Registration No. 333-56221
File No. 811-08799
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION SATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. _6_ / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 / X /
AMENDMENT NO. 8 / X /
OPPENHEIMER CAPITAL PRESERVATION FUND
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(Exact Name of Registrant as Specified in Charter)
Two World Trade Center, New York, New York 10048-0203
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(Address of Principal Executive Offices)
212-323-0200
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(Registrant's Telephone Number)
ANDREW J. DONOHUE, ESQ.
OppenheimerFunds, Inc.
Two World Trade Center, New York, New York 10048-0203
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(Name and Address of Agent for Service)
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 February 18, 2000, pursuant to
paragraph (b) / / 60 days after filing, pursuant to paragraph (a)(1) / X /
On February 12, 2001, pursuant to paragraph (a)(1) / / 75 days after
filing, pursuant to paragraph (a)(2) / / On __________________, pursuant
to paragraph (a)(2)
of Rule 485.
<PAGE>
Oppenheimer
Capital Preservation Fund
Prospectus dated February 12, 2001
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the Fund's securities nor has it determined that this
Prospectus is accurate or complete. It is a criminal offense to represent
otherwise.
Oppenheimer Capital Preservation Fund is a mutual fund. It seeks high current
income while seeking to maintain stable prices for its shares. The Fund invests
mainly in the shares of other Oppenheimer mutual funds and buys special
investment contracts from financial institutions such as banks that are intended
to stabilize the Fund's share prices. The Fund's shares are offered only to
retirement plans and 403(b)(7) custodial plans.
The Fund is not a money market fund, and there is no guarantee that it will be
able to maintain stable share prices.
This Prospectus contains important information about the Fund's objective, its
investment policies, strategies and risks. It also contains important
information about how to buy or sell shares of the Fund and other account
features. Please read this Prospectus carefully before you invest and keep it
for future reference about your account.
<PAGE>
Contents
A B O U T T H E F U N D
The Fund's Investment Objective and Strategies
Main Risks of Investing in the Fund
The Fund's Past Performance
Fees and Expenses of the Fund
About the Fund's Investments
How the Fund is Managed
A B O U T YOUR A C C O U N T
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Class Y Shares
Class N Shares
Special Investor Services
AccountLink
PhoneLink
OppenheimerFunds Internet Web Site
Retirement Plans
How to Sell Shares
Redemption Fees
By Mail
By Telephone
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Financial Highlights
<PAGE>
About the Fund
The Fund's Investment Objective and Strategies
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WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund seeks high current income
while seeking to maintain a stable value per share.
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WHAT DOES THE FUND INVEST IN? The Fund is a special type of mutual fund known as
a "fund of funds" because it invests in other mutual funds. The Fund normally
invests at least 85% of its total assets in shares of other Oppenheimer funds,
listed in the chart below, that seek current income. The Fund buys shares of the
underlying Oppenheimer funds within the parameters listed below in normal market
conditions. "Normal market conditions" are when securities markets and economic
conditions are not unstable or adverse, in the judgment of the Fund's investment
Manager, OppenheimerFunds, Inc.
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Oppenheimer fund Normal Allocation of the Fund's Net
Assets
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Oppenheimer Limited-Term
Government Fund at least 65% but not more than 90%
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Oppenheimer Bond Fund Not more than 20%
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Oppenheimer Strategic Not more than 20%
Income Fund
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Oppenheimer U.S. Not more than 15%
Government Trust
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Oppenheimer Money Market At least 10%
Fund, Inc.
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To try to maintain the prices of its shares at $10.00, the Fund also
invests up to 15% of its net assets in specialized investment contracts,
referred to as "wrapper agreements," that are issued by banks, insurance
companies or other financial institutions. A wrapper agreement is a contract
that obligates the wrapper provider to maintain the book value (the adjusted
cost basis) of some or all of the assets in the Fund's portfolio. For example,
if the Fund were to sell a security for less than its book value, the wrapper
provider might be obligated to pay the Fund the difference, and vice versa if
the Fund sold the security at a price greater than its book value.
Under the terms of the Fund's current wrapper agreement, the Manager can
vary the Fund's investment allocation in the other Oppenheimer funds within the
parameters stated in the chart above. However, the Fund is required to invest at
least the minimum amount of its assets stated in the chart in Oppenheimer
Limited-Term Government Fund and Oppenheimer Money Market Fund. Those
allocations can change under the wrapper agreement and might also change if the
Fund buys other wrapper agreements.
The Fund normally attempts to maintain an average effective portfolio
duration of not more than three years (measured on a dollar-weighted basis).
This is done to try to reduce the volatility of the values of its portfolio
investments. In implementing this strategy, the Fund looks to the average
effective portfolio duration of each of the underlying funds in which it
invests.
In return for the stable net asset value protection provided by a wrapper
agreement, in most cases the shareholder foregoes any gains realized by the Fund
from its portfolio investments. Those gains are paid in most cases to the
provider of the wrapper agreement as part of the consideration for the risks it
assumes.
HOW DOES THE PORTFOLIO MANAGER DECIDE WHAT SECURITIES TO BUY OR SELL? The Fund's
portfolio manager allocates the Fund's assets mainly among shares of other
Oppenheimer funds that seek current income, normally according to the allocation
parameters described above, and within the investment restrictions contained in
its wrapper agreement. Those restrictions typically impose credit quality,
duration and percentage allocation standards that correspond to or may be
stricter than the Fund's own investment policies.
For example, the Fund's current wrapper agreement limits the Fund's
investments in other Oppenheimer funds to the percentages in the chart above,
along with U.S. Treasury obligations, money market instruments and derivative
investments on U.S. Treasury securities, such as futures and options.
Additionally, the Fund must maintain an average credit quality of at least "AA-"
(as rated by Standard & Poor's Rating Services ("S&P")) and "Aa3" (as rated by
Moody's Investors Service, Inc. ("Moody's")).
The relatively greater emphasis on investment in Oppenheimer Limited-Term
Government Fund is intended to help limit volatility in the Fund's share price,
because Oppenheimer Limited-Term Government Fund also seeks to maintain an
effective average portfolio duration of not more than three years. If the Fund's
other mutual fund investments become more volatile, the portfolio manager can
increase the relative allocation of the Fund's assets in Oppenheimer Money
Market Fund to up to 100%, because that fund seeks to maintain a stable share
price of $1.00. The portfolio manager may also use U.S. Government securities
and money market investments that offer current income while helping reduce
overall portfolio volatility.
In selecting a wrapper agreement provider to seek to maintain share price
stability, the Fund looks at the universe of financial institutions that offer
such agreements and attempts to select the providers that have acceptable credit
ratings and offer contract terms that are as favorable as the Fund can
negotiate.
WHO IS THE FUND DESIGNED FOR? Shares of the Fund are offered only to certain
types of retirement plans. These include participant-directed qualified
retirement plans and 403(b)(7) custodial plans that have special agreements with
the Fund's Distributor. The Fund is designed for plan participants who may wish
to allocate a portion of their retirement plan portfolio to a fund seeking
current income while seeking to maintain a stable share price. The Fund is not a
money market fund. Because it does not seek capital appreciation in the value of
its shares nor does it seek to distribute capital gains, it is not appropriate
for investors whose main goal is growth in the value of their investment. While
it may be appropriate for a portion of a retirement plan investment, the Fund is
not a complete investment program. Main Risks of Investing in the Fund
All investments have risks to some degree. The Fund's investments are subject to
changes in their value from a number of factors, described below. Overall, there
is the risk that security selection and asset allocation by the Manager might
not be successful in seeking the Fund's investment objective, or could cause the
Fund to underperform other funds having a similar objective.
RISKS UNDER THE FUND'S WRAPPER AGREEMENTS. While a wrapper agreement is intended
to offset changes in the book value of the Fund's investments and help the Fund
maintain stable share prices at $10.00 per share, there can be no guarantee that
the Fund's wrapper agreements will enable the Fund to meet those goals. Because
there is no active trading market for wrapper agreements, they are illiquid
investments, which means that the Fund cannot quickly sell or assign its
position at an acceptable price. There is the risk that the provider of a
wrapper agreement might default on its obligations to the Fund. If the Fund
defaults in its obligations under a wrapper agreement, for example, by violating
any investment limitations imposed under the agreement, the issuer might
terminate the agreement.
The universe of financial institutions offering wrapper agreements is
limited, and there is the risk that the Fund might not be able to purchase
wrapper agreements or might not be able to buy them at a competitive cost. It is
also possible that the Fund might not be able to buy wrapper agreements to cover
all of its portfolio investments. If a wrapper agreement were terminated, the
Fund might not be able to secure a replacement agreement as to the assets
covered by the terminated agreement. The Fund pays fees to the wrapper provider,
increasing the Fund's expenses and reducing the Fund's overall returns.
If any of those events were to occur, there is a risk that the price of
the Fund's shares could fall below $10.00 per share if market or economic
conditions or political events affect the value of its investments, if
prevailing interest rates rise, causing the values of the Fund's investments in
debt securities to fall and the Fund's attempts to limit its effective average
portfolio duration are unsuccessful, or if the issuer of a debt security the
Fund buys defaults on its obligation to pay interest or repay principal.
