As filed with the Securities and Exchange Commission on
September 22, 1997
Registration No. 333-31533
File No. 811-08297
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 / X /
PRE-EFFECTIVE AMENDMENT NO. 1 / X /
POST-EFFECTIVE AMENDMENT NO. ___ / /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 / X /
AMENDMENT NO. 1 / X/
OPPENHEIMER MIDCAP FUND
- -------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Two World Trade Center, New York, New York 10048-0203
- -------------------------------------------------------------------
(Address of Principal Executive Offices)
212-323-0200
- -------------------------------------------------------------------
(Registrant's Telephone Number)
ANDREW J. DONOHUE, ESQ.
OppenheimerFunds, Inc.
Two World Trade Center, New York, New York 10048-0203
- -------------------------------------------------------------------
(Name and Address of Agent for Service)
Approximate Date of Proposed Offering: As soon as practicable
after the effective date of this Registration Statement and
thereafter from day to day.
It is proposed that this filing will become effective:
/ / Immediately upon filing pursuant to paragraph (b)
/ / On __________________, 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.
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933:
An indefinite number of Class A, Class B, Class C, and Class Y
shares of Beneficial Interest of the Registrant is being registered
by this Registration Statement pursuant to Rule 24f-2 under the
Investment Company Act of 1940.
The Registrant hereby amends the Registration Statement on such
date or dates as may be necessary to delay its effective date until
the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of
1933 or until the Registration Statement shall become effective on
such date as the Commission, acting pursuant to Section 8(a), shall
determine.
<PAGE>
FORM N-1A
OPPENHEIMER MIDCAP FUND
Cross Reference Sheet
Part A of
Form N-1A
Item No. Prospectus Heading
1 Cover Page
2 Expenses; A Brief Overview of the Fund
3 *
4 Front Cover Page; Investment Objective and Policies
5 Expenses; How the Fund is Managed - Organization and
History; Back Cover
5A *
6 Dividends, Capital Gains and Taxes; 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
Item No. Heading in Statement of Additional Information or
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 *
23 Financial Statements
________________
*Not applicable or negative answer.
745n1a.1
<PAGE>
OPPENHEIMER
MidCap Fund
Prospectus dated ,1997
Oppenheimer MidCap Fund is a mutual fund that seeks capital
appreciation as its investment objective. Current income is not an
objective. The Fund seeks its investment objective by emphasizing
investment in equity securities of companies with medium market
capitalizations that are believed to have favorable growth
prospects. Under normal market conditions, the Fund will invest at
least 65% of its total assets in equity securities of "growth-type"
companies with a market capitalization between $1 billion and $5
billion at the time of purchase. The Fund may use hedging
instruments and derivative investments to seek to reduce the risks
of market fluctuations that affect the value of the securities the
Fund holds. In an uncertain investment environment, temporary
defensive investment methods may be stressed.
Some of the Fund's investment techniques may be considered
speculative. These techniques may increase the risks of investing
in the Fund and may also increase the Fund's operating costs.
Please refer to "Investment Objectives and Policies" for more
information about the types of securities the Fund invests in and
refer to "Investment Risks" for a discussion of the risks of
investing in the Fund.
This Prospectus explains concisely 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 , 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).
(OppenheimerFunds logo)
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
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.<PAGE>
Contents
ABOUT THE FUND
Expenses
A Brief Overview of the Fund
Investment Objective and Policies
Investment Risks
Investment Techniques and Strategies
How the Fund is Managed
Performance of the Fund
ABOUT YOUR ACCOUNT
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<PAGE>
ABOUT THE FUND
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 value per share. All
shareholders therefore pay those expenses indirectly. Shareholders
pay other expenses directly, such as sales charges and account
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 will expect to bear
indirectly.
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.
Shareholder Transaction Expenses
<TABLE>
<CAPTION>
Class A Class B Class C Class Y
Shares Shares Shares Shares
<S> <C> <C> <C> <C>
Maximum Sales Charge on Purchases 5.75% None None None
(as a % of offering price)
Maximum Deferred Sales Charge None(1) 5% in the first 1% if shares None
(as a % of the lower of the original year, declining are redeemed
offering price or redemption proceeds) to 1% in the within 12
sixth year and months of
eliminated purchase(2)
thereafter(2)
Maximum Sales Charge on Reinvested None None None None
Dividends
Exchange Fee None None None None
Redemption Fee None None None None
</TABLE>
(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 calendar months if you purchased Fund shares by
exchanging shares of other Oppenheimer funds that were 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 charge.
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 adviser,
OppenheimerFunds, Inc. (which is referred to in this Prospectus as
the "Manager"). The rates of the 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.
Annual Fund Operating Expenses (as a Percentage of Average Net
Assets)
Class A Class B Class C Class Y
Shares Shares Shares Shares
Management Fees 0.75% 0.75% 0.75% 0.75%
12b-1 Plan Fees 0.25% 1.00% 1.00% None
Other Expenses 0.50% 0.50% 0.50% 0.50%
Total Fund
Operating Expenses 1.50% 2.25% 2.25% 1.25%
The 12b-1 Plan Fees for Class A shares are service fees. The
maximum fee is 0.25% of average net assets of that class. For
Class B and Class C shares, the 12b-1 Plan Fees are service fees
(the maximum fee is 0.25% of average net assets of the respective
class) and the asset-based sales charge of 0.75%. These plans are
described in greater detail in "How to Buy Shares". Because the
Fund is a new fund and has no operating history, the rates for the
management fees and the 12b-1 Plan fees are the maximum rates that
can be charged. "Other Expenses" in the table above are estimates
based on the Manager's projections of those expenses in the Fund's
current fiscal year (which ends August 31, 1998).
The actual expenses for each class of shares in the Fund's current
fiscal year and in future years may be more or less than the
numbers in the table, depending on a number of factors, including
changes in the actual value of the Fund's assets represented by
each class of shares.
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, 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
Class A Shares $72 $102
Class B Shares $73 $100
Class C Shares $33 $70
Class Y Shares $13 $40
If you did not redeem your investment, it would incur the
following expenses:
1 year 3 years
Class A Shares $72 $102
Class B Shares $23 $70
Class C Shares $23 $70
Class Y Shares $13 $40
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 effect
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,
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.
<PAGE>
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.
What Is The Fund's Investment Objective? The Fund's
investment objective is to seek capital appreciation.
What Does The Fund Invest In? The Fund seeks its investment
objective by emphasizing investment in equity securities of
companies with medium market capitalizations that are believed to
have favorable growth prospects. Under normal market conditions,
the Fund will invest at least 65% of its total assets in equity
securities of "growth-type" companies with a market capitalization
between $1 billion and $5 billion at the time of purchase. The
Fund may use hedging instruments and derivative investments to seek
to reduce the risks of market fluctuations that affect the value of
the securities the Fund holds. In an uncertain investment
environment, temporary defensive investment methods may be
stressed. These investments and investment methods are more fully
explained in "Investment Objective and Policies" starting on page
__.
Who Manages The Fund? The Fund's investment adviser (the
"Manager") is OppenheimerFunds, Inc., which (including
subsidiaries) manages investment company portfolios currently
having over $70 billion in assets at September 30, 1997. The
Manager is paid an advisory fee by the Fund, based on its net
assets. The Fund has a portfolio manager, , who
is employed by the Manager and is primarily responsible for the
selection of the Fund's securities. The Fund's Board of Trustees,
elected by shareholders, oversees the investment adviser and the
portfolio manager. Please refer to "How the Fund is Managed,"
starting on page __ for more information about the Manager and its
fees.
How Risky Is The Fund? All investments carry risks to some
degree. It is important to remember that the Fund is designed for
long-term investors. The Fund's investments in stocks are subject
to changes in their value from a number of factors such as changes
in general stock market movements or changes in value of particular
stocks from an event affecting the issuer. The Fund emphasizes
investment in medium market capitalization companies, which
investments are generally more volatile and may involve greater
risks than investments in larger capitalized companies. The Fund's
investments in foreign securities are subject to additional risks
associated with investing abroad, such as the effect of currency
rate changes on stock values. These changes affect the value of
the Fund's investments and its share prices for each class of its
shares. The Fund's ability to borrow for investment purposes is a
speculative investment technique known as "leveraging". Hedging
instruments and derivative investments involve certain risks, as
discussed below.
The Fund may be viewed as an aggressive growth fund, and is
generally expected to be more volatile than the other stock funds,
the income and growth funds and the more conservative income funds
in the Oppenheimer funds spectrum. While the Manager tries to
reduce risks by diversifying investments, by carefully researching
securities before they are purchased for the portfolio, and in some
cases by using hedging techniques, 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 "Investment Risks" starting on page __ for a more complete
discussion of the Fund's investment risks.
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.
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 shares 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,
respectively, of purchase. 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.
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 Policies
Objective. The Fund invests its assets to seek capital
appreciation for shareholders. The Fund does not invest to seek
current income to pay shareholders.
Investment Policies and Strategies. The Fund seeks its
investment objective by emphasizing investment in equity
securities, such as common and preferred stock and securities
having investment characteristics of equity securities (for
example, securities convertible into common stock), of companies
with medium market capitalizations, as described below, that are
believed to have favorable growth prospects.
Under normal market conditions, as a matter of non-fundamental
policy, the Fund will invest at least 65% of its total assets in
equity securities of "growth-type" companies with a market
capitalization between $1 billion and $5 billion ("mid-cap"
companies) at the time of purchase. Market capitalization is
generally defined as the value of a company as determined by the
total current market value of its issued and outstanding common
stock. The balance of the Fund's assets may be invested in other
market capitalizations and security types. When market conditions
are unstable, as a temporary defensive measure, the Fund can hold
cash and invest all or a portion of its assets in money market
instruments.
In selecting investments for the Fund, the Manager will
emphasize mid-cap companies that it believes will have the
potential to achieve long-term earnings growth rates in excess of
the growth of earnings of other companies. Growth companies tend
to be companies whose goods or services have relatively favorable
long-term prospects for increasing demand, or ones which develop
new products, services or markets. They may also include companies
in the natural resources fields or those developing commercial
applications for new scientific knowledge having a potential for
technological innovation, such as computer software,
telecommunications equipment and services, biotechnology, and new
consumer products. The Fund may also invest from time to time in
cyclical industries such as insurance and forest products, when the
Manager believes that they present opportunities for capital
appreciation.
While mid-cap growth companies may offer greater opportunities
for capital appreciation than larger, more established companies,
they may also present greater risks. The Fund is designed for
investors who are willing to accept greater risks of loss in the
hopes of greater gains, and is not intended for those who seek
assured income and conservation of capital. Certain risks of
investing in the Fund are described below.
Can the Fund's Investment Objective and Policies Change?
The Fund has an 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 and practices 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 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.
Portfolio Turnover. A change in the securities held by the
Fund is known as "portfolio turnover". The Fund ordinarily does
not engage in short-term trading to try to achieve its objective.
As a result, the Fund's portfolio turnover is not expected to be
more than 100% each year.
Portfolio turnover affects brokerage costs, dealer markups and
other transaction costs, and results in the Fund's realization of
capital gains or losses for tax purposes.
Investment Risks
All investments carry risks to some degree, whether they are risks
that market prices of the investment will fluctuate (this is known
as "market risk") or that the underlying issuer will experience
financial difficulties and may default on its obligations under a
fixed-income investment to pay interest and repay principal (this
is referred to as "credit risk"). These general investment risks,
and the special risks of certain types of investments that the Fund
may hold, are described below. They affect the value of the Fund's
investments, its investment performance, and the prices of its
shares. These risks collectively form the risk profile of the
Fund.
Because of the types of securities the Fund invests in and the
investment techniques the Fund uses, the Fund is designed for
investors who are investing for the long term. It is not intended
for investors seeking assured income or preservation of capital.
While the Manager tries to reduce risks by diversifying
investments, by carefully researching securities before they are
purchased, and in some cases by using hedging techniques, changes
in overall market prices can occur at any time, and there is no
assurance that the Fund will achieve its investment objective.
When you redeem your shares, they may be worth more or less than
what you paid for them.
Stock Investment Risks. Because the Fund normally invests
most of its assets in stocks, the value of the Fund's portfolio
will be affected by changes in the stock markets. At times, the
stock markets can be volatile, and stock prices can change
substantially. This market risk will affect the Fund's net asset
values per share, which will fluctuate as the values of the Fund's
portfolio securities change. Not all stock prices change uniformly
or at the same time, and not all stock markets move in the same
direction at the same time. Other factors can affect a particular
stock's prices (for example, poor earnings reports by an issuer,
loss of major customers, major litigation against an issuer and
changes in government regulations affecting an industry). Not all
of these factors can be predicted. The Fund attempts to limit
market risks by diversifying its investments, that is, by not
holding a substantial amount of the stock of any one company, and
by not investing too great a percentage of the Fund's assets in any
one company.
