered in connection with Shares (1) sold in purchase transactions, (2) issued
in exchange for shares of another investment company for which the Distributor
serves as distributor or sub-distributor, or (3) issued pursuant to a plan of
reorganization to which the Fund is a party. If the Board believes that the
Distributor may not be rendering appropriate distribution assistance or
administrative support services in connection with the sale of Shares, then the
Distributor, at the request of the Board, shall provide the Board with a written
report or other information to verify that the Distributor is providing
appropriate services in this regard. For such services, the Fund will make the
following payments to the Distributor:
(i) Administrative Support Services Fees. Within forty-five (45)
days of the end of each calendar quarter, the Fund will make payments in the
aggregate amount of 0.0625% (0.25% on an annual basis) of the average during
that calendar quarter of the aggregate net asset value of the Shares computed as
of the close of each business day (the "Service Fee"). Such Service Fee payments
received from the Fund will compensate the Distributor for providing
administrative support services with respect to Accounts. The administrative
support services in connection with Accounts may include, but shall not be
limited to, the administrative support services that a Recipient may render as
described in Section 3(b)(i) below.
(ii) Distribution Assistance Fees (Asset-Based Sales Charge). Within
ten (10) days of the end of each month, the Fund will make payments in the
aggregate amount of 0.0625% (0.75% on an annual basis) of the average during the
month of the aggregate net asset value of Shares computed as of the close of
each business day (the "Asset-Based Sales Charge"). Such Asset-Based Sales
Charge payments received from the Fund will compensate the Distributor for
providing distribution assistance in connection with the sale of Shares.
The distribution assistance services to be rendered by the Distributor in
connection with the Shares may include, but shall not be limited to, the
following: (i) paying sales commissions to any broker, dealer, bank or other
person or entity that sells Shares, and/or paying such persons "Advance Service
Fee Payments" (as defined below) in advance of, and/or in amounts greater than,
the amount provided for in Section 3(b) of this Agreement; (ii) paying
compensation to and expenses of personnel of the Distributor who support
distribution of Shares by Recipients; (iii) obtaining financing or providing
such financing from its own resources, or from an affiliate, for the interest
and other borrowing costs of the Distributor's unreimbursed expenses incurred in
rendering distribution assistance and administrative support services to the
Fund; and (iv) paying other
- 2 -
<PAGE>
direct distribution costs, including without limitation the costs of sales
literature, advertising and prospectuses (other than those prospectuses
furnished to current holders of the Fund's shares ("Shareholders")) and state
"blue sky" registration expenses.
(b) Payments to Recipients. The Distributor is authorized under the
Plan to pay Recipients (1) distribution assistance fees for rendering
distribution assistance in connection with the sale of Shares and/or (2) service
fees for rendering administrative support services with respect to Accounts.
However, no such payments shall be made to any Recipient for any quarter in
which its Qualified Holdings do not equal or exceed, at the end of such quarter,
the minimum amount ("Minimum Qualified Holdings"), if any, that may be set from
time to time by a majority of the Independent Trustees. All fee payments made by
the Distributor hereunder are subject to reduction or chargeback so that the
aggregate service fee payments and Advance Service Fee Payments do not exceed
the limits on payments to Recipients that are, or may be, imposed by the NASD
Conduct Rules. The Distributor may make Plan payments to any "affiliated person"
(as defined in the 1940 Act) of the Distributor if such affiliated person
qualifies as a Recipient or retain such payments if the Distributor qualifies as
a Recipient.
In consideration of the services provided by Recipients, the Distributor
shall make the following payments to Recipients:
(i) Service Fee. In consideration of administrative support services
provided by a Recipient during a calendar quarter, the Distributor shall make
service fee payments to that Recipient quarterly, within forty-five (45) days of
the end of each calendar quarter, at a rate not to exceed 0.0625% (0.25% on an
annual basis) of the average during the calendar quarter of the aggregate net
asset value of Shares, computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by the Recipient
or by its Customers for a period of more than the minimum period (the "Minimum
Holding Period"), if any, that may be set from time to time by a majority of the
Independent Trustees.