RISKS OF INVESTING IN THE UNDERLYING FUNDS. Each of the underlying Oppenheimer
funds in which the Fund invests has its own investment risks, and those risks
can affect the value of each fund's shares and therefore the value of the Fund's
investment. Because each of the underlying funds invests principally in debt
securities, those funds are subject to interest rate risks and credit risks.
Interest Rate Risks. The values of debt securities, including U.S.
government securities, are subject to change when prevailing interest
rates change. When interest rates fall, the values of already-issued debt
securities generally rise. When interest rates rise, the values of
already-issued debt securities generally fall, and they may sell at a
discount from their face amount. The magnitude of those fluctuations will
often be greater for debt securities having longer maturities than for
shorter-term debt securities. Some of the underlying funds in which the
Fund invests, such as Oppenheimer Bond Fund and Oppenheimer Strategic
Income Fund, typically invest in debt securities that have longer
maturities, and changes in values of the shares of those funds when
interest rates change could make the value of the Fund's share prices fall
unless the Fund's wrapper agreements are sufficient to enable the Fund to
maintain stable share prices. Additionally, when interest rates fall, the
underlying funds' investments in new securities will have lower yields,
possibly reducing the Fund's income from those investments.
CreditRisks. Debt securities are subject to credit risk. Credit risk is the
risk that the issuer of a debt security might not make interest and
principal payments on the security as they become due. If the issuer of a
debt security held by an underlying fund fails to pay interest, that
Fund's income paid to its shareholders, including the Fund, might be
reduced. If the issuer fails to repay principal, the value of that
security and the underlying fund's shares might fall. A downgrade in an
issuer's credit rating or other adverse news about an issuer can reduce
the market value of that issuer's securities. Some of the underlying
funds, such as Oppenheimer Bond Fund and Oppenheimer Strategic Income
Fund, invest in securities that are below investment grade in credit
quality, which have greater risks than U.S. government securities or other
investment grade debt securities.
Risks of Foreign Securities. Some of the underlying funds whose shares the Fund
buys, such as Oppenheimer Strategic Income Fund and Oppenheimer Bond Fund,
typically invest substantial portions of their assets in foreign
securities. While foreign securities may offer special investment
opportunities, they also have special risks that can reduce the share
prices and income of those underlying funds. 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.
Currency rate changes can also affect the distributions the underlying
funds make from the income they receive from foreign securities if foreign
currency values change against the U.S. dollar. Foreign investing can
result in higher transaction and operating costs for the underlying funds,
reducing the income they pay to shareholders such as the Fund.
HOW RISKY IS THE FUND OVERALL? The risks described above collectively form the
overall risk profile of the Fund and can affect the value of the Fund's
investments, its investment performance and its prices per share. Particular
investments and investment strategies also have risks. These risks mean that you
can lose money by investing in the Fund. While under most circumstances, the net
asset value of your shares should be the same upon redemption as when they were
purchased, there is the risk that when you redeem your shares, they may be worth
more or less than what you paid for them. There is no assurance that the Fund
will achieve its objective.
While the Fund's goal of maintaining stable share prices may reduce the
volatility of investing in the Fund while seeking current income, because the
Fund will not seek capital gains or growth in the value of its shares, the costs
of its wrapper agreements will reduce its returns and there is the risk that its
total return may be less than an investment in funds that focus on stocks or
higher-yielding bonds.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
The Fund's Past Performance
The bar chart and table below show one measure of the risks of investing
in the Fund, by showing changes in the Fund's performance (for its Class A
shares) and by showing how the average annual total returns of the Fund's shares
compare to those of broad-based market indices. The Fund's past investment
performance is not necessarily an indication of how the Fund will perform in the
future.
Annual Total Returns (Class A) (as of 12/31 each year)
[See appendix to prospectus for data in bar chart showing annual total
returns]
Sales charges are not included in the calculations of return in this bar chart,
and if those charges were included, the returns would be less than those shown.
During the period shown in the bar chart, the highest return (not annualized)
for a calendar quarter was ____% and the lowest return (not annualized) for a
calendar quarter was ____%.
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Average Annual
Total Returns for
the periods ended 1 Year
December 31, 2000
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Class A Shares
(inception 9/27/99) %
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--------------------------------
Merrill Lynch Bond
Master Index
(inception 12/31/89) %
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--------------------------------
Lehman Brothers
Corporate Bond Index
(inception 12/31/89) %
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--------------------------------
Class B Shares
(inception 9/27/99) %
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--------------------------------
Class C Shares
(inception 9/27/99) %
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Class Y Shares
(inception 9/27/99) %
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The Fund's average annual total returns include the applicable sales charge: for
Class A, the current maximum initial sales charge of 3.50%; for Class B, the
contingent deferred sales charges of 4% (1-year) and 3% (life of class); and for
Class C, the 1% contingent deferred sales charge for the 1-year period. Because
Class N shares were not offered for sale during the Fund's fiscal year ended
October 31, 2000, no performance information is included in the table above for
Class N shares.
Fees and Expenses of the Fund
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services. Those expenses
are subtracted from the Fund's assets to calculate the Fund's net asset values
per share. In addition, the Fund will indirectly bear its pro-rata share of the
expenses of the underlying mutual funds in which it invests. All shareholders
therefore pay those expenses indirectly. Shareholders pay other expenses
directly, such as sales charges and account transaction charges. The following
tables are meant to help you understand the fees and expenses you may pay if you
buy and hold shares of the Fund through a retirement plan. The numbers below are
based on the Fund's expenses during its fiscal year ended October 31, 2000,
except that the numbers for Class N shares, which is a new class, are based on
the Fund's anticipated expenses for Class N shares during the upcoming year.
Shareholder Fees (charges paid directly from your investment):
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Class Class B Class C Class Y Class N
A Shares Shares Shares Shares
Shares
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Maximum Sales Charge
(Load) on purchases 3.50% None None None None
(as % of offering
price)
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Maximum Deferred
Sales Charge (Load)
(as % of the lower of None1 4%2 1%3 None 1%5
the original offering
price or redemption
proceeds)
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Redemption Fee 2.0%4 2.0%4 2.0%4 2.0%4 2.0%4
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<PAGE>
1. A contingent deferred sales charge may apply to redemptions of investments of
$500,000 or more of Class A shares. See "How to Buy Shares" for details. 2.
Applies to redemptions in first year after purchase. The contingent deferred
sales charge declines to 1% in the fifth year and is eliminated after that. 3.
Applies to shares redeemed within 12 months of purchase. 4. Certain redemptions
of shares that are made on less than twelve months' prior written notice to the
Fund are subject to a redemption fee of 2% of the proceeds of the redemption.
Please refer to "Redemption Fees" in "How to Sell Shares," below for details. 5.
Applies to shares redeemed within eighteen (18) months of retirement plan's
first purchase of Class N shares.
Combined Annual Fund Operating Expenses
(% of average daily net assets)
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Class Class Class Class Class
A B C N Y
Shares Shares Shares Shares Shares
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Management Fees1 % % % % %
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Distribution and/or 0.25% 1.00% 1.00% 0.25%
Service None
(12b-1) Fees
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Other Expenses1 % % % % %
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Total Annual % % % % %
Operating Expenses
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1. Includes the fees and expenses indirectly incurred by the Fund through its
investments in shares of the underlying Oppenheimer funds. The expenses of the
underlying funds are based on their respective most recent fiscal year-end. The
allocation of the Fund's net assets among the underlying Oppenheimer funds was
as follows at October 31, 2000: __% in Class Y shares of Limited Term Government
Fund, __% in Class Y shares of Bond Fund, __% in shares of Money Market Fund,
Inc. and __% in Class Y shares of Strategic Income Fund. While the Manager does
not anticipate changing that allocation often, if that allocation is changed,
the Combined Annual Fund Operating Expenses of the Fund in future years could be
more than those shown above.
Direct Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)
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Class Class Class Class N Class
A B C Shares Y
Shares Shares Shares Shares
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Management Fees1 % % % % %
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12b-1 Plan Fees % % % % None
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Other Expenses1 % % % % %
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Total Annual % % % % %
Operating Expenses
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1. The management fees payable by the Fund are reduced by the management fees
paid by the underlying Oppenheimer funds on assets representing investments by
the Fund in shares of those underlying funds. That is done so that shareholders
of the Fund do not pay direct and indirect management fees in excess of 0.75%.
The "Management Fees" in the table above are the fees paid directly by the Fund
as reduced by the management fees paid to the Manager by the underlying funds.
The "Other Expenses" in the table above include transfer agent fees, custodial
expenses and accounting and legal expenses paid directly by the Fund. Expenses
may vary in future years. Class N shares were not offered for sale during the
Fund's last fiscal year. The expenses above for Class N shares are based on the
expected expenses for that class of shares for the current fiscal year.
EXAMPLES. The following examples are intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds. The
examples, which are based on the combined annual fund operating expenses, assume
that you invest $10,000 in a class of shares of the Fund for the time periods
indicated and reinvest your dividends and distributions.