Mid-Cap Stocks. While mid-cap company securities may offer
a greater capital appreciation potential than investments in large
capitalization company securities due to their higher growth rates,
they may also present greater risks. Mid-cap company securities
tend to be more sensitive to changes in earnings expectations and
have lower trading volumes than large capitalization company
securities; as a result, they may experience more abrupt and
erratic price movements. Further, since mid-cap companies usually
reinvest a high portion of earnings in their own businesses, they
may lack the dividend yield associated with value stocks that can
cushion total return in a declining market.
Foreign Securities Have Special Risks. The Fund limits its
investments in foreign securities to no more than 10% of its total
assets. While foreign securities offer special investment
opportunities, there are also special risks. The change in value
of a foreign currency against the U.S. dollar will result in a
change in the U.S. dollar value of securities denominated in that
foreign currency. Foreign issuers are not subject to the same
accounting and disclosure requirements that U.S. companies are
subject to. The value of foreign investments may be affected by
exchange control regulations, expropriation or nationalization of
a company's assets, foreign taxes, delays in settlement of
transactions, changes in governmental economic or monetary policy
in the U.S. or abroad, or other political and economic factors.
More information about the risks and potential rewards of investing
in foreign securities is contained in the Statement of Additional
Information.
Borrowing for Leverage. The Fund may borrow up to 10% of
the value of its net assets from banks on an unsecured basis to buy
portfolio securities. The foregoing percentage limit is a
fundamental policy. This investing technique is a speculative
investment method known as "leverage" and may subject the Fund to
greater risks and costs than funds that do not borrow. The Fund
can borrow only if it maintains a 300% ratio of net assets to
borrowing at all times in the manner set forth in the Investment
Company Act. More detail is provided in "Borrowing for Leverage"
in the Statement of Additional Information.
Special Risks of Hedging Instruments. The Fund can invest
in certain hedging instruments, as described below. The use of
hedging instruments requires special skills and knowledge of
investment techniques that are different than what is required for
normal portfolio management. If the Manager uses a hedging
instrument at the wrong time or judges market conditions
incorrectly, hedging strategies may reduce the Fund's return. The
Fund could also experience losses if the prices of its futures and
options positions were not correlated with its other investments or
if it could not close out a position because the market for the
future or option was illiquid.
Options trading involves the payment of premiums and has
special tax effects on the Fund. There are also special risks in
particular hedging strategies. If a covered call written by the
Fund is exercised on a security that has increased in value, the
Fund will be required to sell the security at the call price and
will not be able to realize any profit if the security has
increased in value above the call price. In writing puts, there is
a risk that the Fund may be required to buy the underlying security
at a disadvantageous price. 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. These
risks are described in greater detail in the Statement of
Additional Information.
Special Risks of Derivative Investments. The Fund can
invest in a number of different kinds of derivative investments as
described below. There are special risks in investing in
derivative investments. The company issuing the instrument may
fail to pay the amount due on the maturity of the instrument.
Also, the underlying investment or security on which the derivative
is based, and the derivative itself, might not perform the way the
Manager expected it to perform. The performance of derivative
investments may also be influenced by interest rate and stock
market changes in the U.S. and abroad. All of this can mean that
the Fund may realize less principal or income from the investment
than expected. Certain derivative investments held by the Fund may
trade in the over-the-counter market and may be illiquid. Please
refer to "Illiquid and Restricted Securities" for an explanation.
Investment Techniques and Strategies
The Fund may also use the investment techniques and strategies
described below, which involve certain risks. The Statement of
Additional Information contains more information about these
practices, including limitations on their use that are designed to
reduce some of the risks.
Investing In Small, Unseasoned Companies. The Fund may
invest in securities of small, unseasoned companies. These are
companies that, together with the operations of predecessors, have
been in operation for less than three years. Securities of these
companies may have limited liquidity (which means that the Fund may
have difficulty selling them at an acceptable price when it wants
to) and the prices of these securities may be volatile.
Investing In Foreign Securities. The Fund may purchase
equity securities issued or guaranteed by foreign companies or
foreign governments or their agencies. The Fund generally limits
its investments in foreign securities to no more than 10% of its
total assets. The Fund may buy securities in any country,
developed or underdeveloped, subject to any requisite approvals of
the Fund's Board. Investments in securities of issuers in
underdeveloped countries generally involve more risk and may be
considered highly speculative.
Temporary Defensive Measures. When market conditions are
considered by the Manager to be unstable, as a temporary defensive
measure, the Fund can hold cash or invest without limit in money
market instruments. The Fund will invest in high quality, short-term money
market instruments such as U.S. Treasury and agency
obligations; commercial paper (short-term, unsecured, negotiable
promissory notes of a domestic or foreign company); short-term debt
obligations of corporate issuers; and certificates of deposit and
bankers' acceptances (time drafts drawn on commercial banks usually
in connection with international transactions) of domestic or
foreign banks and savings and loan associations.
Illiquid and Restricted Securities. Under the policies and
procedures established by the Fund's Board of Trustees, the Manager
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 that 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. Illiquid securities include
repurchase agreements maturing in more than seven days, or certain
participation interests other than those with puts exercisable
within seven days. The Manager 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.
The 15% percentage restriction does 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 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 (for example, if qualified
institutional buyers become, for a time, uninterested in purchasing
the security), the Fund's holding of that security may be deemed to
be illiquid and the level of Fund illiquidity could increase.
Loans of Portfolio Securities. To raise cash for liquidity
purposes, 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
25% of the value of the Fund's total assets and are subject to the
conditions described in the Statement of Additional Information.
The Fund presently does not intend to engage in loans of portfolio
securities that will exceed 5% of the value of the Fund's net
assets in the coming year.
Repurchase Agreements. To maintain liquidity to meet
shareholder redemption requests or to settle portfolio trades, the
Fund may enter into repurchase agreements. In a repurchase
transaction, the Fund buys a security and simultaneously sells it
to the vendor for delivery at a future date.
Repurchase agreements must be fully collateralized. However,
if the vendor 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.
The Fund will not enter into a repurchase agreement that causes
more than 15% of its net assets to be subject to repurchase
agreements having a maturity beyond seven days. There is no limit
on the amount of the Fund's net assets that may be subject to
repurchase agreements of seven days or less.
Investment in Other Investment Companies. The Fund
generally may invest up to 10% of its total assets in the aggregate
in shares of other investment companies and up to 5% of its total
assets in any one investment company, as long as each investment
does not represent more than 3% of the outstanding voting
securities of the acquired investment company. These limitations
do not apply in the case of investment company securities which may
be purchased as part of a plan of merger, consolidation,
reorganization or acquisition. Investment in other investment
companies may involve the payment of substantial premiums above the
value of such investment companies' portfolio securities, and is
subject to limitations under the Investment Company Act and market
availability. The Fund does not intend to invest in such
investment companies unless, in the judgment of the Manager, the
potential benefits of such investment justify the payment of any
applicable premiums or sales charge. As a shareholder in an
investment company, the Fund would bear its ratable share of that
investment company's expenses, including its advisory and
administration fees. At the same time, the Fund would continue to
pay its own management fees and other expenses.
Warrants and Rights. Warrants basically are options to
purchase stock at set prices that are valid for a limited period of
time. Rights are similar to warrants but normally have a short
duration and are distributed directly by the issuer to its
shareholders. The Fund may invest up to 5% of its net assets in
warrants or rights. That 5% limitation does not apply to warrants
the Fund has acquired as part of units with other securities or
that are attached to securities. For further details, see
"Warrants and Rights" in the Statement of Additional Information.
Convertible Securities. Although most of the Fund's
investments will be in stocks, the Fund may invest in convertible
securities. Convertible securities are bonds, preferred stocks and
other securities that normally pay a fixed rate of interest or
dividends and give the owner the option to convert the security
into common stock. While the value of convertible securities
depends in part on interest rate changes and the credit quality of
the issuer, the price will also change based on the price of the
underlying stock. Although convertible securities generally have
less potential for gain than common stock, their income provides a
cushion against stock price declines. The Manager generally
analyzes these investments from the perspective of the growth
potential of the underlying stock and treats them as "equity
substitutes." The Fund will only invest in convertible debt
securities that are rated investment grade by Moody's Investors
Service, Inc., Standard & Poor's Corporation, Duff & Phelps, Inc.
or another nationally recognized statistical rating organization.
Hedging. As described below, the Fund may purchase and sell
certain kinds of futures contracts, put and call options, forward
contracts, and options. These are all referred to as "hedging
instruments." The Fund does not use hedging instruments for
speculative purposes, and has limits on their use, described below.
The types of hedging instruments the Fund may use are described in
greater detail in "Other Investment Techniques and Strategies" in
the Statement of Additional Information.
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 may decline, or to establish a position in the
securities market as a temporary substitute for purchasing
individual securities. Some of these strategies, such as selling
futures, buying puts and writing covered calls, hedge the Fund's
portfolio against price fluctuations.
Other hedging strategies, such as buying futures and call
options, tend to increase the Fund's exposure to the securities
market. Forward contracts are used to try to manage foreign
currency risks on the Fund's foreign investments. Foreign currency
options are used to try to protect against declines in the dollar
value of foreign securities the Fund owns, or to protect against an
increase in the dollar cost of buying foreign securities. Writing
covered call options may also provide income to the Fund for
liquidity purposes.
Futures. The Fund may buy and sell futures contracts that
relate to (l) broadly-based stock indices (these are referred to as
Stock Index Futures),(2) foreign currencies (these are called
Forward Contracts and are discussed below) and (3) commodities
(these are referred to as commodity futures).
Put and Call Options. The Fund may buy and sell exchange-traded and
over-the-counter put and call options, including index
options, securities options, currency options, commodities options,
and options on the other types of futures described in "Futures,"
above. A call or put may be purchased only if, after the purchase,
the value of all call and put options held by the Fund will not
exceed 5% of the Fund's total assets.
If the Fund sells (that is, writes) a call option, it must be
"covered." That means the Fund must own the security subject to
the call while the call is outstanding, or, for other types of
written calls, the Fund must segregate liquid assets to enable it
to satisfy its obligations if the call is exercised. Up to 25% of
the Fund's total assets may be subject to calls.
The Fund may buy puts whether or not it holds the underlying
investment in the portfolio. If the Fund writes a put, the put
must be covered by segregated liquid assets. The Fund will not
write puts if more than 50% of the Fund's net assets would have to
be segregated to cover put options.
Forward Contracts. Forward contracts are foreign currency
exchange contracts. They 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 bought or sold, or to protect
against possible losses from changes in the relative values of the
U.S. dollar and foreign currency. The Fund limits its net exposure
under forward contracts in a particular foreign currency to the
amount of its assets denominated in that currency or denominated in
a closely-correlated currency.
Derivative Investments. In general, a "derivative
investment" is a specially designed investment. Its performance is
linked to the performance of another investment or security, such
as an option, future, index, currency or commodity. The Fund can
invest in a number of different kinds of "derivative investments."
They are used in some cases for hedging purposes and in other cases
to attempt to seek increased total return. In the broadest sense,
exchange-traded options and futures contracts (discussed in
"Hedging," above) may be considered "derivative investments."
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 its 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. The Fund may not sell securities short except in
collateralized transactions referred to as "short sales against-the-box,"
where the Fund owns an equivalent amount of the
securities sold short. This technique is primarily used for tax
purposes. No more than 15% of the Fund's net assets will be held
as collateral for such short sales at any one time.
Other Investment Restrictions. The Fund has certain investment
restrictions that are fundamental policies. Under these
restrictions, the Fund cannot do any of the following:
buy securities issued or guaranteed by any one issuer
(except the U.S. Government or any of its agencies or
instrumentalities) if, with respect to 75% of its total assets,
more than 5% of the Fund's total assets would be invested in
securities of that issuer, or the Fund would then own more than 10%
of that issuer's voting securities.
concentrate investments in any particular industry;
therefore the Fund will not purchase the securities of companies in
any one industry if, thereafter, 25% or more of the value of the
Fund's total assets would consist of securities of companies in
that industry.
Unless the Prospectus states that a percentage restriction
applies on an ongoing basis, it applies only at the time the Fund
makes an investment, and the Fund need not sell securities to meet
the percentage limits if the value of the investment increases in
proportion to the size of the Fund. Other investment restrictions
are listed in "Investment Restrictions" in the Statement of
Additional Information.