Alternatively, the Distributor may, at its sole option, make the following
service fee payments to any Recipient quarterly, within forty-five (45) days of
the end of each calendar quarter: (A) "Advance Service Fee Payments" at a rate
not to exceed 0.25% of the average during the calendar quarter of the aggregate
net asset value of Shares, computed as of the close of business on the day such
Shares are sold, constituting Qualified Holdings, sold by the Recipient during
that quarter and owned beneficially or of record by the Recipient or by its
Customers, plus (B) service fee payments at a rate not to exceed 0.0625% (0.25%
on an annual basis) of the average during the calendar quarter of the aggregate
net asset value of Shares, computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by the Recipient
or by its Customers for a period of more than one (1) year. At the Distributor's
sole option, Advance Service Fee Payments may be made more often than quarterly,
and sooner than the end of the calendar quarter. In the event Shares are
redeemed less than one year after the date such Shares were sold, the Recipient
is obligated to and will repay the Distributor on demand a pro rata portion of
such Advance Service Fee Payments, based on the ratio of the time such Shares
were held to one (1) year.
- 3 -
<PAGE>
The administrative support services to be rendered by Recipients in
connection with the Accounts may include, but shall not be limited to, the
following: answering routine inquiries concerning the Fund, assisting in the
establishment and maintenance of accounts or sub-accounts in the Fund and
processing Share redemption transactions, making the Fund's investment plans and
dividend payment options available, and providing such other information and
services in connection with the rendering of personal services and/or the
maintenance of Accounts, as the Distributor or the Fund may reasonably request.
(ii) Distribution Assistance Fee (Asset-Based Sales Charge)
Payments. Irrespective of whichever alternative method of making service fee
payments to Recipients is selected by the Distributor, in addition the
Distributor shall make distribution service fee payments to each Recipient
quarterly, within forty-five (45) days after the end of each calendar quarter,
at a rate not to exceed 0.1875% (0.75% on an annual basis) of the average during
the calendar quarter of the aggregate net asset value of Shares computed as of
the close of each business day constituting Qualified Holdings owned
beneficially or of record by the Recipient or its Customers for a period of more
than one (1) year. Alternatively, at its sole option, the Distributor may make
distribution assistance fee payments to a Recipient quarterly, at the rate
described above, on Shares constituting Qualified Holdings owned beneficially or
of record by the Recipient or its Customers without regard to the 1-year holding
period described above. Such payments shall be made only to Recipients that are
registered with the SEC as a broker-dealer or are exempt from registration.
The distribution assistance to be rendered by the Recipients in connection
with the sale of Shares may include, but shall not be limited to, the following:
distributing sales literature and prospectuses other than those furnished to
current Shareholders, providing compensation to and expenses of personnel of the
Recipient who support the distribution of Shares by the Recipient, and providing
such other information and services in connection with the distribution of
Shares as the Distributor or the Fund may reasonably request.
(c) A majority of the Independent Trustees may at any time or from time to
time (i) increase or decrease the rate of fees to be paid to the Distributor or
to any Recipient, but not to exceed the rates set forth above, and/or (ii)
direct the Distributor to increase or decrease any Minimum Holding Period, any
maximum period set by a majority of the Independent Trustees during which fees
will be paid on Shares constituting Qualified Holdings owned beneficially or of
record by a Recipient or by its Customers (the "Maximum Holding Period") or
Minimum Qualified Holdings. The Distributor shall notify all Recipients of any
Minimum Qualified Holdings, Maximum Holding Period and Minimum Holding Period,
if any, that are established and the rate of payments hereunder applicable to
Recipients, and shall provide each Recipient with written notice within thirty
(30) days after any change in these provisions. Inclusion of such provisions or
a change in such provisions in a supplement or amendment to or revision of the
prospectus of the Fund shall constitute sufficient notice.
(d) The Service Fee and the Asset-Based Sales Charge on Shares are subject
to reduction or elimination under the limits to which the Distributor is, or may
become, subject under the NASD Conduct Rules.
- 4 -
<PAGE>
(e) Under the Plan, payments may be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include profits
derived from the advisory fee it receives from the Fund), or (ii) by the
Distributor (a subsidiary of OFI), from its own resources, from Asset-Based
Sales Charge payments or from the proceeds of its borrowings.