The first example assumes that you redeem all of your shares at the end of
those periods and that the redemption fee does not apply. The second example
assumes that you redeem all of your shares at the end of those periods and the
redemption fee applies. The third example assumes that you keep your shares. All
three examples also assume that your investment has a 5% return each year and
that the class's operating expenses remain the same. Your actual costs may be
higher or lower because expenses will vary over time. Based on these expense
assumptions your expenses would be as follows:
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If shares are
redeemed 1 Year 3 Years
(no redemption fee):
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Class A Shares $ $
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Class B Shares $ $
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Class C Shares $ $
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Class N Shares $ $
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Class Y Shares $ $
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If shares are
redeemed 1 Year 3 Years
(with redemption
fee):
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Class A Shares $ $
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Class B Shares $ $
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Class C Shares $ $
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Class N Shares $ $
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Class Y Shares $ $
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If shares are not 1 Year 3 Years
redeemed:
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Class A Shares $ $
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Class B Shares $ $
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Class C Shares $ $
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Class N Shares $ $
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Class Y Shares $ $
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In the first example, expenses include the Class A initial sales charge for
Class A and the applicable Class B, Class C or Class N contingent deferred sales
charges but do not include the redemption fee. In the second example, expenses
include the Class A initial sales charge for Class A and the applicable Class B,
Class C or Class N contingent deferred sales charge and the 2% redemption fee.
In the third example, Class A expenses include the sales charge, but Class B,
Class C and Class N expenses do not include contingent deferred sales charges
and do not include the redemption fee.
There are no sales charges on Class Y shares.
About the Fund's Investments
THE FUND'S PRINCIPAL INVESTMENT POLICIES. The allocation of the Fund's portfolio
among different investments will vary over time based upon the Manager's
evaluation of economic and market trends. The Fund's portfolio might not always
include all of the different types of investments described below. The Statement
of Additional Information contains more detailed information about the Fund's
investment policies and risks.
The Fund's investment Manager, OppenheimerFunds, Inc., tries to reduce
risks by allocating the Fund's investments in underlying mutual funds to seek to
keep effective average portfolio duration to not more than three (3) years, to
help reduce overall share price volatility, and by purchasing wrapper
agreements. However, changes in the overall market prices of debt securities and
the income they pay can occur at any time, and the Fund's share prices and
income could fluctuate.
Investments in Other Mutual Funds. Under normal circumstances, the Fund invests
mainly in shares of Oppenheimer Limited-Term Government Fund, Oppenheimer
Bond Fund, Oppenheimer U.S. Government Trust, Oppenheimer Strategic Income
Fund, and Oppenheimer Money Market Fund, Inc. (those funds are referred to
as the "underlying funds"). These underlying funds were chosen based on the
Manager's determination that they could provide a high current return while
being acceptable investments under wrapper agreements. Following are brief
descriptions of the investment objective and policies of the underlying
funds. Those objectives and policies may change from time to time without
the need for approval by the Fund's shareholders. Additional information
about the underlying funds is contained in the Statement of Additional
Information and in the respective prospectus for each underlying fund. To
obtain a prospectus of any of the underlying funds, simply call the
toll-free number listed on the back cover of this Prospectus.
<PAGE>
o Oppenheimer Limited-Term Government Fund. This fund seeks high current
return and safety of principal. The fund invests only in obligations
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, including mortgage-backed securities, and repurchase
agreements on U.S. government securities. It also seeks to maintain an
average effective portfolio duration of not more than three (3) years,
to help reduce overall share price volatility. This fund can also write
covered calls and use certain types of securities called "derivative
investments" and hedging instruments to try to manage duration, enhance
income and manage investment risks.
o Oppenheimer Bond Fund. This fund seeks a high level of current income by
investing mainly in debt instruments. Under normal market conditions,
this fund invests at least 65% of its total assets in investment grade
debt securities issued by foreign or domestic issuers. These include
investment-grade debt securities rated BBB or above by S&P or Baa or
above by Moody's or another nationally recognized statistical rating
organization, or unrated securities that are of comparable quality in
the opinion of the Manager. The Fund also buys securities issued or
guaranteed as to principal and interest by the U.S. Government, its
agencies or instrumentalities or obligations secured by such securities.
The fund can invest up to 35% of its total assets in high yield
instruments that are below investment grade (commonly referred to as "junk
bonds") issued by foreign or domestic issuers. Although non-investment
grade securities generally offer the potential for higher income than
investment grade securities, they may be subject to greater market
fluctuations and a greater risk of default because of the issuer's low
creditworthiness.
o Oppenheimer U.S. Government Trust. This fund seeks high current income
consistent with preservation of capital. This fund invests mainly in
debt instruments issued or guaranteed by the U.S. Government or its
agencies or instrumentalities, including mortgage-backed securities, and
repurchase agreements on U.S. government securities. This fund may also
invest in "stripped" mortgage-related securities. Stripped
mortgage-related securities usually have two classes that receive
different proportions of the interest and principal payments. In
certain cases, one class will receive all of the interest payments,
while the other class will receive all of the principal value on
maturity. These investments are subject to greater volatility in price
when prevailing interest rates change.
<PAGE>
o Oppenheimer Strategic Income Fund. This fund seeks high current income
by investing mainly in debt securities and by writing covered call
options on them. It invests principally in three market sectors: (1)
debt securities of foreign governments and companies, (2) U.S.
Government securities, and (3) lower-rated, high yield debt securities
of U.S. and foreign companies. Under normal market conditions, the fund
will invest some of its assets in each of those three sectors, but the
fund is not required to invest any fixed amount of its assets in any
sector. The fund can invest up to 100% of its assets in any one sector
if the Manager believes that in doing so the Strategic Income Fund can
achieve its objective without undue risk.
o Oppenheimer Money Market Fund. This fund seeks the maximum current
income that is consistent with stability of principal. It invests in
short-term high-quality money market instruments. They include
short-term U.S. Government securities, repurchase agreements,
certificates of deposit and commercial paper. The fund attempts to
maintain a stable share price of $1.00 per share, but there is no
guarantee it will do so. The Fund can invest up to 100% of its net
assets in shares of this fund for temporary defensive purposes.
Wrapper Agreements. The Fund intends to purchase wrapper agreements from
insurance companies, banks or other financial institutions that are rated,
at the time of the Fund's purchase of the wrapper, in one of the top three
long-term rating categories of Moody's or S&P.
Each wrapper agreement the Fund enters into will obligate the issuer of the
wrapper to maintain the "book value" of a portion of the Fund's investments
if certain events occur. The Fund may elect not to cover some of its assets
with wrapper agreements, such as debt securities that have a remaining
maturity of sixty (60) days or less and any cash or other short-term
investments.
Under the terms of a typical wrapper agreement, if the assets covered by
the agreement plus accrued income are insufficient to provide proceeds for
redemption of Fund shares by a retirement plan investing in the Fund, the
wrapper provider becomes obligated to pay to the Fund its share of the
amount required to redeem the shares at their book value (which will
normally be $10.00 per share).
Under a wrapper agreement, the issuer may be called upon to make payments
to the Fund to enable the Fund to pay redemption proceeds for its shares
based on the purchase price (the "book value") of the Fund's assets covered
by the agreement, rather than the market value of those covered assets. The
book value of the covered assets is the price the Fund paid for them plus
interest on those assets accrued at a rate calculated pursuant to a formula
specified in the wrapper agreement. That rate is referred to as the
"crediting rate." There may be an adjustment to the crediting rate if the
Fund owns any defaulted securities that are covered assets under the
wrapper agreement. The crediting rate normally is reset monthly. However,
if there is a material change in interest rates or purchases or redemptions
of Fund shares, the crediting rate may be reset more frequently than
monthly.
The crediting rate can change as the difference between market value and
book value of the covered assets changes. As a result, the crediting rate
will generally reflect movements in prevailing interest rates. However, at
times it may be more or less than the prevailing interest rate or the
actual income earned on the covered assets. The degree of any increase or
decrease in the crediting rate will also depend on the duration of the
Fund's portfolio. Since any differences between the market value and book
value of a covered asset are amortized over a period equal to the duration
of the Fund, any differences between book value and market value will be
amortized faster as duration decreases and more slowly as the Fund's
portfolio duration increases.
The crediting rate may also be affected by increases and decreases of the
amount of covered assets under the wrapper agreement as a result of the
purchase and redemption of Fund shares resulting from contributions to the
retirement plans that invest in the Fund and distributions from those
plans. In no event will the crediting rate under a wrapper agreement the
Fund enters into fall below zero.
The terms of the wrapper agreements may vary as to exactly when payments
must actually be made between the Fund and the wrapper provider. In most
cases, payments will be due under a wrapper agreement only upon termination
of the agreement, upon total liquidation of the assets covered by the
agreement, or when the market value of the covered assets falls below a
certain percentage of their book value. Certain terminations of a wrapper
agreement, for example when a new wrapper provider is substituted for the
original wrapper provider, might not trigger a payment obligation.