How the Fund is Managed
Organization and History. The Fund was organized in June 1997 as
a Massachusetts business trust. The Fund is an open-end,
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. The Trustees are elected by
shareholders of the Fund. The initial Board has been elected by
the Manager as the sole initial shareholder. "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 in matters submitted to the vote of shareholders.
Only shares of a particular class vote as a class on matters that
affect that class alone. Shares are freely transferrable.
The Manager and Its Affiliates. The Fund is managed by the
Manager, OppenheimerFunds, Inc., which is responsible for selecting
the Fund's investments and handles its day-to-day business. The
Manager carries out its duties, subject to the policies established
by the Board of Trustees, under an Investment Advisory Agreement
which states the Manager's responsibilities. The Agreement sets
forth the fees paid by the Fund to the Manager, and describes the
expenses that the Fund is responsible for paying to conduct its
business.
The Manager has operated as an investment adviser since 1959.
The Manager (including subsidiaries) currently manages investment
companies, including other Oppenheimer funds, with assets of more
than $70 billion as of September 30, 1997, and with more than 3
million shareholder accounts. The Manager is owned by Oppenheimer
Acquisition Corp., a holding company that is owned in part by
senior officers of the Manager and controlled by Massachusetts
Mutual Life Insurance Company.
Portfolio Manager. The Portfolio Manager of the Fund is
[Portfolio Manager], who is employed by the Manager. [He] [She] is
the person principally responsible for the day-to-day management of
the Fund's portfolio. [5-year history]
Fees and Expenses. Under the Investment Advisory Agreement,
the Fund pays the Manager the following annual fees, which decline
on additional assets as the Fund grows: 0.75% of the first $200
million of average annual net assets; 0.72% of the next $200
million; 0.69% of the next $200 million; 0.66% of the next $200
million; and 0.60% of average annual net assets over $800 million.
The Fund pays expenses related to its daily operations, such
as custodian fees, Trustees' fees, transfer agency fees, legal 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, the Manager is permitted by the
Investment Advisory Agreement to consider whether brokers have sold
shares of the Fund or any other funds for which the Manager serves
as investment adviser.
The Distributor. The Fund's shares are sold through
dealers, brokers and other financial institutions that have a sales
agreement with OppenheimerFunds Distributor, Inc., a subsidiary of
the Manager that acts as the Fund's Distributor. The Distributor
also distributes the shares of the other "Oppenheimer funds"
managed by the Manager and is sub-distributor for funds managed by
a subsidiary of the Manager.
The Transfer Agent. The Fund's Transfer Agent is
OppenheimerFunds Services, a division of the Manager, which acts as
the shareholder servicing agent for the Fund on an "at-cost" basis.
It also acts as the shareholder servicing agent for other
Oppenheimer funds. Shareholders should direct inquiries about
their account to the Transfer Agent at the address and toll-free
numbers 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 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. This performance
data is described below, but 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.
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. However, total
returns may also be quoted "at net asset value," without
considering the effect of either the front-end or the appropriate
contingent deferred sales charge, as applicable, and those returns
would be less if sales charges were deducted.
ABOUT YOUR ACCOUNT
How to Buy Shares
Classes of Shares. The Fund offers investors four different
classes of shares. Three classes, Class A, Class B and Class C,
are available to non-institutional investors. 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.
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
calendar months if you purchased Fund shares by exchanging shares
of other Oppenheimer funds that were purchased prior to May 1,
1997), you may pay a contingent deferred sales charge. The amount
of that sales charge will vary depending on the amount you
invested. Sales charge rates are described in "Buying Class A
Shares" below.
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.
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 discussed in "Buying Class C
Shares" below.
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, other
registered investment companies and other institutional investors
having an agreement with the Manager or the Distributor. The
intent of these agreements is to allow tax-qualified institutional
investors to invest indirectly (through separate accounts) in Class
Y shares and to allow other institutional investors to invest
directly in Class Y shares. Individual investors are not permitted
to invest directly in Class Y shares. While Class Y shares are not
subject to a contingent deferred sales charge, asset-based sales
charge or service fee, an insurance company purchasing Class Y
shares may impose charges on its separate accounts investing in
those 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
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.
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
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 shares of 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
carefully.
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.
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
purposes 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 held 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.
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; and
subsequent purchases of at least $25 can be made by telephone
through AccountLink.
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.
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.
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 certain 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.
Buying Shares Through Your Dealer. Your dealer will place
your order with the Distributor on your behalf.
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.
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, 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.
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.
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 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 defined 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:
Front-End Front-End
Sales Charge Sales Charge Commission
as Percentage as Percentage as Percentage
Amount of of Offering of Amount of Offering
Purchase Price Invested Price
- -----------------------------------------------------------------------------
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%
<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.
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:
Purchases aggregating $1 million or more;
Purchases by a retirement plan qualified under section 401
(a) if the retirement plan has total plan assets of $500,000 or
more;
Purchases by a retirement plan qualified under sections
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 employees'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;
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 form a qualified retirement plan if the administrator
of that plan has made special arrangements with the Distributor for
these 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 in a Retirement Plan in which Oppenheimer funds
are also offered as 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 shares of the Oppenheimer funds 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 (which includes the Fund)
that are redeemed within 12 months of the end of the calendar month
of their purchase. That sales charge will 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.
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 18 months of the end of the calendar month of the purchase
of the exchanged shares, the sales charge will apply.
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.
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:
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
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.
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.
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:
the Manager or its affiliates;
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;
registered management investment companies, or separate
accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose;
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;
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);
dealers, brokers 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 investment plans made available to
their clients (those clients may be charged the transaction fee by
their dealer, broker or advisor for the purchase or sale of fund
shares);
(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, (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; and (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);
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;
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;
any unit investment trust that has entered into an
appropriate agreement with the Distributor;
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
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:
shares issued in plans of reorganization, such as mergers,
asset acquisitions and exchange offers, to which the Fund is a
party;
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;
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;
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
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:
to make Automatic Withdrawal Plan payments that are limited
annually to no more than 12% of the original account value;
involuntary redemptions of shares by operation of law or
involuntary redemptions of small accounts (see "Shareholder Account
Rules and Policies," below);
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);
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);
for distributions from TRAC-2000 401(k) plan sponsored by
the Distributor due to the termination of the TRAC-2000 program;
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.
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; and
for distributions from 401(k) plans sponsored by broker-
dealers that have entered into a special agreement with the
Distributor allowing this waiver.
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.
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 an 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:
Years Since Beginning of Contingent Deferred Sales Charge
Month in Which Purchase on Redemption in that Year
Order Was Accepted (As % of Amount Subject to Charge)
- -------------------------------------------------------------------
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
- -------------------------------------------------------------------
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.
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 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 compensate the
Distributor for 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.
Distribution and Service Plans for Class B and Class C Shares. The
Fund has adopted Distribution and Service Plans for Class B 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
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
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 may 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 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 agreement with the Distributor, the Distributor may 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
advance at the time of purchase.
The Distributor's actual expenses in selling Class B and Class
C shares may be more or less 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 Class 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.
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
in "Reduced Sales Charges" in the Statement of Additional
Information.
Waivers for Redemptions 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:
distributions to participants or beneficiaries from
Retirement Plans, if the distributions are made (a) under an
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);
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);
returns of excess contributions to Retirement Plans;
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;
shares redeemed involuntarily, as described in "Shareholder
Account Rules and Policies," below;
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; (6) for
loans to participants or beneficiaries; or
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:
shares sold to the Manager or its affiliates;
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; and
shares issued in plans of reorganization to which the Fund
is a party.
Special Investor Services
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.
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.
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.
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.
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.
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. Requests 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:
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.
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:
Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses
403(b)(7) Custodial Plans for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable
organizations
SEP-IRAs (Simplified Employee Pension Plans) for small
business owners or people with income from self-employment,
including SAR/SEP-IRAs
Pension and Profit-Sharing Plans for self-employed persons
and other employers
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.
Retirement Accounts. To sell shares in an OppenheimerFunds
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.
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):
You wish to redeem more than $50,000 worth of shares and
receive a check
The redemption check is not payable to all shareholders
listed on the account statement
The redemption check is not sent to the address of record on
your account statement
Shares are being transferred to a Fund account with a
different owner or name
Shares are redeemed by someone other than the owners (such
as an Executor)
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
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:
Your name
The Fund's name
Your Fund account number (from your account statement)
The dollar amount or number of shares to be redeemed
Any special payment instructions
Any share certificates for the shares you are selling
The signatures of all registered owners exactly as the
account is registered, and
Any special requirements or documents requested by the
Transfer Agent to assure proper authorization of the person asking
to sell shares.
Use the following address for requests by mail:
OppenheimerFunds Services
P.O. Box 5270, Denver, Colorado 80217
Send courier or Express Mail requests to:
OppenheimerFunds Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
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.
To redeem shares through a service representative, call 1-800-852-8457.
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 sent to that bank account.
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.
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 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:
Shares of the fund selected for exchange must be available
for sale in your state of residence.
The prospectuses of this Fund and the fund whose shares you
want to buy must offer the exchange privilege.
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.
You must meet the minimum purchase requirements for the fund
you purchase by exchange.
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:
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."
Telephone Exchange Requests. Telephone exchange requests
may 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:
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.
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.
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.
For tax purposes, exchanges of shares involve a redemption
of the shares of the fund you own and a purchase of 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.
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.
The Distributor has entered into agreements with certain
dealers and investment advisors permitting them to exchange their
clients' shares by telephone. These privileges are limited under
those agreements and the Distributor has the right to reject or
suspend those privileges. As a result, those exchanges may be
subject to notice requirements, delays and other limitations that
do not apply to shareholders who exchange their shares directly by
calling or writing to the Transfer Agent.
Shareholder Account Rules and Policies
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
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.
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.
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.
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.
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.
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.
The redemption price for shares will vary from day to day
because the values of the securities in the Fund's portfolio
fluctuate, 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.
Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the
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.
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.
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.
"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.
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.
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
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 those dividends to
shareholders in December, but the Board of Trustees can change that
date. The Board may also cause the Fund to declare dividends after
the close of the Fund's fiscal year (which ends August 31st).
Because the Fund does not have an objective of seeking current
income, the amounts of dividends it pays, if any, will likely be
small. Dividends paid on 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 that
the Fund will pay any dividends.
Capital Gains. The Fund may make distributions annually in
December out of any net short-term or long-term capital gains, and
the Fund may make supplemental distributions of capital gains
following the end of its fiscal year. Long-term capital gains will
be separately identified in the tax information the Fund sends you
after the end of the year. Short-term capital gains are treated as
dividends for tax purposes. 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:
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.
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.
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.
Reinvest Your Distributions in Another Oppenheimer Fund
Account. You can reinvest all distributions in another Oppenheimer
fund account you have established.
Taxes. If your account is not a tax-deferred retirement account,
you should be aware of the following tax implications of investing
in the Fund. Long-term capital gains are taxable as long-term
capital gains when distributed to shareholders. It does not
matter how long you held your shares. Dividends paid from short-term capital
gains and net investment income are taxable as
ordinary income. These dividends and distributions are subject to
federal income tax and may be subject to state or local taxes.
Your distributions are taxable when paid, whether you reinvest them
in additional shares or take them in cash. Every year the Fund
will send you and the IRS a statement showing the amount of all
taxable distributions you received in the previous year.
"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.
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
received when you sold them.
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>
APPENDIX 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 Value 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
Reduced Class A Initial Sales Charge Rates for Certain
Former Quest Shareholders
Purchases by Groups, Associations and Certain Qualified
Retirement Plans. The following table sets forth the initial sales
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.
<PAGE>
Front-End Front-End
Sales Sales Commission
Charge Charge as
Number of as a as a Percentage
Eligible Percentage Percentage of
Employees of Offering of Amount Offering
or Members Price Invested Price
- -------------------------------------------------------------------
9 or fewer 2.50% 2.56% 2.00%
- -------------------------------------------------------------------
At least 10 but not
more than 49 2.00% 2.04% l.60%
- -------------------------------------------------------------------
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.
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
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.
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:
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.
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.
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:
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.
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
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 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.
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
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.
<PAGE>
Oppenheimer MidCap Fund
Two World Trade Center
New York, New York 10048-0203
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
Price Waterhouse LLP
950 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
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., 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.
psp0745.001.1197
<PAGE>
Oppenheimer MidCap Fund
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated _________, 1997
This Statement of Additional Information of Oppenheimer MidCap
Fund is not a Prospectus. This document contains additional
information about the Fund and supplements information in the
Prospectus dated _________, 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.