(f) Recipients are intended to have certain rights as third-party
beneficiaries under this Plan, subject to the limitations set forth below. It
may be presumed that a Recipient has provided distribution assistance or
administrative support services qualifying for payment under the Plan if it has
Qualified Holdings of Shares that entitle it to payments under the Plan. If
either the Distributor or the Board believe that, notwithstanding the level of
Qualified Holdings, a Recipient may not be rendering appropriate distribution
assistance in connection with the sale of Shares or administrative support
services for Accounts, then the Distributor, at the request of the Board, shall
require the Recipient to provide a written report or other information to verify
that said Recipient is providing appropriate distribution assistance and/or
services in this regard. If the Distributor or the Board of Trustees still is
not satisfied after the receipt of such report, either may take appropriate
steps to terminate the Recipient's status as a Recipient under the Plan,
whereupon such Recipient's rights as a third-party beneficiary hereunder shall
terminate. Additionally, in their discretion a majority of the Fund's
Independent Trustees at any time may remove any broker, dealer, bank or other
person or entity as a Recipient, whereupon such person's or entity's rights as a
third-party beneficiary hereof shall terminate. Notwithstanding any other
provision of this Plan, this Plan does not obligate or in any way make the Fund
liable to make any payment whatsoever to any person or entity other than
directly to the Distributor.
4. Selection and Nomination of Trustees. While this Plan is in effect, the
selection and nomination of persons to be Trustees of the Fund who are not
"interested persons" of the Fund ("Disinterested Trustees") shall be committed
to the discretion of the incumbent Disinterested Trustees. Nothing herein shall
prevent the incumbent Disinterested Trustees from soliciting the views or the
involvement of others in such selection or nomination as long as the final
decision on any such selection and nomination is approved by a majority of the
incumbent Disinterested Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Fund shall
provide written reports to the Fund's Board for its review, detailing services
rendered in connection with the distribution of the Shares, the amount of all
payments made under this Plan and the purpose for which the payments were made.
The reports shall be provided quarterly, and shall state whether all provisions
of Section 3 of this Plan have been complied with.
6. Related Agreements. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by a vote of a majority of the Independent
Trustees or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding voting Class C shares; (ii) such termination
shall be on not more than sixty days' written notice to any other party to the
agreement; (iii) such agreement shall automatically terminate in the event of
its "assignment" (as defined in the 1940 Act); (iv) such agreement shall go into
effect when approved by a vote of the Board and its
- 5 -
<PAGE>
Independent Trustees cast in person at a meeting called for the purpose of
voting on such agreement; and (v) such agreement shall, unless terminated as
herein provided, continue in effect from year to year only so long as such
continuance is specifically approved at least annually by a vote of the Board
and its Independent Trustees cast in person at a meeting called for the purpose
of voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan has been
approved by a vote of the Board and its Independent Trustees cast in person at a
meeting called on August 27, 1996, for the purpose of voting on this Plan, and
shall take effect on the date that the Fund's Registration Statement is declared
effective by the Securities and Exchange Commission. Unless terminated as
hereinafter provided, it shall continue in effect for one year from such date of
effectiveness and from year to year thereafter or as the Board may otherwise
determine only so long as such continuance is specifically approved at least
annually by a vote of the Board and its Independent Trustees cast in person at a
meeting called for the purpose of voting on such continuance.
This Plan may not be amended to increase materially the amount of payments
to be made without approval of the Class B Shareholders, in the manner described
above, and all material amendments must be approved by a vote of the Board and
of the Independent Trustees.
This Plan may be terminated at any time by vote of a majority of the
Independent Trustees or by the vote of the holders of a "majority" (as defined
in the 1940 Act) of the Fund's outstanding voting securities of the Class. In
the event of such termination, the Board and its Independent Trustees shall
determine whether the Distributor shall be entitled to payment from the Fund of
the Service Fee and/or the Asset-Based Sales Charge in respect of Shares sold
prior to the effective date of such termination.
8. Disclaimer of Shareholder and Trustee Liability. The Distributor understands
that the obligations of the Fund under this Plan are not binding upon any
Trustee or shareholder of the Fund personally, but bind only the Fund and the
Fund's property. The Distributor represents that it has notice of the provisions
of the Declaration of Trust of the Fund disclaiming shareholder and Trustee
liability for acts or obligations of the Fund.
OPPENHEIMER REAL ASSET FUND
/s/ Bridget A. Macaskill
By: _________________________________
Bridget A. Macaskill, President
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
/s/ Andrew J. Donohue
By: _________________________________
Andrew J. Donohue, Vice President
OFMI\735C.WPD
- 6 -
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 1018862
<NAME> Oppenheimer Real Asset Fund - A Shares
<S> <C>
<PERIOD-TYPE> 4-MOS
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<CIK> 1018862
<NAME> Oppenheimer Real Asset Fund - B Shares
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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<CIK> 1018862
<NAME> Oppenheimer Real Asset Fund - C Shares
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<NAME> Oppenheimer Real Asset Fund - Y Shares
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