Additionally, a wrapper provider's obligation to make payments for Plan
withdrawals (as opposed to those directed by Plan participants) may require
adjustments to the Crediting Rate and increases in the Fund's holdings of
short term investments, which might adversely affect the return of the
Fund.
If the Fund had to liquidate all of its portfolio assets covered under a
wrapper agreement to raise cash to pay redemption proceeds for Fund shares,
the wrapper provider may be obligated to pay the Fund all or some of the
difference between the market value and book value of the covered assets,
if market value is less than the book value. If, on the other hand, the
market value of the liquidated covered assets is greater than the
corresponding book value, the Fund may be obligated to pay all or some of
the difference to the wrapper provider.
CAN THE FUND'S INVESTMENT OBJECTIVE AND POLICIES CHANGE? The Fund's Board of
Trustees can change non-fundamental policies without shareholder approval,
although significant changes will be described in amendments to this Prospectus.
Fundamental policies cannot be changed without the approval of a majority of the
Fund's outstanding voting shares. The Fund's investment objective is a
fundamental policy. Other investment restrictions that are fundamental policies
are listed in the Statement of Additional Information. An investment policy is
not fundamental unless this Prospectus or Statement of Additional Information
says that it is.
OTHER INVESTMENT STRATEGIES. To seek its objective, the Fund can also use the
investment techniques and strategies described below. The Fund might not always
use all of them. These investments and techniques have risks, although some are
designed to help reduce overall investment or market risks. Some investments and
investment techniques may be limited from time to time under the terms of a
wrapper agreement.
U.S. Treasury Obligations. The Fund can invest in securities issued or
guaranteed by the U.S. Treasury. These include Treasury bills (which
have maturities of one (1) year or less when issued), Treasury notes
(which have maturities of from one (1) to ten (10) years), and Treasury
bonds (which have maturities of more than ten years). U.S. Treasury
securities are backed by the full faith and credit of the United States
as to timely payments of interest and repayments of principal. The Fund
can also buy U. S. Treasury securities that have been "stripped" of
their coupons by a Federal Reserve Bank, zero-coupon U.S. Treasury
securities described below and Treasury Inflation-Protection Securities
("TIPS").
Derivative Investments. The Fund can invest in a number of different kinds of
"derivative" investments based on U.S. Treasury securities. In general
terms, a "derivative" investment is an investment contract whose value
depends on or is derived from the value of an underlying asset, interest
rate or index. In the broadest sense, options, futures contracts, and
other hedging instruments the Fund can use may be considered "derivative
investments." In addition to using hedging instruments, the Fund can use
other derivative investments because they offer the potential for
increased income.
If the issuer of a derivative does not pay the amount due, the Fund can
lose money on the investment. Also, the underlying security or investment
on which the derivative is based, and the derivative itself, might not
perform the way the Manager expected it to. If that happens, the Fund's
share prices could fall, and the Fund could get less income than expected
or its hedge might be unsuccessful. Certain derivative investments held by
the Fund may be illiquid, making it difficulty for the Fund to sell them
quickly at an acceptable price.
o Hedging. The Fund can buy and sell futures contracts, put and call
options, forward contracts and options on futures and broadly-based
securities indices. These are all referred to as "hedging instruments."
The Fund does not use hedging instruments for speculative purposes, and
has limits on its use of them under its investment policies and wrapper
agreement. The Fund is not required to use hedging instruments in seeking
its objective.
The Fund could buy and sell options and futures to try to manage interest
rate risks and its portfolio duration. To the extent hedging instruments
reduce fluctuations in the market value of the assets cover by a wrapper
agreement, they will also reduce the risk exposure to the wrapper provider
under that agreement.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. For example, if a covered call written by the Fund is
exercised on an investment that has increased in value, the Fund will be
required to sell the investment at the call price and will not be able to
realize any profit if the investment has increased in value above the call
price. In writing a put, there is a risk that the Fund may be required to
buy the underlying security at a disadvantageous price.
If the Manager used a hedging instrument at the wrong time or judged
market conditions incorrectly, the strategy could reduce the income the
Fund receives. 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 of an illiquid
market.
How the Fund is Managed
THE MANAGER. The Manager chooses the Fund's investments and handles its
day-to-day business. The Manager carries out its duties, subject to the policies
established by the Fund's Board of Trustees, under an investment advisory
agreement that states the Manager's responsibilities. The agreement sets the
fees the Fund pays to the Manager and describes the expenses that the Fund is
responsible to pay to conduct its business.
The Manager has operated as an investment adviser since January 1960. The
Manager (including subsidiaries) managed more than $125 billion in assets as of
October 31, 2000, including other Oppenheimer funds with more than 5 million
shareholder accounts. The Manager is located at Two World Trade Center, 34th
Floor, New York, New York 10048-0203.
Portfolio Manager. The Portfolio Manager of the Fund is John Kowalik. He has
been the person principally responsible for the day-to-day management of
the Fund's investments since its inception. Mr. Kowalik is a Senior Vice
President of the Manager (since July 1998) and of HarbourView Asset
Management Corporation (since April 2000). He is also an officer and a
portfolio manager of other Oppenheimer funds. Prior to joining the Manager,
Mr. Kowalik was formerly a managing Director and Senior Portfolio Manager
at Prudential Global Advisors (from June 1989 - June 1998).
Advisory Fees. Under the investment advisory agreement, the Fund pays the
Manager an advisory fee at an annual rate that declines on additional
assets as the Fund grows: 0.75% of the first $200 million of average annual
net assets of the Fund, 0.72% of the next $200 million, 0.69% of the next
$200 million, 0.66% of the next $200 million, 0.60% of the next $200
million and 0.50% of average annual net assets over $1 billion. That fee is
reduced by the management fees received by the Manager from the underlying
funds attributable to the Fund's investments in shares of those underlying
funds. This assures that the Manager is not paid twice for managing the
same assets, and the management fee paid directly and indirectly by the
Fund to the Manager shall not exceed the fee rates listed above.
ABOUT YOUR ACCOUNT
How to Buy Shares
HOW DO YOU BUY SHARES? You can buy shares several ways, as described below. The
Fund's Distributor, OppenheimerFunds Distributor, Inc., may appoint servicing
agents to accept purchase (and redemption) orders. The Distributor, in its sole
discretion, may reject any purchase order for the
Fund's shares.
Shares of the Fund are offered only to retirement plans that meet criteria
set by the Distributor. Purchases of Fund shares on behalf of participants in
retirement plans that invest in the Fund are handled in accordance with the
respective plan's provisions. Plan participants should contact their plan
administrator to find out how to instruct the plan to buy shares of the Fund for
their account. It is the responsibility of the plan administrator or other plan
service provider to forward purchase instructions to the Fund's Distributor. The
following explanation of how to purchase Fund shares is intended for plan
administrators and plan service providers.
Buying Shares Through A Dealer. Retirement plans can buy shares through any
dealer, broker or financial institution that has a sales agreement with the
Distributor. The dealer will place the purchase order with the Distributor
on behalf of the plan.
Buying Shares Through the Distributor. The plan administrator or trustee should
complete the appropriate OppenheimerFunds retirement plan 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 the
plan's agent in buying the shares. However, we recommend that you discuss
your investment with a financial advisor before you make a purchase to be
sure that the Fund is appropriate for your retirement plan.
o Paying by Federal Funds Wire. Shares purchased through the Distributor may
be paid for by Federal Funds wire. The minimum investment is $2,500.
Before sending a wire, call the Distributor's Wire Department at
1.800.525.7048 to notify the Distributor of the wire and to receive
further instructions.
o Buying Shares Through OppenheimerFunds AccountLink. With AccountLink, you
pay for shares by electronic payments through the Automated Clearing House
(ACH) system. You can provide those instructions automatically, under an
Asset Builder Plan, described below, or by telephone instructions using
OppenheimerFunds PhoneLink, also described below. Please refer to
"AccountLink," below for more details.
How Much Must You Invest? A retirement plan can buy Fund shares with a
minimum initial investment of $250 and make subsequent investments with as
little as $25. There are reduced minimum investments under special
investment plans.
o With Asset Builder Plans, 403(b) Plans, Automatic Exchange Plans and
military allotment plans, you can make initial and subsequent investments
for as little as $25. You can make additional purchases of at least $25
through AccountLink.
o Under retirement plans, such as pension and profit-sharing plans and
401(k) plans, you can start your account with as little as $250.
Additional purchases may be as little as $25.
o The minimum investment requirement does not apply to reinvesting dividends
from the Fund or other Oppenheimer funds (a list of them is in the
Statement of Additional Information, or a plan can ask its dealer or call
the Transfer Agent), or reinvesting distributions from unit investment
trusts that have made arrangements with the Distributor.
At What Price Are Shares Sold? Shares are sold at their offering price which is
the net asset value per share plus any initial sales charge that applies. The
offering price that applies to a purchase order is based on the next calculation
of the net asset value per share that is made after the Distributor receives the
purchase order at its offices in Colorado, or after any agent appointed by the
Distributor receives the order and sends it to the Distributor.