Contents Page
About the Fund
Investment Objective and Policies. . . . . . . . . . . . .
Investment Policies and Strategies. . . . . . . . . . . .
Other Investment Techniques and Strategies. . . . . . . .
Other Investment Restrictions . . . . . . . . . . . . . .
How the Fund is Managed. . . . . . . . . . . . . . . . . .
Organization and History. . . . . . . . . . . . . . . . .
Trustees and Officers of the Fund . . . . . . . . . . . .
The Manager and Its Affiliates. . . . . . . . . . . . . .
Brokerage Policies of the Fund . . . . . . . . . . . . . .
Performance of the Fund. . . . . . . . . . . . . . . . . .
Distribution and Service Plans . . . . . . . . . . . . . .
About Your Account
How To Buy Shares . . . . . . . . . . . . . . . . . . . .
How To Sell Shares. . . . . . . . . . . . . . . . . . . .
How To Exchange Shares. . . . . . . . . . . . . . . . . .
Dividends, Capital Gains and Taxes . . . . . . . . . . . .
Additional Information About the Fund. . . . . . . . . . .
Financial Information About the Fund
Independent Auditors' Report . . . . . . . . . . . . . . .
Statement of Assets & Liabilities. . . . . . . . . . . . .
Appendix: Corporate Industry Classifications . . . . . . . A-1
ABOUT THE FUND
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and
policies of the Fund are described 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 objective.
Certain capitalized terms used in this Statement of Additional
Information have the same meanings as those terms have in the
Prospectus.
In selecting securities for the Fund's portfolio, the Fund's
investment advisor, OppenheimerFunds, Inc. (referred to as the
"Manager"), evaluates the merits of securities primarily through
the exercise of its own investment analysis. This may include,
among other things, evaluation of the history of the issuer's
operations, prospects for the industry of which the issuer is part,
the issuer's financial condition, the issuer's pending product
developments and developments by competitors, the effect of general
market and economic conditions on the issuer's business, and
legislative proposals or new laws that might affect the issuer.
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
does not pay current income will not be an adverse factor in
selecting securities to try to achieve the Fund's investment
objective of capital appreciation unless the Manager believes that
the lack of yield might adversely affect appreciation
possibilities.
The portion of the Fund's assets allocated to securities and
methods selected for capital appreciation will depend upon the
judgment of the Manager as to the future movement of the equity
securities markets. If the Manager believes that economic
conditions favor a rising market, the Fund will emphasize
securities and investment methods selected for high capital growth.
If the Manager believes that a market decline is likely, defensive
securities and investment methods will be emphasized.
Foreign Securities. As noted in the Prospectus, 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
and equity 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.
"Foreign securities" include equity and debt securities of
companies organized under the laws of countries other than the
United States and debt securities of foreign governments that are
traded on foreign securities exchanges or in the foreign over-the-counter
markets. Securities of foreign issuers that are
represented by American Depository Receipts or that are listed on
a U.S. securities exchange or traded in the U.S. over-the-counter
markets are not considered "foreign securities" for the purpose of
the Fund's investment allocations, because they are not subject to
many of the special considerations and risks, discussed below, that
apply to foreign securities traded and held abroad.
Investing in foreign securities offers potential benefits not
available from investing solely in securities of domestic issuers,
including the opportunity to invest in foreign issuers that appear
to offer growth potential, or in foreign countries with economic
policies or business cycles different from those of the U.S., or to
reduce fluctuations in portfolio value by taking advantage of
foreign stock markets that do not move in a manner parallel to U.S.
markets. In buying foreign securities, the Fund may convert U.S.
dollars into foreign currency, but only to effect securities
transactions on foreign securities exchanges and not to hold such
currency as an investment. If the Fund's portfolio securities are
held abroad, the countries in which such securities may be held
will be approved by the Fund's Board of Trustees and the sub-custodians or
depositories holding such securities will be selected
by the Fund's foreign custody manager.
Risks of Foreign Investing. Investing in foreign
securities involves special additional risks and considerations not
typically associated with investing in securities of issuers traded
in the U.S. These include: reduction of income by foreign taxes,
fluctuation in value of foreign portfolio investments due to
changes in currency rates and control regulations (e.g. currency
blockage); transaction charges for currency exchange, lack of
public information about foreign issuers; lack of uniform
accounting, auditing and financial reporting standards comparable
to those applicable to domestic issuers, less volume on foreign
exchanges than on U.S. exchanges, greater volatility and less
liquidity on foreign markets than in the U.S.; less regulation of
foreign issuers, stock exchanges and brokers than in the U.S.;
greater difficulties in commencing lawsuits against foreign
issuers, higher brokerage commission rates than in the U.S.;
increased risks of delays in settlement of portfolio transactions
or loss of certificates for portfolio securities because of the
lesser speed and reliability of mail service between the U.S. and
foreign countries than within the U.S.; possibilities in some
countries of expropriation or nationalization of assets,
confiscatory taxation, political, financial or social instability
or adverse diplomatic developments; and differences (which may be
favorable or unfavorable) between the U.S. economy and foreign
economies. From time to time, U.S. Government policies have
discouraged certain investments abroad by U.S. investors, through
taxation or other restrictions, and it is possible that such
restrictions could be re-imposed.
Borrowing For Leverage. From time to time, the Fund may
borrow from banks on an unsecured basis subject to the restrictions
stated in the Prospectus. Any such borrowing will be made only
from banks, and, pursuant to the requirements of the Investment
Company Act of 1940, will only be made to the extent that the value
of the Fund's assets, less its liabilities other than borrowing, is
equal to at least 300% of all borrowing including the proposed
borrowing. If the value of the Fund's assets, when computed in
that manner, 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 that requirement. To do
so, the Fund may have to sell a portion of its investments at a
time when independent investment judgment would not dictate such
sale. Interest on money borrowed is an expense the Fund would not
otherwise incur, so that during periods of substantial borrowing,
its expenses may increase more than funds that do not borrow.
Other Investment Techniques and Strategies
Investing in Small, Unseasoned, Companies. The securities
of small, unseasoned companies may have a limited trading market,
which may adversely affect the Fund's ability to dispose of them
and can reduce the price the Fund might be able to obtain for them.
If other investment companies and investors that invest in these
types of securities trade the same securities when the Fund
attempts to dispose of its holdings, the Fund may receive lower
prices than might be obtained, because of the thinner market for
such securities.
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 may also
acquire, through private placements, securities having 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 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 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.
Loans of Portfolio Securities. The Fund may lend its
portfolio securities subject to the restrictions stated in the
Prospectus. Repurchase transactions are not considered "loans" for
the purpose of the Fund's limit on the percentage of its assets
that can be loaned. Under applicable regulatory requirements
(which are subject to change), the loan collateral on each business
day must at least equal the value of the loaned securities and must
consist of cash, bank letters of credit or securities of the U.S.
Government (or its agencies or instrumentalities). 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', administrative or other fees the
Fund pays in connection with the loan. The terms of the Fund's
loans must meet applicable tests under the Internal Revenue Code
and must permit the Fund to reacquire loaned securities on five
days' notice or in time to vote on any important matter.
Repurchase Agreements. The Fund may acquire securities
subject to repurchase agreements for liquidity purposes to meet
anticipated redemptions, or pending the investment of the proceeds
from sales of Fund shares, or pending the settlement of purchases
of portfolio securities. In a repurchase transaction, the Fund
acquires a security from, and simultaneously resells it to, an
approved vendor. An "approved vendor" is a U.S. commercial bank or
the U.S. branch of a foreign bank or a broker-dealer which has been
designated a primary dealer in government securities which must
meet credit requirements set by the Fund's Board of Trustees from
time to time. The repurchase 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 the 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 value of the
collateral 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.
Hedging. The Fund may use hedging instruments for the
purposes described in the Prospectus. When hedging to attempt to
protect against declines in the market value of the Fund's
portfolio, or 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, (ii) buy puts on such Futures or securities, or
(iii) write covered calls on securities or on Futures. When
hedging to establish a position in the equity securities markets as
a temporary substitute for the purchase of individual equity
securities the Fund may: (i) buy Stock Index Futures, or (ii) buy
calls on such Futures or securities held by it. Normally, the Fund
would then purchase the equity securities and terminate the hedging
position.
The Fund's strategy of hedging with Futures and options on
Futures will be incidental to the Fund's investment activities in
the underlying cash market. 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, and are legally permissible and disclosed in the
Prospectus. Additional information about the hedging instruments
the Fund may use is provided below.
Stock Index Futures. As described in the Prospectus, the
Fund may invest in Stock Index Futures only if they relate to
broadly-based stock indices. A stock index is considered to be
broadly-based if it includes stocks that are not limited to issuers
in any particular industry or group of industries. A stock index
assigns relative values to the common stocks included in the index
and fluctuates with the changes in the market value of those
stocks. Stock indices cannot be purchased or sold directly.
Stock index futures are contracts based on the future value of
the basket of securities that comprise the underlying stock index.
The contracts obligate the seller to deliver, and the purchaser to
take, cash to settle the futures transaction or to enter into an
offsetting contract. No physical delivery of the securities
underlying the index is made on settling the futures obligation. No
monetary amount is paid or received by the Fund on the purchase or
sale of a Stock Index Future. Upon entering into a Futures
transaction, the Fund will be required to deposit an initial margin
payment, in cash or U.S. Treasury bills, with the futures
commission merchant (the "futures broker"). Initial margin
payments 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 certain specified
conditions. As the Future is marked to market (that is, its value
on the Fund's books is changed) to reflect changes in its market
value, subsequent margin payments, called variation margin, will be
paid to or by the futures broker on a daily basis.
At any time prior to the expiration of the Future, the Fund
may elect to close out its position by taking an opposite position,
at which time a final determination of variation margin is made and
additional cash is required to be paid by or released to the Fund.
Any gain or loss is then realized by the Fund on the Future for tax
purposes. Although Stock Index Futures by their terms call for
settlement by the delivery of cash, in most cases the settlement
obligation is fulfilled without such delivery by entering into an
offsetting transaction. All futures transactions are effected
through a clearing house associated with the exchange on which the
contracts are traded.
Writing Covered Calls. As described in the Prospectus, the
Fund may write covered calls. When the Fund writes a call on an
investment, it receives a premium and agrees to sell the callable
investment to a purchaser of a corresponding call during the call
period (usually not more than 9 months) at a fixed exercise price
(which may differ from the market price of the underlying
investment) regardless of market price changes during the call
period. 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 option transaction costs and the
premium received on the call the Fund has written is more or less
than the price of the call the Fund subsequently purchased. A
profit may also be realized if the call lapses unexercised, because
the Fund retains the underlying investment and the premium
received. Those profits are considered short-term capital gains
for Federal income tax purposes, as are premiums on lapsed calls,
and when distributed by the Fund are taxable as ordinary income.
If the Fund could not effect a closing purchase transaction due to
the lack of a market, it would have to hold the callable investment
until the call lapsed or was exercised.
The Fund may also write calls on Futures without owning a
futures contract or deliverable securities, provided that at the
time the call is written, the Fund covers the call by segregating
in escrow an equivalent dollar value of deliverable securities or
liquid assets of any type, including equity and debt securities.
The Fund will segregate additional liquid assets if the value of
the escrowed assets drops below 100% of the current value of the
Future. In no circumstances would an exercise notice as to a
Future put the Fund in a short futures position.
Writing Put Options. A put option on securities 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. Writing a put covered by segregated liquid assets equal to
the exercise price of the put has the same economic effect to the
Fund as writing a covered call. 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 buy the underlying investment from the buyer of the put
at the exercise price, even though the value of the investment may
fall below the exercise price. If the put expires unexercised, the
Fund (as the writer of the put) realizes a gain in the amount of
the premium less transaction costs. If the put is exercised, the
Fund must fulfill its obligation to purchase the underlying
investment at the exercise price, 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 sale price of the
underlying investment and the premium received minus the sum of the
exercise price and any transaction costs incurred.
When writing put options on securities, to secure its
obligation to pay for the underlying security, the Fund will
deposit in escrow liquid assets with a value equal to or greater
than the exercise price of the underlying securities. 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 exchange or broker-dealer
through whom such option was sold, requiring the Fund to exchange
currency at the specified rate of exchange or to take delivery of
the underlying security against payment of the exercise price. The
Fund may have 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 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 capital gains for Federal
tax purposes, and when distributed by the Fund, are taxable as
ordinary income.