Net Asset Value. The net asset value of each class of shares is determined as
of the close of The New York Stock Exchange, on each day the Exchange is
open for trading (referred to in this Prospectus as a "regular business
day"). The Exchange normally closes at 4:00 P.M., New York time, but may
close earlier on some days. All references to time in this Prospectus mean
"New York time".
The net asset value per share is determined 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. To determine net asset value, the Fund's Board
of Trustees has established procedures to value the Fund's securities, in
general based on market value. The Board has adopted special procedures for
valuing illiquid and restricted securities and obligations for which market
values cannot be readily obtained.
The Offering Price. To receive the offering price for a particular day, in
most cases the Distributor or its designated agent must receive your
order by the time of day The New York Stock Exchange closes that day.
If your order is received on a day when the Exchange is closed or after
it has closed, the order will receive the next offering price that is
determined after your order is received. Shares purchased for your
account through AccountLink normally will be purchased two (2) business
days after the regular business day on which you instruct the
Distributor to initiate the ACH transfer to buy the shares.
Buying Through a Dealer. If you buy shares through a dealer, your dealer must
receive the order by the close of The New York Stock Exchange and transmit
it to the Distributor so that it is received before the Distributor's close
of business on a regular business day (normally 5:00 P.M.) to receive that
day's offering price. Otherwise, the order will receive the next offering
price that is determined.
What Classes of Shares Does the Fund Offer? The Fund offers investors five (5)
different classes of shares. The different classes of shares represent
investments in the same portfolio of securities, but the classes are subject to
different expenses and will likely have different share prices. When you buy
shares, be sure to specify the class of shares. If you do not choose a class,
your investment will be made in Class A shares.
-------------------------------------------------------------------------------
|X| Class A Shares. If you buy Class A shares, you pay an initial sales
charge. The amount of that sales charge will vary depending on the amount
you invest. The sales charge rates are listed in "How Can You Buy Class A
Shares?" below.
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
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|X| Class B Shares. If you buy Class B shares, you pay no sales charge
at the time of purchase, but you will pay an annual asset-based sales
charge. If you sell your shares within five (5) years of buying them, you
will normally pay a contingent deferred sales charge. That contingent
deferred sales charge varies depending on how long you own your shares, as
described in "How Can You Buy Class B Shares?" below.
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
|X| Class C Shares. If you buy Class C shares, you pay no sales charge at
the time of purchase, but you will pay an annual asset-based sales charge. If
you sell your shares within twelve (12) months of buying them, you will normally
pay a contingent deferred sales charge of 1%, as described in "How Can You Buy
Class C Shares?" below.
|X| Class N Shares. Class N shares are offered only through retirement
plans (including IRAs and 403(b) plans) that purchase $500,000 or more of Class
N Shares of one or more Oppenheimer funds or through retirement plans (not
including IRAs and 403(b) plans) that have assets of $500,000 or more or 100
eligible plan participants. Non-retirement plan investors cannot buy Class N
shares directly. If you buy Class N shares, you pay no sales charge at the time
of purchase, but you will pay an annual asset-based sales charge. If you sell
your shares eighteen (18) months of the retirement plan's first purchase of
Class N shares, you may pay a contingent deferred sales charge of 1%, as
described in "How Can You Buy Class N Shares?" below.
|X| Class Y Shares. Class Y shares are offered only to retirement plans
that have special agreements with the Distributor.
WHICH CLASS OF SHARES SHOULD YOU CHOOSE? Once you decide that the Fund is an
appropriate investment for your Plan, the decision as to which class of shares
is best suited to your Plan depends on a number of factors that you should
discuss with your financial advisor. Some factors to consider are how much your
Plan intends to invest and how long the Plan intends to hold the investment. 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 discussion below is not intended to be investment advice or a
recommendation, because each investor's financial considerations are different.
The discussion below assumes that you will purchase only one class of shares and
not a combination of shares of different classes. Of course, these examples are
based on approximations of the effect of current sales charges and expenses
projected over time, and do not detail all of the considerations in selecting a
class of shares. You should analyze your options carefully with your financial
advisor before making that choice.
How Long Do You Expect to Hold Your Investment? While future financial needs
cannot be predicted with certainty, knowing how long the Plan expects to
hold its 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 the Plan will 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, compared to the effect over time of higher class-based expenses
on Class B or Class C shares. For retirement plans that qualify to purchase
Class N shares, Class N shares will generally be more advantageous than
Class C shares; Class A shares and Class B shares are not available for
purchase by such retirement plans.
o Investing for the Shorter Term. While the Fund is meant to be a
long-term investment, if the Plan has a relatively short-term investment
horizon (that is, it will hold shares for not more than six (6) years),
you should probably consider purchasing Class A or Class C shares on
behalf of the Plan rather than Class B shares. That is because of the
effect of the Class B contingent deferred sales charge if shares are
redeemed within five (5) 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 the Plan sells after holding them one (1) year.
However, if the Plan intends to invest more than $100,000 for the shorter
term, then as the Plan's investment horizon increases toward six (6)
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 the Plan's account over the longer term than the
reduced front-end sales charge available for larger purchases of Class A
shares.
And for Plans that invest $1 million or more, in most cases Class A shares
will be the most advantageous choice, no matter how long the Plan intends
to hold the 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 Plan.
o Investing for the Longer Term. If the Plan is investing less than $100,000
for the longer-term, and does not expect to need access to its money for
seven (7) years or more, Class B shares may be appropriate.
Of course, these examples are based on approximations of the effect of
current sales charges and expenses projected over time, and do not detail
all of the considerations in selecting a class of shares. You should
analyze your options carefully with your financial advisor before making
that choice.
Are There Differences in Account Features That Matter to You? Some account
features may not be available to Class B, Class C or Class N shareholders.
Other features may not be advisable because of the effect of the
contingent deferred sales charge for Class B, Class C or Class N
shareholders. Therefore, you should carefully review how the Plan will use
its investment account before deciding which class of shares to buy.
Additionally, the dividends payable to Class B, Class C and Class N
shareholders will be reduced by the additional expenses borne by those
classes that are not borne by Class A shares, such as the Class B, Class C
and Class N asset-based sales charges described below and in the Statement
of Additional Information. Share certificates are not available for Class
A, Class B, Class C, Class N and Class Y shares.
How Do Share Classes Affect Payments to My Broker? A financial advisor may
receive different compensation for selling one class of shares than for
selling another class. It is important to remember that Class B, Class C
and Class N contingent deferred sales charges and asset-based sales charges
have the same purpose as the front-end sales charge on sales of Class A
shares: to compensate the Distributor for concessions and expenses it pays
to dealers and financial institutions for selling shares. The Distributor
may pay additional compensation from its own resources to securities
dealers or financial institutions based upon the value of shares of the
Fund owned by the dealer or financial institution for its own account or
for its customers.
SPECIAL SALES CHARGE ARRANGEMENTS AND WAIVERS. Appendix B to the Statement of
Additional Information details the conditions for the waiver of sales charges
that apply in certain cases and the special sales charge rates that apply to
purchases of shares of the Fund by certain groups, or in special types of
transactions. To receive a waiver or special sales charge rate, you must advise
the Distributor when purchasing shares or the Transfer Agent when redeeming
shares that the special conditions apply.
HOW CAN YOU BUY 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 other cases, reduced
sales charges may be available, as described below or in the Statement of
Additional Information. 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 or allocated to
your dealer as concession. The Distributor reserves the right to re-allow the
entire concession to dealers. The current sales charge rates and concessions
paid to dealers and brokers are as follows:
----------------------------------------------------------------------
Front-End Sales Front-End Sales
Charge As a Charge As a Concession As
Percentage of Percentage of Percentage of
Amount of Purchase Offering Price Net Amount Offering Price
Invested
----------------------------------------------------------------------
----------------------------------------------------------------------
Less than $100,000 3.50% 3.63% 3.00%
----------------------------------------------------------------------
----------------------------------------------------------------------
$100,000 or more
but less than 3.00% 3.09% 2.50%
$250,000
----------------------------------------------------------------------
----------------------------------------------------------------------
$250,000 or more
but less than 2.50% 2.56% 2.00%
$500,000
----------------------------------------------------------------------
Class A Contingent Deferred Sales Charge. There is no initial sales charge on
purchases of Class A shares of the Fund aggregating $500,000 or more by a
retirement plan. There is no initial sales charge for certain purchases by
particular types of retirement plans described in Appendix B to the
Statement of Additional Information. The Distributor pays dealers of
record concessions in an amount equal to 0.25% of purchases of Class A
shares of this Fund in amounts aggregating $500,000 or more. The
concession will be paid only on purchases that were not previously subject
to a front-end sales charge and dealer concession.1 That concession will
not be paid on purchases of shares in amounts of $1 million or more
(including any right of accumulation) by a retirement plan that pays for
the purchase with the redemption proceeds of Class C shares of one or more
Oppenheimer funds held by the plan for more than one (1) year.
If a plan redeems any of those shares within an eighteen (18) month
"holding period" measured from 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. That sales charge will be equal to 1.0% of the lesser of (1) the
aggregate net asset value of the redeemed shares at the time of redemption
(excluding shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original net asset value of the redeemed shares.