Purchasing Puts and Calls. The Fund may purchase calls to
protect against the possibility that the Fund's portfolio will not
participate in an anticipated rise in the securities market. When
the Fund purchases a call, it pays a premium (other than in a
closing purchase transaction), and, except as to calls on stock
indices, 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. 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 call price, 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 call on a stock index, it pays a premium, but
settlement is in cash rather than by delivery of the underlying
investment to the Fund.
When the Fund purchases a put, it pays a premium and, except
as to puts on stock 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 (a "protective put") enables
the Fund to attempt to protect itself during the put period against
a decline in the value of the underlying investment below the
exercise price by selling the 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 and the Fund will lose the
premium payment and the right to sell the underlying investment.
However, the put may be sold prior to expiration (whether or not at
a profit).
Puts and calls on broadly-based stock indices or Stock Index
Futures are similar to puts and calls on securities or futures
contracts except that all settlements are in cash and gain or loss
depends on changes in the index in question (and thus on price
movements in the stock market generally) rather than on price
movements of individual securities or futures contracts. When the
Fund buys a call on a stock index or Stock Index Future, it pays a
premium. If the Fund exercises the call during the call period, 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 stock 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 call 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 a stock index or
Stock Index Future, 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 cash to the Fund to settle
the put if the closing level of the stock index or Stock Index
Future 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.
When the Fund purchases a put on a stock index, or on a Stock
Index Future not owned by it, the put protects the Fund to the
extent that the index moves in a similar pattern to the securities
the Fund holds. The Fund can either resell the put or, in the case
of a put on a Stock Index Future, 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 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 the expiration date. In the event of a decline
in price of the underlying investment, the Fund could exercise or
sell the put at a profit to attempt to offset some or all of its
loss on its portfolio securities.
The Fund's option activities may affect its portfolio 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. The exercise by the Fund of
puts on securities will cause the sale of underlying investments,
increasing portfolio turnover. Although the decision whether to
exercise a put it holds is within the Fund's control, holding a put
might cause the Fund to sell the related investments for reasons
that would not exist in the absence of the put. The Fund will pay
a brokerage commission each time it buys or sells a call, put or an
underlying investment in connection with the exercise of a put or
call. Those commissions may be higher than the commissions for
direct purchase or sales of the underlying investments.
Premiums paid for options are small in relation to the market
value of the underlying 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.
Options on Foreign Currency. The Fund may write and
purchase calls 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 dealer 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 transaction
costs.
A call written on a foreign currency by the Fund is covered if
the Fund owns the underlying 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 due to an expected adverse
change in the exchange rate 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. This is a
cross-hedging strategy. In such circumstances, the Fund
collateralizes the option by maintaining in a segregated account
with the Fund's Custodian, cash or U.S. Government Securities in an
amount not less than the value of the underlying foreign currency
in U.S. dollars marked-to-market daily.
Foreign Contracts. The Fund may enter into foreign
currency exchange contracts ("Forward Contracts"), which obligate
the seller to deliver and the purchaser to take a specific amount
of foreign currency at a specific future date for a fixed price.
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 are generally
traded in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. The
Fund may enter into a Forward Contract in order to "lock in" the
U.S. dollar price of a security 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.
There is a risk that 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. Forward contracts
include standardized foreign currency futures contracts which are
traded on exchanges and are subject to procedures and regulations
applicable to other Futures. The fund may also enter into a
forward contract to sell a foreign currency denominated in a
currency other than that in which the underlying security is
denominated. This is done in the expectation that there is a
greater correlation between the foreign currency of the forward
contract and the foreign currency of the underlying investment than
between the U.S. dollar and the foreign currency of the underlying
investment. This technique is referred to as "cross hedging."
The success of cross hedging is dependent on many factors,
including the ability of the Manager to correctly identify and
monitor the correlation between foreign currencies and the U.S.
dollar. To the extent that the correlation is not identical, the
Fund may experience losses or gains on both the underlying security
and the cross currency hedge.
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 securities 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.
There is no limitation as to the percentage of the Fund's
assets that may be committed to foreign currency exchange
contracts. The Fund does not enter into such forward contracts or
maintain a net exposure in such contracts to the extent that the
Fund would be obligated to deliver an amount of foreign currency in
excess of the value of the Fund's assets denominated in that
currency, or enter into a "cross hedge," unless it is denominated
in a currency or currencies that the Manager believes will have
price movements that tend to correlate closely with the currency in
which the investment being hedged is denominated. See "Tax Aspects
of Covered Calls and Hedging Instruments" below for a discussion of
the tax treatment of foreign currency exchange contracts.
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 a security 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 by entering 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
security is purchased or sold, or on which the dividend 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 U.S.
dollar value of portfolio positions ("position hedge"). In a
position hedge, for example, when the Fund believes that foreign
currency may suffer a substantial decline against the U.S. dollar,
it may enter into a forward sale contract to sell an amount of that
foreign currency approximating the value of some or all of the
Fund's portfolio securities denominated in such foreign currency,
or 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 dollar amount. In this situation the Fund may, in the
alternative, enter into a forward contract to seek a different
foreign currency for a fixed U.S. dollar amount where the Fund
believes that the U.S. dollar value of the currency to be sold
pursuant to the forward contract will fall whenever there is a
decline in the U.S. dollar value of the currency in which portfolio
securities of the Fund are denominated ("cross hedge").
The Fund's Custodian will place liquid assets of any types, in
a separate account of the Fund having a value equal to the
aggregate amount of the Fund's commitments under forward contracts
to cover its short positions. If the value of the securities
placed in the separate account declines, additional cash or
securities will be placed in the account on a daily basis so that
the value of the account will equal the amount of the Fund's net
commitments with respect to such contracts. As an alternative to
maintaining all or part of the separate account, 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 in 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 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 offsetting Forward Contract under
either 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. Because such contracts are not
traded on an exchange, 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 all of its holdings of
foreign currency deposits 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.
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 thereon as established by
the Commodities Futures Trading Commission ("CFTC"). In
particular, the Fund is excluded from registration as a "commodity
pool operator" if it complies with the requirements of Rule 4.5
adopted by the CFTC. Under this Rule, the Fund is not limited
regarding the percentage of its assets committed to futures margins
and related options premiums subject to a hedge position. However,
under the Rule the Fund must limit its aggregate initial futures
margins and related options premiums to 5% or less of the Fund's
total assets for hedging strategies that are considered bona fide
hedging strategies under the Rule. Under the Rule the Fund also
must use short future options on futures positions solely for bona
fide hedging purposes within the meaning and intent of applicable
provisions of the Commodity Exchange Act.
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. 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 purchases a Future, the Fund will maintain, in a segregated
account or accounts with its Custodian, liquid assets of any type,
including equity and debt securities of any grade, in an amount
equal to the market value of the securities underlying such Future,
less the margin deposit applicable to it.
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 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 the illiquid securities, stated in the Prospectus) the
mark-to-market value of any OTC option held by it. The Securities
and Exchange Commission ("SEC") 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 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 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 and call options offer large amounts of leverage.
The leverage offered by trading options could result in the Fund's
net asset value being more sensitive to changes in the value of the
underlying investments.
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).
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 may
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 which 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 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 an 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,
which may ultimately increase or decrease the amount of the Fund's
investment company income available for distribution to its
shareholders.
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 (i) selling Stock Index Futures or (ii) purchasing
puts on stock indices or Stock Index Futures to attempt to protect
against declines in the value of the Fund's equity securities. The
risk is that the prices of Stock Index Futures will correlate
imperfectly with the behavior of the cash (i.e., market value)
prices of the Fund's equity 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 offering transactions which could distort
the normal relationship between the cash and futures markets.
Second, the liquidity of the futures markets depends on the
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 equity securities 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 equity securities being hedged if the historical
volatility of the prices of the equity 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 equity
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 equity 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 equities markets as a temporary substitute for the purchase
of individual equity securities (long hedging) by buying Stock
Index Futures and/or calls on such Futures, on securities or on
stock indices, it is possible that the market may decline. If the
Fund then concludes not to invest in equity securities at that time
because of concerns as to a 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
equity securities purchased.
Convertible Securities. While convertible securities are
a form of debt security in many cases, their conversion feature
(allowing conversion into equity securities) causes them to be
regarded more as "equity equivalents." As a result, the rating
assigned to the security has less impact on the Manager's
investment decision with respect to convertible securities than in
the case of non-convertible fixed-income securities. To determine
whether convertible securities should be regarded as "equity
equivalents," the Manager examines the following factors: (1)
whether, at the option of the investor, the convertible security
can be exchanged for a fixed number of shares of common stock of
the issuer, (2) whether the issuer of the convertible securities
has restated its earnings per share of common stock on a fully
diluted basis (considering the effect of converting the convertible
securities), and (3) the extent to which the convertible security
may be a defensive "equity substitute," providing the ability to
participate in any appreciation in the price of the issuer's common
stock.
Short Sales Against-the-Box. In this type of short sale,
while the short position is open, the Fund must own an equal amount
of the securities sold short, or by virtue of ownership of other
securities have the right, without payment of further
consideration, to obtain an equal amount of securities sold short.
Short sales against-the-box may be made to defer, for Federal
income tax purposes, recognition of gain or loss on the sale of
securities "in the box" until the short position is closed out.
They may also be used to protect a gain on the security "in-the-box"
when the Fund does not want to sell it and recognize a capital
gain.
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 Fund's fundamental polices 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 as the vote of the holders
of the lesser of (i) 67% or more of the shares present or
represented by proxy at a shareholder meeting, if the holders of
more than 50% of the outstanding shares are present, or (ii) more
than 50% of the outstanding shares.
Under these additional restrictions, the Fund cannot:
lend money, but the Fund can engage in repurchase
transactions and can invest in all or a portion of an issue of
bonds, debentures, commercial paper, or other similar corporate
obligations; the Fund may also make loans of portfolio securities
subject to the restrictions set forth in the Prospectus and above
under the caption "Loans of Portfolio Securities";
underwrite securities of other companies, except insofar as
it might be deemed to be an underwriter for purposes of the
Securities Act of 1933 in the resale of any securities held in its
own portfolio;
invest in physical commodities or physical commodity
contracts; however, the Fund may (i) buy and sell hedging
instruments to the extent specified in its Prospectus from time to
time and (ii) buy and sell options, futures, securities or other
instruments backed by, or the investment return from which, is
linked to changes in the price of, physical commodities;
invest in real estate or interests in real estate, but may
purchase readily marketable securities of companies holding real
estate or interests therein;
issue "senior securities", but this does not prohibit it
from borrowing money subject to the provisions set forth in the
Prospectus and in the section titled "Borrowing for Leverage" or
entering into margin, collateral or escrow arrangements as
permitted by its other investment policies.
As a matter of fundamental policy, the Fund also may invest
all of its assets in the securities of a single open-end management
investment company for which the Manager or one of its subsidiaries
or a successor is advisor or sub-advisor, notwithstanding any other
fundamental investment policy or limitation. That other fund must
have substantially the same fundamental investment objective,
policies and limitations as the Fund. The Fund is permitted by
this policy (but not required) to adopt a "master-feeder" structure
in which the Fund and other "feeder" funds would invest all of
their assets in a single pooled "master fund" in an effort to take
advantage of potential efficiencies. The Fund has no present
intention of adopting a "master-feeder" structure, and would be
required to update its Prospectus and this Statement of Additional
Information prior to its doing so.
Non-Fundamental Investment Restrictions. The following operating
policies of the Fund are not fundamental policies and, as such, may
be changed by vote of a majority of the Fund's Board of Trustees
without shareholder approval. These additional restrictions
provide that the Fund cannot:
invest in companies for the primary purpose of acquiring
control or management thereof;
invest in or hold securities of any issuer if those
officers and trustees of the Fund or officers and
directors of its advisor owning individually more than
1/2 of 1% of the securities of such issuer together own
more than 5% of the securities of that issuer;
purchase securities on margin; however, the Fund can make
margin deposits in connection with any of the hedging
instruments permitted by any of its other investment
policies;
mortgage or pledge any of its assets; this does not
prohibit the escrow arrangements contemplated by the
writing of covered call options or other collateral or
margin arrangements in connection with any of the hedging
instruments permitted by any of its other investment
policies.
The percentage restrictions described above and in the
Prospectus (other than the percentage limitations that apply on an
ongoing basis) apply only at the time of investment and require no
action by the Fund as a result of subsequent changes in relative
values.
For purposes of the Fund's policy not to concentrate its
assets, described in "Other Investment Restrictions" in the
Prospectus, the Fund has adopted the industry classifications set
forth in the Appendix 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 to 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 principal occupations and
business affiliations during the past five years. The address of
each is Two World Trade Center, 34th Floor, New York, New York
10048, except as noted. All of the Trustees are also directors or
trustees of the Oppenheimer Quest For Value Funds (consisting of
the following series: Oppenheimer Quest Growth & Income Value
Fund, Oppenheimer Quest Officers Value Fund, Oppenheimer Quest
Opportunity Value Fund and Oppenheimer Quest Small Cap Value Fund),
Oppenheimer Quest Global Value Fund, Inc. and Oppenheimer Quest
Capital Value Fund, Inc. (the "Oppenheimer Quest Funds"), and
Rochester Fund Municipals, Rochester Portfolio Series - Limited
Term New York Municipal Fund and Bond Fund Series - Oppenheimer
Bond Fund for Growth (the "Oppenheimer Rochester funds"). As of
the date of this Statement of Additional Information, the Manager
owned all of the outstanding shares of the Fund as its initial
shareholder and no Trustee or officer of the Fund owned of record
or beneficially any shares of the Fund.
Bridget A. Macaskill, Chairman of the Board of Trustees and
President; Age 49.
President, Chief Executive Officer and a Director of the Manager
and HarbourView Asset Management Corporation ("HarbourView"), a
subsidiary of the Manager; President and a Director of Oppenheimer
Acquisition Corporation. ("OAC"), the Manager's parent holding
company, and Oppenheimer Partnership Holdings, Inc.; Chairman and
a Director of Shareholder Services, Inc. ("SSI"), and Shareholder
Financial Services, Inc. ("SFSI"), transfer agent subsidiaries of
the Manager; and a director of Oppenheimer Real Asset Management,
Inc.; a director of the NASDAQ Stock Market, Inc. and Hillsdown
Holdings plc (a U.K. food company).
Paul Y. Clinton, Trustee; Age: 66
39 Blossom Avenue, Osterville, Massachusetts 02655
Principal of Clinton Management Associates, a financial and venture
capital consulting firm; Trustee of Capital Cash Management Trust,
a money-market fund and Narragansett Tax-Free Fund, a tax-exempt
bond fund; Director of OCC Cash Reserves, Inc. and Trustee of OCC
Accumulation Trust, both of which are open-end investment
companies. Formerly: Director, External Affairs, Kravco
Corporation, a national real estate owner and property management
corporation; President of Essex Management Corporation, a
management consulting company; a general partner of Capital Growth
Fund, a venture capital partnership; a general partner of Essex
Limited Partnership, an investment partnership; President of Geneve
Corporation., a venture capital fund; Chairman of Woodland Capital
Corp., a small business investment company; and Vice President of
W.R. Grace & Company.
Thomas W. Courtney, Trustee; Age: 64
833 Wyndemere Way, Naples, Florida 34105
Principal of Courtney Associates, Inc. (venture capital firm);
former General Partner of Trivest Venture Fund (private venture
capital fund); former President of Investment Counseling Federated
Investors, Inc.; Trustee of Cash Assets Trust, a money market fund;
Director of OCC Cash Reserves, Inc., and Trustee of OCC
Accumulation Trust, both of which are open-end investment
companies; former President of Boston Company Institutional
Investors; Trustee of Hawaiian Tax-Free Trust and Tax-Free Trust of
Arizona, tax-exempt bond funds; Director of several privately owned
corporations; former Director of Financial Analysts Federation.
Lacy B. Herrmann, Trustee; Age: 68
380 Madison Avenue, Suite 2300, New York, New York 10017
Chairman and Chief Executive Officer of Aquila Management
Corporation, the sponsoring organization and Administrator and/or
Sub-Adviser to the following open-end investment companies, and
Chairman of the Board of Trustees and President of each: Churchill
Cash Reserves Trust, Short Term Asset Reserves, Pacific Capital
Cash Assets Trust, Pacific Capital U.S. Treasuries Cash Assets
Trust, Pacific Capital Tax-Free Cash Assets Trust, Prime Cash Fund,
Narragansett Insured Tax-Free Income Fund, Tax-Free Fund For Utah,
Churchill Tax-Free Fund of Kentucky, Tax-Free Fund of Colorado,
Tax-Free Trust of Oregon, Tax-Free Trust of Arizona, Hawaiian Tax-Free Trust,
and Aquila Rocky Mountain Equity Fund; Vice President,
Director, Secretary, and formerly Treasurer of Aquila Distributors,
Inc., distributor of the above funds; President and Chairman of the
Board of Trustees of Capital Cash Management Trust ("CCMT"), and an
Officer and Trustee/Director of its predecessors; President and
Director of STCM Management Company, Inc., sponsor and adviser to
CCMT; Chairman, President and a Director of InCap Management
Corporation, formerly sub-adviser and administrator of Prime Cash
Fund and Short Term Asset Reserves; Director of OCC Cash Reserves,
Inc., and Trustee of OCC Accumulation Trust, both of which are
open-end investment companies; Trustee of Brown University.
George Loft, Trustee; Age: 82
51 Herrick Road, Sharon, Connecticut 06069
Private Investor; Director of OCC Cash Reserves, Inc., and Trustee
of OCC Accumulation Trust, both of which are open-end investment
companies.
[Portfolio Manager]
Andrew J. Donohue, Secretary; Age: 47
Executive Vice President, General Counsel and a director of the
Manager, OppenheimerFunds Distributor, Inc., (the "Distributor"),
HarbourView, SSI, SFSI, Oppenheimer Partnership Holdings, Inc., and
MultiSource Services, Inc., (a broker-dealer); President and a
director of Centennial Asset Management Corporation ("Centennial");
President and a director of Oppenheimer Real Asset Management,
Inc.; Secretary and General Counsel of OAC; an officer of other
Oppenheimer funds.
George C. Bowen, Treasurer; Age: 61
6803 South Tucson Way, Englewood, Colorado, 80112
Senior Vice President and Treasurer of the Manager; 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; Vice President, Treasurer and Secretary of
SFSI; Senior Vice President, Treasurer and Secretary of SSI, Vice
President and Treasurer of Oppenheimer Real Asset Management, Inc.;
Chief Executive Officer, Treasurer and a director of MultiSource
Services, Inc.; an officer of other Oppenheimer funds.
Robert G. Zack, Assistant Secretary; Age: 49
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI and SFSI; an officer of other
Oppenheimer funds.
Robert J. Bishop, Assistant Treasurer; Age: 38
6803 South Tucson Way, Englewood, Colorado, 80112
Vice President of the Manager/Mutual Fund Accounting; an officer of
other Oppenheimer funds; formerly a Fund Controller for the
Manager.
Scott Farrar, Assistant Treasurer; Age: 32
6803 South Tucson Way, Englewood, Colorado, 80112
Vice President of the Manager/Mutual Fund Accounting, an officer of
other Oppenheimer funds; previously a Fund Controller for the
Manager.
Remuneration of Trustees. All officers of the Fund and Ms.
Macaskill, a Trustee, are officers or directors of the Manager and
receive no salary or fee from the Fund. The remaining Trustees of
the Fund are expected to receive the compensation shown below from
the Fund with respect to the Fund's fiscal year ending August 31,
1998.
Aggregate Benefits
Compensation Accrued as
from the Part of the
Name of Person Fund(1) Fund
Paul Y. Clinton $ None
Thomas W. Courtney $ None
Lacy B. Herrmann $ None
George Loft $ None
(1) Estimated to be received during the current fiscal year
ending August 31, 1998.
Major Shareholders. As of the date of this Statement of
Additional Information, the Manager was the sole initial
shareholder of the Fund's Class A, Class B, Class C and Class Y
shares.
The Manager and Its Affiliates. The Manager 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 the Manager's directors and
officers, some of whom also serve as officers of the Fund, and one
of whom (Ms. Macaskill) serves as an officer and Trustee 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.
Portfolio Management. The Portfolio Manager of the Fund is
_____________, who is principally responsible for the day-to-day
management of the Fund's portfolio. [Mr.] [Ms.] ___________'s
background is described in the Prospectus under "Portfolio
Manager." Other members of the Manager's Equity Portfolio
Department, particularly ___________, provide the Portfolio Manager
with counsel and support in managing the Fund's portfolio.
The Investment Advisory Agreement. The Investment Advisory
Agreement between the Manager and the Fund requires the Manager, 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 the Manager under the
Investment Advisory Agreement or by the Distributor under the
General Distributor's Agreement are paid by the Fund. The
Investment Advisory Agreement lists examples of expenses paid by
the Fund, the major categories of which relate to interest, taxes,
brokerage commissions, fees to certain Trustees, legal and audit
expenses, custodian and transfer agent expenses, share issuance
costs, certain printing and registration costs and non-recurring
expenses, including litigation costs.
The Investment Advisory Agreement provides 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 thereunder, the Manager is not liable for
any loss resulting from a good faith error or omission on its part
with respect to any of its duties thereunder. The Investment
Advisory Agreement permits 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
the Manager shall no longer act as investment adviser to the Fund,
the right of the Fund to use the name "Oppenheimer" as part of its
name may be withdrawn.
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, 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.
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 under the Investment Advisory Agreement
is to arrange the portfolio transactions for the Fund. The
Investment Advisory Agreement contains provisions relating to the
employment of broker-dealers ("brokers") to effect the Fund's
portfolio transactions. In doing so, the Manager is authorized by
the Investment 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 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 Investment 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 of 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
its 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 Investment Advisory Agreement and
the procedures and rules described above, allocations of brokerage
are generally 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
Investment 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/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 to which the
option relates. When possible, concurrent orders to purchase or
sell the same security 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 price. The Fund seeks to obtain prompt
execution of these orders at the most favorable net price.
The research services provided by a particular broker may be
useful only to one or more of the advisory accounts of the Manager
and its 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 part 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 Manager in a non-research
capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to
the Manager in the investment decision-making process may be paid
for in commission dollars. The Board of Trustees has permitted the
Manager to use concessions on fixed-price offerings to obtain
research, in the same manner as is permitted for agency
transactions. The Board has also permitted the Manager to use
stated commissions on secondary fixed-income agency trades to
obtain research where the broker has represented to 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 Manager, by making
available additional views for consideration and comparisons, and
by enabling 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 no direct or indirect financial interest in the
operation of the Investment Advisory Agreement or the Distribution
and Service Plans described below) annually reviews information
furnished by the Manager as to the commissions paid to brokers
furnishing such services so that the Board may ascertain whether
the amount of such commissions was reasonably related to the value
or benefit of such services.
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
"total return at net asset value" of an investment in a class of
shares of the Fund may be 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.
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 )
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). In
calculating total returns for Class B shares, the payment of the
contingent deferred sales charge, (5% for the first year, 4% for
the second year, 3% for the third and fourth years, 2% for the
fifth year, 1% for the sixth year and none thereafter) is applied
to the investment result for the period shown. For Class C shares,
the 1.0% contingent deferred sales charge is applied to the
investment result for the one-year period (or less). Total returns
also assume that all dividends and capital gains distributions
during the period are reinvested at net asset value per share, and
that the investment is redeemed at the end of the period.
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.
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 with that of other alternatives, investors should understand
that as the Fund is an equity fund seeking capital appreciation,
its shares are subject to greater market risks and volatility than
shares of funds having other investment objectives and that the
Fund is designed for investors who are willing to accept greater
risk of loss in the hopes of realizing greater gains.
Other Performance Comparisons. From time to time the Fund may also
include in its advertisements and sales literature performance
information about the Fund or rankings of the Fund's performance
cited in newspapers or periodicals, such as The New York Times.
These articles may include quotations of performance from other
sources, such as Lipper Analytical Services, Inc. ("Lipper") or
Morningstar, Inc. Lipper is a widely-recognized independent mutual
fund monitoring service that 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 of
shares is ranked against (i) all other funds and (ii) all other
capital appreciation funds. The Lipper performance rankings are
based on total returns that include the reinvestment of capital
gain distributions and income dividends but do not take sales
charges or taxes in terms of consideration.
From time to time the Fund may publish the star ranking of the
performance of its Class A, Class B, Class C and 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 bond
funds and municipal bond funds) based on risk-adjusted total
investment returns. The Fund is ranked among domestic stock funds.
Investment return measures a fund's or class' 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' performance below 90-day U.S.
Treasury bill returns. Risk and investment return are combined to
produce star rankings reflecting performance relative to the
average fund in the 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' 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
ranking, Morningstar also categorizes and compares a fund's 3-year
performance based 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 comparisons by
Morningstar are based on the same risk and return measurements as
its star rankings but do not consider the effect of sales charges.