The Class A contingent deferred sales charge will not exceed the aggregate
amount of the concessions the Distributor paid to your dealer on all
purchases of Class A shares of all Oppenheimer funds the plan made that
were subject to the Class A contingent deferred sales charge.
Can You Reduce Class A Sales Charges? A plan may be eligible to buy Class A
shares at reduced sales charge rates under the Fund's "Right of
Accumulation" or a Letter of Intent, as described in "Reduced Sales
Charges" in the Statement of Additional Information.
HOW CAN YOU BUY 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 five (5) years of the end of the calendar month of their purchase, a
contingent deferred sales charge will be deducted from the redemption proceeds.
The Class B 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 B shares.
The amount of the contingent deferred sales charge will depend on the
number of years since the Plan invested and the dollar amount being redeemed,
according to the following schedule:
----------------------------------------------------------------------
Contingent Deferred Sales Charge
Years Since Beginning of Month in on Redemptions in That Year
Which Purchase Order was Accepted (As % of Amount Subject to
Charge)
----------------------------------------------------------------------
----------------------------------------------------------------------
0 - 1 4.0%
----------------------------------------------------------------------
----------------------------------------------------------------------
1 - 2 3.0%
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2 - 3 2.0%
----------------------------------------------------------------------
----------------------------------------------------------------------
3 - 4 2.0%
----------------------------------------------------------------------
----------------------------------------------------------------------
4 - 5 1.0%
----------------------------------------------------------------------
----------------------------------------------------------------------
5 and following None
----------------------------------------------------------------------
In the table, a "year" is a 12-month period. In applying the contingent deferred
sales charge, 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. Class B shares automatically convert to
Class A shares seventy-two (72) months after a plan purchases them. 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 any Class B shares a plan holds convert, any other Class B
shares that were acquired by the reinvestment of dividends and
distributions on the converted share will also convert to Class A shares.
For further information on the conversion feature and its tax
implications, see "Class B Conversion" in the Statement of Additional
Information.
HOW CAN YOU BUY 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 a holding period of twelve (12) months from the end of the calendar month
of their purchase, a contingent deferred sales charge of 1.0% will be deducted
from the redemption proceeds. 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.
HOW CAN YOU BUY CLASS N SHARES? As discussed above, Class N shares are offered
only through retirement plans (including IRAs and 403(b) plans) that purchase
$500,000 or more of Class N shares of one or more Oppenheimer funds or through
retirement plans (not including IRAs and 403(b) plans) that have assets of
$500,000 or more or 100 or more eligible participants. Non-retirement plan
investors cannot buy Class N shares directly.
A contingent deferred sales charge of 1.00% will be imposed if:
o The retirement plan (not including IRAs and 403(b) plans) is
terminated or Class N shares of all Oppenheimer funds are terminated
as an investment option of the plan and Class N shares are redeemed
within eighteen (18) months after the plan's first purchase of Class
N shares of any Oppenheimer fund, or
o With respect to an individual retirement plan or 403(b) plan, Class N
shares are redeemed within eighteen (18) months of the plan's first
purchase of Class N shares of any Oppenheimer fund.
Retirement plans that offer Class N shares may impose charges on plan
participant accounts. The procedures for buying, selling, exchanging and
transferring the Fund's other classes of shares (other than the time those
orders must be received by the Distributor or Transfer Agent in Colorado) and
the special account features applicable to purchasers of those other classes of
shares described elsewhere in this prospectus do not apply to Class N shares
offered through a group retirement plan. Instructions for purchasing redeeming,
exchanging or transferring Class N shares offered through a group retirement
plan must be submitted by the plan, not by plan participants for whose benefit
the shares are held.
WHO CAN BUY CLASS Y SHARES? Class Y shares are sold at net asset value per share
without sales charge directly to certain employee benefit plans that have
special agreements with the Distributor for this purpose. For example,
Massachusetts Mutual Life Insurance Company, an affiliate of the Manager, may
purchase Class Y shares of the Fund and other Oppenheimer funds (as well as
Class Y shares of funds advised by Mass Mutual) for accounts it sponsors and
offers to its customers.
While Class Y shares are not subject to initial or contingent deferred
sales charges or asset-based sales charges, a broker-dealer arranging purchases
of Class Y shares for plan accounts may impose charges on those purchases. The
procedures for buying, selling, exchanging, or transferring the Fund's other
classes of shares (other than the time those orders must be received by the
Distributor or Transfer Agent at their Colorado office), and the special account
features available to purchasers of those other classes of shares described
elsewhere in this Prospectus do not apply to Class Y shares. Instructions for
purchasing, redeeming, exchanging or transferring Class Y shares must be
submitted by the Plan, not by Plan participants for whose benefit the shares are
held.
DISTRIBUTION AND SERVICE (12b-1) PLANS.
Service Plan for Class A Shares. The Fund has adopted a Service Plan for Class A
shares. It reimburses the Distributor for a portion of its costs incurred
for services provided to accounts that hold Class A shares. Reimbursement
is made quarterly at an annual rate of up to 0.25% of the average annual
net assets of Class A shares of the Fund. The Distributor currently uses
all of those fees to pay dealers, brokers, banks and other financial
institutions quarterly for providing personal service and maintenance of
accounts of their customers that hold Class A shares.
Distribution and Service Plans for Class B, Class C and Class N Shares. The Fund
has adopted Distribution and Service Plans for Class B, Class C and Class
N shares to pay the Distributor for its services and costs in distributing
Class B, Class C and Class N shares and servicing accounts. Under the
12b-1 plans, the Fund pays the Distributor an annual asset-based sales
charge of 0.75% per year on Class B shares and on Class C shares. The
Distributor also receives a service fee of 0.25% per year under each plan.
The asset-based sales charge and service fees increase Class B and Class C
expenses by to 1.00% and the service fee increases Class N expenses by
0.25% of the net assets per year of the respective class. Because these
fees are paid out of the Fund's assets on an on-going basis, over time
these fees will increase the cost of a Plan's investment and may cost the
Plan more than other types of sales charges.
The Distributor uses the service fees to compensate dealers for providing
personal services for accounts that hold Class B, Class C or Class N
shares. The Distributor pays the 0.25% service fees to dealers in advance
for the first year after the Class B or Class C shares are sold by the
dealer. After the Class B or Class C shares have been held for a year, the
Distributor pays the service fees to dealers on a quarterly basis. The
Distributor pays the 0.25% service fees to dealers on a quarterly basis
beginning in the first quarter after the shares have been sold.
The Distributor currently pays a sales concession 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.
The Distributor currently pays sales concessions 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 pays the
asset-based sales charge as an ongoing concession to the dealer on Class C
shares that have been outstanding for a year or more.
The Distributor currently pays sales concessions of 0.25% of the purchase
price of Class N shares to dealers from its own resources at the time of
sale.
Special Investor Services
ACCOUNTLINK. You can use our AccountLink feature to link a plan's Fund
account with an account at a U.S. bank or other financial institution. It
must be an Automated Clearing House (ACH) member. AccountLink lets you:
o transmit funds electronically to purchase shares by telephone (through a
service representative or by PhoneLink) or automatically under Asset
Builder Plans, or
o have the Transfer Agent send redemption proceeds or transmit dividends
and distributions directly to a bank account. Please call the Transfer
Agent for more information.
You may purchase shares by telephone on behalf of a plan only after the
plan's 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 the stated bank
account.
AccountLink privileges should be requested on your Application or your
dealer's settlement instructions if you buy your shares through a 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 fiduciary listed in the registration on the Plan's account as
well as to the 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 fiduciaries who own the 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. If a plan's participant accounts are
maintained by the plan's recordkeeper, then plan participants will not be able
to access their account information through PhoneLink. Those participants should
contact the plan's recordkeeper for information about accessing their plan
accounts via telephone. Plan participants in an OppenheimerFunds-sponsored plan
account, including a Pinnacle 401(k) Plan, may call 1.800.411.6971 to access
their plan account information via telephone.
Purchasing Shares. You may purchase shares on behalf of a Plan in amounts up to
$100,000 by phone, by calling 1.800.533.3310. You must have established
AccountLink privileges to link a 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 the Plan's Fund
account to another OppenheimerFunds account you have already established
on behalf of the Plan by calling the special PhoneLink number.
Selling Shares. Plan sponsors of plans other than OppenheimerFunds-sponsored
plans can redeem shares by telephone automatically by calling the
PhoneLink number and the Fund will send the proceeds directly to the
stated AccountLink bank account. Please refer to "How to Sell Shares,"
below for details.
CAN YOU SUBMIT TRANSACTION REQUESTS BY FAX? Requests for certain types of
account transactions may be sent to the Transfer Agent by fax (telecopier).
Please call 1-800-525-7048 for information about which transactions may be
handled this way. Transaction requests submitted by fax are subject to the same
rules and restrictions as written and telephone requests described in this
Prospectus.
OPPENHEIMERFUNDS INTERNET WEB SITE. You can obtain information about the Fund,
as well as Plan account balances, on the OppenheimerFunds Internet web site, at
http://www.oppenheimerfunds.com. Additionally, fiduciaries listed in the account
registration (and the dealer of record) may request certain account transactions
through a special section of that web site. To perform account transactions, you
must first obtain a personal identification number (PIN) by calling the Transfer
Agent at 1.800.533.3310. If you do not want to have Internet account transaction
capability for the plan's account, please call the Transfer Agent at
1.800.525.7048. This web site is not available for plan participant accounts
maintained by the plan's record-keeper. Those participants should contact their
plan's record-keeper for information about accessing their plan account
information via the Internet. Plan participants in the
OppenheimerFunds-sponsored Pinnacle 401(k) Plan may access their plan account
information by visiting the OppenheimerFunds Internet Web Site listed above and
then following the prompts for Pinnacle Online.
AUTOMATIC WITHDRAWAL AND EXCHANGE PLANS. The Fund has several plans that enable
a plan to sell shares automatically or exchange them to another OppenheimerFunds
account on a regular basis. Please call the Transfer Agent or consult the
Statement of Additional Information for details.
REINVESTMENT PRIVILEGE. If a plan redeems some or all of its Class A or Class B
shares of the Fund, the plan has up to six (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 only to Class A shares
that the plan purchased subject to an initial sales charge and to Class A or
Class B shares on which the plan paid a contingent deferred sales charge when it
redeemed them. This privilege does not apply to Class C and Class N shares. The
individual authorized to negotiate the account on behalf of the plan must be
sure to ask the Distributor for this privilege when sending payment.
RETIREMENT PLANS. Fund shares are available as an investment solely to
participant-directed qualified retirement plans and 403(b) Custodial Plans. The
Distributor offers a number of different retirement plans that individuals and
employers can use to invest in the Fund:
SEP-IRAs. These are Simplified Employee Pension Plans for small business owners
or people with income from self-employment.
403(b)(7) Custodial Plans. These are tax-deferred plans for employees of
eligible tax-exempt organizations, such as schools, hospitals and
charitable organizations.
401(k) Plans. These are special retirement plans for businesses.
Pension and Profit-Sharing Plans. These plans are designed for businesses
and self-employed individuals.
Please call the Distributor for OppenheimerFunds retirement plan
documents, which include applications and important information.
How to Sell Shares
<PAGE>
HOW CAN PLAN PARTICIPANTS ARRANGE TO SELL SHARES? The redemption of Fund shares
held in accounts for plan participants are handled in accordance with the plan's
specific provisions. Plans may have different provisions with respect to the
timing and method of redemptions by plan participants. Plan participants should
contact their plan administrator to find out how they can arrange to redeem
shares of the Fund. It is the responsibility of the individual authorized to buy
and sell shares on behalf of a plan to forward instructions for redemption
transactions to the Fund's transfer agent. The information below about selling
shares generally applies to plan sponsors or plan administrators, and not to
individual participants.
HOW CAN PLAN SPONSORS AND ADMINISTRATORS SELL SHARES? A plan sponsor or
administrator can arrange to take money out of the plan's account in the Fund by
selling (redeeming) some or all of its shares on any regular business day. A
plan's shares will be sold at the next net asset value calculated after an order
is received and accepted by the Transfer Agent. The Fund offers plans a number
of ways to sell Fund shares: in writing or by telephone. A plan can also set up
Automatic Withdrawal Plans to redeem shares on a regular basis, as described
above. A plan administrator who has questions about any of these procedures
should please call the Transfer Agent first, at 1.800.525.7048, for assistance.
Redemptions In-Kind. The Fund reserves the right to honor any requests for
redemptions by making payment in whole or in part in portfolio securities
and in wrapper agreements, selected solely in the discretion of the
Manager. To the extent that a redemption in-kind includes wrapper
agreements, the Fund will assign to the redeeming plan one or more wrapper
agreements issued by the wrapper providers covering the portfolio
securities distributed in-kind. The terms and conditions of wrapper
agreements provided to a redeeming plan will be the same or substantially
similar to the terms and conditions of the wrapper agreements held by the
Fund. If the redeeming plan does not meet the wrapper provider's
underwriting requirements, the wrapper provider may reserve the right to
terminate the wrapper agreement issued in an in-kind redemption at market
value. Please refer to "Redemptions In-Kind" in the Statement of
Additional Information for further details.
Certain Requests Require a Signature Guarantee. To protect the Plan and the Fund
from fraud, the following redemption requests must be in writing and must
include a guarantee of the signature of the individual authorized to
negotiate the Fund account on behalf of the Plan (although there may be
other situations also requiring a signature guarantee):
o The Plan wishes to redeem more than $100,000 and receive a check o The
redemption check is not payable to the Plan listed on the account
statement
o The redemption check is not sent to the Plan's address of record on the
account statement
o Shares are being transferred to a Fund account with a different owner or
name
o Shares are redeemed by someone other than the owners
<PAGE>
Where Can You Have Your Signature Guaranteed? The Transfer Agent will accept a
guarantee of your signature by a number of financial institutions,
including:
o a U.S. bank, trust company, credit union or savings association,
o a foreign bank that has a U.S. correspondent bank,
o a U.S. registered dealer or broker in securities, municipal securities
or government securities,
o a U.S. national securities exchange, a registered securities association
or a clearing agency.
If you are signing on behalf of a corporation, partnership or other
business or as a fiduciary, you must also include your title in the
signature.
HOW DO YOU SELL SHARES BY MAIL? Write a letter of instructions that
includes:
o The Plan's name
o The Fund's name
o The Plan's Fund account number (from the account statement)
o The dollar amount or number of shares to be redeemed
o Any special payment instructions
o The signatures of all persons authorized to negotiate the account on
behalf of the Plan, and
o Any special documents requested by the Transfer Agent to assure proper
authorization of the person asking to sell the shares.
----------------------------------------------------------------------
Use the following address for Send courier or express mail
requests by mail: requests to:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Avenue, Building
Denver, Colorado 80217-5270 D
Denver, Colorado 80231
----------------------------------------------------------------------
HOW DO YOU SELL SHARES BY TELEPHONE? Plan sponsors and Plan administrators may
also sell Plan shares by telephone. To receive the redemption price calculated
on a particular regular business day, all calls 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. Plan sponsors and administrators may
not redeem shares held in an OppenheimerFunds-sponsored retirement plan or under
a share certificate by telephone. o To redeem shares through a service
representative, call 1.800.852.8457 o To redeem shares automatically on
PhoneLink, call 1.800.533.3310
A Plan may have a check sent to the address on the account statement, or,
if the Plan has linked its Fund account to a bank account on AccountLink, the
Plan may have the proceeds sent to that bank account.
Are There Limits on Amounts Redeemed by Telephone?
o Telephone Redemptions Paid by Check. Up to $100,000 may be redeemed by
telephone in any seven (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 thirty (30) days
of changing the address on an account.
o Telephone Redemptions Through AccountLink or by Wire. There are no dollar
limits on telephone redemption proceeds sent to a bank account designated
when establishing AccountLink. Normally the ACH transfer to a bank is
initiated on the business day after the redemption. A Plan does not
receive dividends on the proceeds of the shares it redeemed while they are
waiting to be transferred.
Plans may also have the Transfer Agent send redemption proceeds of $2,500
or more by Federal Funds wire to a designated commercial bank account. The
bank must be a member of the Federal Reserve wire system. There is a $10
fee for each Federal Funds wire. To place a wire redemption request, call
the Transfer Agent at 1.800.852.8457. If you have requested Federal Funds
wire privileges for your account, the wire of redemption proceeds will
normally be transmitted on the next bank business day after the shares are
redeemed. There is a possibility that the wire may be delayed up to seven
days to enable the Fund to sell securities to pay the redemption proceeds.
No dividends are accrued or paid on the proceeds of shares that have been
redeemed and are awaiting transmittal by wire.
CAN YOU SELL 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. If the Plan's shares are held in
the name of your dealer, you must redeem them through your dealer.
HOW CONTINGENT DEFERRED SALES CHARGES AFFECT REDEMPTIONS. If you purchase shares
subject to a Class A, Class B, Class C or Class N contingent deferred sales
charge and redeem any of those shares during the applicable holding period for
the class of shares you own, the contingent deferred sales charge will be
deducted from the redemption proceeds (unless you are eligible for a waiver of
that sales charge based on the categories listed in Appendix B to the Statement
of Additional Information) and you advise the Transfer Agent of your eligibility
for the waiver when you place your redemption request.
A 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 net
asset value. A contingent deferred sales charge is not imposed on: o the amount
of the Plan's account value represented by an increase in net
asset value over the initial purchase price,
o shares purchased by the reinvestment of dividends or capital gains
distributions, or
o shares redeemed in the special circumstances described in Appendix B to
the Statement of Additional Information.
With respect to Class N shares, a 1% contingent deferred sales charge will
be imposed if:
o The retirement plan (not including IRAs and 403(b) plans) is terminated
or Class N shares of all Oppenheimer funds are terminated as an
investment option of the plan and Class N shares are redeemed within
eighteen (18) months after the plan's first purchase of Class N shares
of any Oppenheimer fund, or,
o With respect to an individual retirement plan or 403(b) plan, Class N
shares are redeemed within eighteen (18) months of the plan's first
purchase of Class N shares of any Oppenheimer fund.