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, using its own 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" (as
defined in the Investment Company Act) of the shares of each class,
in each instance that vote having been cast by the Manager 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
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 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.
Any unreimbursed expenses incurred by the Distributor with
respect to Class A shares for any fiscal year may not be recovered
in subsequent years. Payments received by the Distributor under
the Plan for Class A shares will not be used to pay any interest
expense, carrying charge, 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.
Although the Class B and 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 and the Class C Plans by the Board. Initially, the
Board has set no minimum holding period. All payments under the
Class B Plan and the Class C Plans 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 Plans provide for the distributor to be
compensated at a flat rate, whether the Distributor's 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 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 sales person 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
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 three 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 charges 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 (i) Distribution Plan fees, (ii)
incremental transfer and shareholder servicing agent fees and
expenses, (iii) registration fees and (iv) shareholder meeting
expenses, to the extent that such expenses pertain to a specific
class rather than to the Fund as a whole.
Determination of Net Asset Values 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 "NYSE") on each day that the NYSE is open, by
dividing the Fund's net assets attributable to a class by the
number of shares of that class that are outstanding. The NYSE
normally closes at 4:00 P.M., but may close earlier on some other
days (for example, in case of weather emergencies or days falling
before a holiday). The NYSE's most recent annual announcement
(which is subject to change) states that it will close on New
Year's Day, President's 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 NYSE 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 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 sale prices of the preceding trading day or
closing "bid" prices that day); (ii) securities traded on a foreign
securities exchange are valued generally at the last sale 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 preceding the valuation date, or at the mean between
"bid" and "ask" 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 "ask" prices determined by a portfolio pricing
service approved by the Fund's Board of Trustees or obtained by the
Manager 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
the mean between the "bid" and "ask" prices determined by a pricing
service approved by the Fund's Board of Trustees or obtained by the
Manager from two active market makers in the security on the basis
of reasonable inquiry; (v) money market-type debt securities held
by a non-money market fund that had a maturity of less than 397
days when issued that have a remaining maturity of 60 days or less,
and debt instruments held by a money market fund that have a
remaining maturity of 397 days or less, shall be valued at cost,
adjusted for amortization of premiums and accretion of discount;
and (vi) 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 "ask" prices provided by a single active market maker
(which in certain cases may be the "bid" price if no "ask" price is
available).
In the case of U.S. Government Securities and mortgage-backed
securities, 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 Manager may use
pricing services approved by the Board of Trustees to price U.S.
Government Securities or mortgage-backed securities 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.
Trading in securities on European and Asian exchanges and
over-the-counter markets is normally completed before the close of
the NYSE. 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 NYSE 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 is likely to effect
a material change in the value of such security. 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. The values of securities
denominated in foreign currency will be converted to U.S. dollars
at the closing price in the London foreign exchange market that day
as provided by a reliable bank, dealer or pricing service.
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 preceding trading
day if it is within the spread of the closing "bid" and "ask"
prices on the principal exchange or on NASDAQ on the valuation
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 "ask" prices obtained by
the Manager from two active markets makers (which in certain cases
may be the "bid" price if no "ask" price is available).
When the Fund writes an option, an amount equal to the premium
received 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 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 the shares.
Dividends will begin to accrue on such shares on the day the Fund
receives Federal Funds for the purchase through the ACH system
before the close of the NYSE that day, which is normally three days
after the ACH transfer is initiated. The NYSE 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 NYSE, the
shares will be purchased and dividends will begin to accrue on the
next regular business day. The proceeds of ACH transfers are
normally received by the Fund three days after the transfers are
initiated. 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
Rights 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 incurs 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. Relations by virtue of a remarriage (step-children, step-parents,
etc.) are included.
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 Bond Fund For Growth
Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Champion Income Fund
Oppenheimer Developing Markets Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Equity Income Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Bond Fund
Oppenheimer Value Stock Fund
Oppenheimer International Bond Fund
Oppenheimer International Growth Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street California Municipal Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer MidCap Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer Florida Municipal Fund
Oppenheimer New Jersey Municipal Fund
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Municipal Bond Fund
Oppenheimer Insured Municipal Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer New York Municipal Fund
Oppenheimer Quest Growth & Income Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Real Asset Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer Disciplined Value Fund
Oppenheimer LifeSpan Balanced Fund
Oppenheimer LifeSpan Growth Fund
Oppenheimer LifeSpan Income Fund
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer U.S. Government Trust
Rochester Fund Municipals
Limited Term New York Municipal Fund
and the following "Money Market Funds":
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.
Oppenheimer Cash Reserves
Oppenheimer Money Market Fund, Inc.
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).
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 holding 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,"
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.
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
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 charge 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 or 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 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
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 declines 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
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.
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.
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-l
under the Investment Company Act, pursuant to which the Fund is
obligated to redeem shares solely in cash up to the lesser or
$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
charge, or (ii) Class B shares that were subject to the Class B
contingent deferred sales charge when redeemed. 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 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 or
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, SEP-IRAs, SAR-SEPs, 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 requirements. Participants (other than self-employed
persons maintaining a plan account in their own name) in
OppenheimerFunds-sponsored prototype pension, 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, 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 NYSE 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 customer prior to the time the
NYSE closed (normally, that is 4:00 P.M., but may be earlier 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
documents 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
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 the 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 you select 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 that would require the redemption of shares held less than 6
years or 12 months, respectively, because of the imposition of the
Class B or Class C contingent deferred sales charge on such
withdrawals (except where the Class B or Class C contingent
deferred sales charge is 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 the Prospectus. These provisions
may be amended from time to time by the Fund and/or Distributor.
When adopted, such amendments will automatically apply to existing
Plans.
Automatic Exchange Plans. Shareholders can authorize the
Transfer Agent (on the OppenheimerFunds Application or signature-guaranteed
instructions) to exchange a predetermined amount of
shares of the Fund for shares (of the same class) of other
Oppenheimer funds automatically on a monthly, quarterly, semiannual
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.
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 withdrawal 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 because of the sales charges that apply to purchases
when made. Accordingly, a shareholder normally may not maintain an
Automatic Withdrawal Plan (the "Plan") while simultaneously making
regular purchases of Class A shares.
The Transfer Agent will administer the investor's 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 in administering 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 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
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 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 Municipal 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 other Oppenheimer funds or through
OppenheimerFunds sponsored 401(k) plans). A current list showing
which funds offer which classes 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
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).
Shares of the Fund acquired by reinvestment of dividend or
distributions from any other of the Oppenheimer funds (except
Oppenheimer Cash Reserves) 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, 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.
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 (18 months for
shares purchased prior to May 1, 1997) of the end of the calendar
month of the initial purchase of the exchanged Class A shares, 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 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 the representatives of authorized
dealers 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 by 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, 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 a 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 shares as a result
of the asset-based sales charges on Class B and Class C shares, and
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 gain
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. 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 sales of securities or dividends from
foreign corporations, those dividends will not qualify for the
deduction.
If prior distributions must be re-characterized at the end of
the fiscal year as a result of the effect of the Fund's investment
policies, shareholders may have a nontaxable return of capital,
which will be identified in notices to shareholders. There is no
fixed dividend rate and there can be no assurance as to the payment
of any dividends or the realization of any capital gains.
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 intends to qualify as a regulated investment company in
its first 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 to determine whether a Fund will
qualify, and a Fund might not meet those tests in a particular
year. If it does not qualify, a Fund will be treated for tax
purposes as an ordinary corporation and will 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 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 certain of the Oppenheimer funds may be
invested in shares of the 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
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.
Independent Accountants. The independent accountants of the Fund
audit the Fund's financial statements and perform other related
audit services. They also act as auditors for certain other funds
advised by the Manager.<PAGE>
Appendix
Corporate Industry Classifications
Aerospace/Defense Gas Utilities*
Air Transportation Gold
Auto Parts Distribution Health Care/Drugs
Automotive Health Care/Suppliers & Services
Bank Holding Companies Homebuilders/Real Estate
Banks Hotel/Gaming
Beverages Industrial Services
Broadcasting Information Technology
Broker-Dealers Insurance
Building Materials Leasing & Factoring
Cable Television Leisure
Chemicals Manufacturing
Commercial Finance Metals/Mining
Computer Hardware Nondurable Household Goods
Computer Software Oil - Integrated
Conglomerates Paper
Consumer Finance Publishing/Printing
Containers Railroads
Convenience Stores Restaurants
Department Stores Savings & Loans
Diversified Financial Shipping
Diversified Media Special Purpose Financial
Drug Stores Specialty Retailing
Drug Wholesalers Steel
Durable Household Goods Supermarkets
Education Telecommunications - Technology
Electric Utilities Telephone - Utility
Electrical Equipment Textile/Apparel
Electronics Tobacco
Energy Services & Producers Toys
Entertainment/Film Trucking
Environmental Wireless Services
Food
___________________
* 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>
Oppenheimer MidCap Fund
Two World Trade Center
New York, New York 10048-0203
1-800-525-7048
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 Accountants
Price Waterhouse LLP
950 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
<PAGE>
OPPENHEIMER MIDCAP FUND
FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
- -------- ---------------------------------
(a) Financial Statements:
--------------------
(1) Financial Highlights (See Parts A and B): Not
applicable.
(2) Report of Independent Auditors (See Part B):*
(3) Statement of Investments (See Part B): Not
applicable.
(4) Statement of Assets and Liabilities (See Part B):*
(5) Statement of Operations (See Part B): Not
applicable.
(6) Statement of Changes in Net Assets (See Part B):
Not applicable.
(7) Notes to Financial Statements (See Part B): Not
applicable.
____________
* To be filed by amendment
(b) Exhibits:
--------
(1) Declaration of Trust dated 6/18/97: Filed with the
Registration Statement of Registrant, 7/18/97, and incorporated
herein by reference.
(2) By-Laws dated 6/18/97: Filed with the Registration
Statement of Registrant, 7/18/97, and incorporated herein by
reference.
(3) Not applicable.
(4) (i) Specimen Class A Share Certificate: Filed with
the Registration Statement of Registrant, 7/18/97, and incorporated
herein by reference.
(ii) Specimen Class B Share Certificate: Filed with
the Registration Statement of Registrant, 7/18/97, and incorporated
herein by reference.
(iii) Specimen Class C Share Certificate: Filed with
the Registration Statement of Registrant, 7/18/97, and incorporated
herein by reference.
(iv) Specimen Class Y Share Certificate: Filed
with the Registration Statement of Registrant, 7/18/97, and
incorporated herein by reference.
(5) Form of Investment Advisory Agreement: Filed with
the Registration Statement of Registrant, 7/18/97, and incorporated
herein by reference.
(6) (i) Form of General Distributor's Agreement:
Filed with the Registration Statement of
Registrant, 7/18/97, and incorporated herein
by reference.
(ii) Form of Oppenheimer Funds 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) Form of Oppenheimer Funds 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) Form of Oppenheimer Funds 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 Oppenheimer Fund
Management, 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, 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) Custody Agreement between Registrant and The Bank
of New York: Filed herewith.
(9) Not applicable.
(10) Opinion and Consent of Counsel: To be filed by
amendment.
(11) Independent Auditors' Consent: To be filed by
amendment.
(12) Not applicable.
(13) Investment Letter from OppenheimerFunds, Inc. to
Registrant: To be filed by amendment.
(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: Filed with Post-Effective Amendment No.
21 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 of 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 of Oppenheimer Strategic
Income & Growth Fund (Reg. No. 33-47378),
9/28/95, and incorporated 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) Form of Service Plan and Agreement for Class
A shares under Rule 12b-1: Filed herewith.
(ii) Form of Distribution and Service Plan and
Agreement for Class B shares under Rule 12b-1: Filed herewith.
(iii) Form of 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:
Not applicable.
(ii) Financial Data Schedule for Class B shares:
Not applicable.
(iii) Financial Data Schedule for Class C shares:
Not applicable.
(iv) Financial Data Schedule for Class Y shares:
Not applicable.
(18) OppenheimerFunds Multiple Class Plan under Rule 18f-3
dated 3/18/96: Filed with the Registration Statement of
Registrant, 7/18/97, and incorporated herein by reference.
-- Powers of Attorney: Filed with the Registration Statement
of Registrant, 7/18/97, and incorporated herein by reference.
-- Certified Board Resolutions: Filed herewith.
Item 25. Persons Controlled by or Under Common Control
with Registrant
- -------- ---------------------------------------------
None
<PAGE>
Item 26. Number of Holders of Securities
- -------- -------------------------------
Number of
Record Holders
as of the date of
Title of Class this Registration Statement
- -------------- --------------------------
Class A Shares of Beneficial Interest
Class B Shares of Beneficial Interest
Class C Shares of Beneficial Interest
Class Y Shares of Beneficial Interest
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
(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 & Current Position With Other Business and Connections
OppenheimerFunds, Inc. During the Past Two Years
- --------------------------- -------------------------------
<S> <C>
Mark J.P. Anson, 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, the senior
equity portfolio manager for the Panorama
Series Fund, Inc. ("Company") and other
mutual fund and pension funds managed by
G.R. Phelps & Co. Inc., the Company's former
investment adviser, which was a subsidiary
of Connecticut mutual Life Insurance Company;
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.
Kathleen Beichert,
Vice President Formerly employed by Smith Barney, Inc.
Rajeev Bhaman,
Assistant Vice President Formerly Vice President of Asian Equities
for Barcleys de Zoete Wedd, Inc.
Robert J. Bishop,
Vice President Assistant Treasurer of the Oppenheimer
funds; previously a Fund Controller for
OppenheimerFunds, Inc. (the "Manager").
George Bowen,
Senior Vice President & Treasurer Treasurer of the Oppenheimer funds; Vice
President and Assistant Secretary of the
Denver-based Oppenheimer Funds. Vice
President and Treasurer of OppenheimerFunds
Distributor, Inc. (the "Distributor") and
HarbourView Asset Management Corporation
("HarbourView"), an investment adviser
subsidiary of the Manager; Senior Vice
President, Treasurer, Assistant Secretary
and a director of Centennial Asset
Management Corporation ("Centennial"), an
investment adviser subsidiary of the
Manager; 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 Executive Officer of MultiSource
Services, Inc. ("MultiSource"); Vice
President and Treasurer of ORAMI;
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 Previously, a Director of Educational
Services for H.D. Vest Investment
Securities, Inc.
Michael A. Carbuto,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; Vice President
of Centennial.
Ruxandra Chivu, None.
Assistant Vice President
O. Leonard Darling,
Executive Vice President Formerly Co-Director of Fixed Income for
State Street Research & Management Co.
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.
Andrew J. Donohue,
Executive Vice President,
General Counsel & 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.
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 ORAMI.
Ronald H. Fielding,
Senior Vice President; Chairman,
Rochester Division An officer, director and/or portfolio
manager of certain Oppenheimer funds;
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.
John Fortuna, None.
Vice President
Patricia Foster,
Vice President Formerly, an officer of certain Oppenheimer
funds; Secretary and General Counsel of
Rochester Capital Advisors, L.P. and
Secretary of Rochester Tax Managed Fund,
Inc.
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; Vice President and Counsel of OAC;
formerly he held the following positions:
a director of HarbourView and Centennial,
a director of SFSI and SSI, an officer of
other Oppenheimer Funds.
Linda Gardner,
Vice President None.
Jill Glazerman,
Assistant Vice President None.
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.
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,
Assistant Vice President None.
Jane Ingalls,
Vice President Formerly a Senior Associate with Robinson,
Lake/Sawyer Miller.
Byron Ingram,
Assistant Vice President None.
Ronald Jamison, Formerly Vice President and
Vice President 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 of Van Eck
Global.
Avram Kornberg,
Vice President Formerly a Vice President with Bankers
Trust.
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 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
ORAMI; Chairman and Director of SSI.
Timothy Martin,
Assistant Vice President Formerly, Vice President, Mortgage Trading,
at S.N. Phelps & Co., Salomon Brothers, and
Kidder Peabody.
Loretta McCarthy,
Executive 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 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.
Gina M. Palmieri,
Assistant Vice President None.
Robert E. Patterson,
Senior Vice President An officer and/or portfolio manager of
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; formerly, Senior
Investment Officer and Portfolio Manager
with Chemical Bank.
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 Formerly a Product Manager for Metropolitan
Life Insurance Company.
Michael S. Rosen
Vice President; President,
Rochester Division An officer and/or portfolio manager of
certain Oppenheimer funds; formerly, Vice
President 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.
Lawrence Rudnick,
Assistant Vice President Formerly Vice President of Dollar Dry Dock
Bank.
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.
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
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.
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.
Caleb Wong,
Assistant Vice President None.
Robert G. Zack,
Senior Vice President and
Assistant Secretary Associate General Counsel of the Manager;
Assistant Secretary of the Oppenheimer
Funds; Assistant Secretary of SSI and SFSI;
an officer of other Oppenheimer Funds.
Arthur J. Zimmer,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; Vice President
of Centennial.
</TABLE>
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 MidCap Fund
Oppenheimer Global Emerging Growth 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.
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 Strategic Income & Growth 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:
<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 Oppenheimer
funds.
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
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
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
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
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
Gary Paul Tyc(1) Assistant Treasurer None
Mark Stephen Vandehey(1) Vice President None
Marjorie Williams Vice President None
6930 East Ranch Road
Cave Creek, AZ 85331
</TABLE>
(1) 6803 South Tucson Way, Englewood, Colorado 80112
(2) Two World Trade Center, New York, NY 10048-0203
(3) 350 Linden Oaks, Rochester, NY 14625-2807
(c) Not applicable.
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 OppenheimerFunds, Inc. at its offices at 6803
South Tucson Way, Englewood, Colorado 80112.
Item 31. Management Services
- -------- -------------------
Not applicable.
Item 32. Undertakings
- -------- ------------
(a) Not applicable.
(b) Registrant undertakes to file a post-effective
amendment, using financial statements which need not be certified,
within four to six months from the effective date of its
registration statement under the Securities Act of 1933.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York and
State of New York on the 18th day of September, 1997
OPPENHEIMER MIDCAP FUND
By: /s/ Bridget A. Macaskill*
------------------------------------
Bridget A. Macaskill
Chairman of the Board and President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated:
Signatures Title Date
- ---------- ----- ----
/s/ Bridget A Macaskill* Chairman of the Board, September 18, 1997
- ----------------------- President (Principal
Bridget A. Macaskill Executive Officer) and
Trustee
/s/ George C. Bowen* Treasurer (Principal September 18, 1997
- ----------------------- Financial and
George C. Bowen Accounting Officer)
/s/ Paul Y. Clinton* Trustee September 18, 1997
- -----------------------
Paul Y. Clinton
/s/ Thomas W. Courtney* Trustee September 18, 1997
- -----------------------
Thomas W. Courtney
/s/ Lacy B. Herrmann* Trustee September 18, 1997
- -----------------------
Lacy B. Herrmann
/s/ George Loft* Trustee September 18, 1997
- -----------------------
George Loft
By: Robert G. Zack*
_________________
/s/ Robert G. Zack
Attorney-in-Fact
<PAGE>
OPPENHEIMER MIDCAP FUND
EXHIBIT INDEX
Form N-1A
Item No. Description
24(b)(8) Custody Agreement
- ---- Certified Board Resolutions
OPPENHEIMER MIDCAP FUND
CUSTODY AGREEMENT
Agreement made as of this 2nd day of September, 1997, between
OPPENHEIMER MIDCAP FUND, a business trust organized and existing
under the laws of the Commonwealth of Massachusetts, having its
principal office and place of business at Two World Trade Center,
New York, New York 10048 (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").
WITNESSETH, that for and in consideration of the mutual
promises hereinafter set forth, the Fund and the Custodian agree as
follows:
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 Ap-
pendices 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 Certi-
ficate 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 "Offi-
cer of OSS" shall be an Authorized Person only for purposes of
Articles XII and XIII hereof.
3. "Book-Entry System" shall mean the Federal Reserve/Trea-
sury book-entry system for United States and federal agency secu-
rities, its successor or successors and its nominee or
nominees.
4. "Call Option" shall mean an exchange traded Option with
respect to Securities other than Index, Futures Contracts, and Fu-
tures Contract Options entitling the holder, upon timely exercise
and payment of the exercise price, as specified therein, to pur-
chase 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 Agree-
ment to be given to the Custodian which is actually received (irre-
spective 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.
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. "Investment Company Act of 1940" shall mean the
Investment Company Act of 1940, as amended, and the rules and
regulations thereunder.
18. "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.
19. "Index Option" shall mean an exchange traded Option
entitling the holder, upon timely exercise, to receive an amount of
cash determined by reference to the difference between the exercise
price and the value of the index on the date of exercise.
20. "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.
21. "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.
22. "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.
23. "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.
24. "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
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 OSS" shall be an
Officer only for purposes of Articles XII and XIII hereof.
25. "Option" shall mean a Call Option, Covered Call Option,
Index Option and/or a Put Option.
26. "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.
27. "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.
28. "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.
29. "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.
30. "Rule 17f-5" shall mean Rule 17f-5 (Reg. Section
270.17f-5) promulgated by the Securities and Exchange
Commission under the Investment Company Act
of 1940, as amended.
31. "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, Reverse Repurchase Agreements, over the counter Options on
Securities, common stocks and other securities having
characteristics similar to common stocks, preferred stocks,
convertible fixed-income securities, 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, 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.
32. "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.
33. "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.
34. "Shares" shall mean the shares of beneficial interest of
the Fund and its Series.
35. "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.
36. "Transfer Agent" shall mean OppenheimerFunds Services, a
divisionof OppenheimerFunds, Inc., its successors and assigns.
37. "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.
38. "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
is able to verify by codes or otherwise with a reasonable degree of
certainty the identity of the sender of such communication.
ARTICLE I
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 II
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
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:
(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
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 Cus-
todian 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
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.
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.
ARTICLE III
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
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 IV
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 issuer and the
title and number of shares subject to such Option or, 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 an 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
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.
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
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
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
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 V
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
(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
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 VI
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 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 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.
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
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
depoited 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 Fu-
tures 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
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 VII
SHORT SALES
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.
1. 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 VIII
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
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 IX
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
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 X
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
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 Colla-
teral 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
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 XI
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
codividend 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.
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 XII
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
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 XIII
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
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 or for any
purpose described in its then current prospectus, 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 or for any purpose described in its then current
prospectus, 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
such bank, the Custodian shall not be under any obligation to
deliver any Securities.
ARTICLE XIV
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
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
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
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 reasonable level of safeguards for
maintaining the Fund's assets in light of prevailing settlement and
securities handling practices, procedures and controls in the
relevant market. 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 XV
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
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
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
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
coCustodians, 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
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
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
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
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 XVI
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.
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 XVII
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
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.
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
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 XVIII
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
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
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 MIDCAP FUND
By: /s/ Andrew J. Donohue
Andrew J. Donohue, Secretary
[SEAL]
Attest:
By: /s/ Robert G. Zack
Robert G. Zack, Assistant Secretary
THE BANK OF NEW YORK
[SEAL] By: /s/ Jorge Ramos
Jorge Ramos, Vice President
Attest:
By: /s/ Daniel Manniello
Daniel Manniello
OPPENHEIMER MIDCAP FUND
CERTIFIED BOARD RESOLUTIONS
The undersigned, the duly elected, acting and qualified
Secretary of the above referenced funds (the "Funds") does hereby
certify that the resolutions set forth below were duly adopted and
approved at a meeting of the Board of Trustees or Directors, as
applicable, of the Funds held on August 5, 1997:
"RESOLVED, that Andrew J. Donohue and Robert G. Zack be,
and each of them hereby is, appointed the attorney-in-fact
and agent of Bridget A. Macaskill, the Chairman
of the Board and President (Principal Executive
Officer) of the Funds, Andrew J. Donohue,
the Secretary of the Funds, and George C. Bowen,
the Treasurer (Principal Financial and Accounting
Officer) of the Funds, with full power of
substitution and resubstitution, to sign on the behalf of
such officers of each of the Funds any and all
Registration Statements (including any post-effective
amendments to such Registration Statements) under the
Securities Act of 1933 and the Investment Company Act of
1940 and any amendments and supplements thereto, and
other documents in connection thereunder, and to file the
same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission; and be it further
RESOLVED, that Andrew J. Donohue and Robert G. Zack be,
and each of them hereby is, authorized, empowered and
directed, in the name and on behalf of the Funds, to take
such additional action and to execute and deliver such
additional documents and instruments as any of them may
deem necessary or appropriate to implement the provisions
of the foregoing resolution, the authority for the taking
of such action and the execution and delivery of such
documents and instruments to be conclusively evidenced
thereby."
IN WITNESS WHEREOF, the undersigned has hereunto set his hand
as of this 5th day of August, 1997.
/s/ Andrew J. Donohue
____________________
Andrew J. Donohue
powers\midcap.res