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 the holding period that applies to that class, and 3. shares
held the longest during the holding period.
Contingent deferred sales charges are not charged when you exchange shares
of the Fund for shares of other Oppenheimer funds. However, if you exchange them
within the applicable contingent deferred sales charge holding period, the
holding period will carry over to the fund whose shares you acquire. Similarly,
if you acquire shares of this Fund by exchanging shares of another Oppenheimer
fund that are still subject to a contingent deferred sales charge holding
period, that holding period will carry over to this Fund.
WHEN ARE REDEMPTION FEES APPLIED? A redemption fee of 2% of the redemption
proceeds is applied to redemptions of Fund shares that are:
o made for reasons other than "benefit responsive withdrawals" by Plan
participants, and
o made on less than twelve months' prior written notice to the Fund. The
redemption fee applies whether the redemption is made in-kind (described above)
or in cash. The redemption fee is paid to the Fund and is intended to compensate
the Fund for expenses associated with the redemption of Fund shares.
A "benefit sensitive withdrawal" is a withdrawal that occurs: o due to the
plan participant's death, retirement, disability, separation
from service,
o to fund Plan participant loans, or
o as another type of "in service" withdrawals made under terms of the
Plan.
The Fund reserves the right to deduct the redemption fee from the
redemption proceeds if 15% or more of plan assets invested in the Fund are
redeemed within five business days, pending a determination by the Fund of
whether the redemption fee is applicable. See the Statement of Additional
Information for information about how the redemption fee applies to withdrawals
caused by certain events affecting the employer.
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. Shares
of the Fund can be purchased by exchange of shares of other Oppenheimer funds on
the same basis. To exchange shares, you must meet several conditions: o Shares
of the fund selected for exchange must be available for sale in
the Plan sponsor's state of organization.
o The prospectuses of both funds must offer the exchange privilege.
o The Plan must hold the shares for at least seven (7) days before it can
exchange them. After the account is open seven (7) days, the Plan can
exchange shares every regular business day.
o The Plan must meet the minimum purchase requirements for the fund whose
shares it purchases by exchange.
o Shares of the Fund may not be exchanged for shares of Oppenheimer Money
Market Fund, Oppenheimer Limited-Term Government Fund or Oppenheimer
Cash Reserves. If a plan offers any of those funds as investment
options, any shares of Oppenheimer funds other than Oppenheimer Money
Market Fund, Oppenheimer Cash Reserves and Oppenheimer Limited-Term
Government Fund purchased by an exchange of this Fund's shares must be
held for at least ninety (90) days before those shares may be
exchanged for shares of Oppenheimer Money Market Fund, Oppenheimer
Limited-Term Government Fund or Oppenheimer Cash Reserves.
o Before exchanging into a fund, you must 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, a Plan can
exchange Class A shares of this Fund only for Class A shares of another fund. In
some cases, sales charges may be imposed on exchange transactions. Please refer
to "How to Exchange Shares" in the Statement of Additional Information for more
details.
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.
How Do You Submit Exchange Requests? Exchanges may be requested in writing or
by telephone:
Written Exchange Requests. Submit an OppenheimerFunds Exchange Request form,
signed by the Plan sponsor or Plan administrator. Send it to the Transfer
Agent at the address on the back cover. Exchanges of shares held under
certificates cannot be processed unless the Transfer Agent receives the
certificates with the request.
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.
Are There Limitations on Exchanges? There are certain exchange policies you
should be aware of:
o Shares are normally redeemed from one fund and purchased from the other
fund in the exchange transaction on the same regular business day on
which the Transfer Agent receives an exchange request that conforms to
the policies described above. It must be received 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 exchanged into up to seven days if it determines it
would be disadvantaged by a same-day exchange. For example, the receipt
of multiple exchange requests from a "market timer" might require the
Fund to sell securities at a disadvantageous time and/or price.
o Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request
that it believes will disadvantage it, or to refuse multiple exchange
requests submitted by a shareholder or dealer.
o The Fund may amend, suspend or terminate the exchange privilege at any
time. The Fund will provide the Plan sponsor or Plan administrator
notice whenever it is required to do so by applicable law, but it may
impose changes at any time for emergency purposes.
o If the Transfer Agent cannot exchange all the shares requested because
of a restriction cited above, only the shares eligible for exchange will
be exchanged.
Shareholder Account Rules and Policies
More information about the Fund's policies and procedures for buying, selling
and exchanging shares is contained 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 person authorized to negotiate the account, the Fund and
the Transfer Agent may rely on the instructions of any one such person.
Telephone privileges apply to each person authorized to negotiate the
account and the dealer representative of record for the account unless the
Transfer Agent receives cancellation instructions from such person.
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. The Transfer Agent and the Fund
will not be liable for losses or expenses arising out of telephone
instructions reasonably believed to be genuine.
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.
Payment for redeemed shares ordinarily is made in cash. It is forwarded by
check, by AccountLink or by Federal Funds wire (as elected by the
shareholder) within seven (7) days after the Transfer Agent receives
redemption instructions in proper form. However, under unusual
circumstances determined by the Securities and Exchange Commission,
payment may be delayed or suspended. For accounts registered in the name
of a broker-dealer, payment will normally be forwarded within three (3)
business days after redemption.
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 ten (10) days from the
date the shares were purchased. That delay may be avoided if the Plan
purchases shares by Federal Funds wire or certified check, or arranges
with its bank to provide telephone or written assurance to the Transfer
Agent that the purchase payment has cleared.
Involuntary redemptions of small accounts may be made by the Fund if the account
value has fallen below $1,000 for reasons other than the fact that the
market value of shares has dropped. In some cases involuntary redemptions
may be made to repay the Distributor for losses from the cancellation of
share purchase orders.
"Backup Withholding" of Federal income tax may be applied against taxable
dividends, distributions and redemption proceeds (including exchanges) if
a Plan fails to furnish the Fund with a correct, certified Social Security
or Employer Identification Number when you sign the application or if you
under-report your income to the Internal Revenue Service.
To avoid sending duplicate copies of materials to households, the Fund will
mail only one copy of each prospectus, annual and semi-annual report to
shareholders having the same last name and address on the Fund's records.
The consolidation of these mailings, called householding, benefits the
Fund through reduced mailing expense.
If you want to receive multiple copies of these materials, you may call
the Transfer Agent at 1.800.525.7048. You may notify the Transfer Agent in
writing. Individual copies of prospectuses and reports will be sent to you
within thirty (30) days after the Transfer Agent receives your request to
stop householding.
Dividends, Capital Gains and Taxes
DIVIDENDS. The Fund intends to declare dividends separately for each class of
shares from net investment income each regular business day and pays those
dividends to shareholders monthly on a date selected by the Board of Trustees.
Daily dividends will not be declared or paid on newly purchased shares until
Federal Funds are available to the Fund from the purchase payment for the
shares.
The amount of those dividends may vary over time, depending on market
conditions, the composition of the Fund's portfolio, and expenses borne by the
particular class of shares. Dividends and distributions paid on Class A shares
and Class Y shares will generally be higher than dividends for Class B, Class C
and Class N shares, which normally have higher expenses than Class A and Class Y
shares. The Fund has no fixed dividend rate and cannot guarantee that it will
pay any dividends or distributions.
The Fund may declare and pay dividends in amounts that are not equal to
the amount of the net investment income it earns. If the amount of distributions
paid exceeds the income earned by the Fund, the excess may be considered a
return of capital. If the income earned by the Fund exceeds the amount of the
dividends paid, the Fund may make an additional distribution of that excess
amount. In an effort to maintain stable net asset values per share if there is
an additional distribution made by the Fund, the Board of Trustees may declare a
reverse split of the shares of the Fund, effective on the ex-distribution date
of the additional distribution. It will be in an amount that will cause the
total number of shares held by each shareholder, including shares acquired by
reinvesting that distribution, to remain the same as before that distribution
was paid.
CAPITAL GAINS. The Fund may realize capital gains on the sale of portfolio
securities. If it does, it may make distributions out of any net short-term or
long-term capital gains in December of each year. The Fund may make supplemental
distributions of dividends and capital gains following the end of its fiscal
year. There can be no assurance that the Fund will pay any capital gains
distributions in a particular year.
TAXES. For retirement plan participants using the Fund as an investment option
under their plan, dividends and capital gain distributions from the Fund
generally will not be subject to current federal personal income tax, but if
they are reinvested in the Fund under the plan, those dividends and
distributions will accumulate on a tax-deferred basis. In general, retirement
plans and, in particular, distributions from retirement plans, are governed by
complex federal and state tax rules. Plan participants should contact their plan
administrator, refer to their plan's Summary Plan Description, and/or speak to a
professional tax advisor regarding the tax consequences of participating in the
plan and making withdrawals from their plan account.
This information is only a summary of certain federal income tax
information about Fund investments. More information is contained in the
Statement of Additional Information.
|X| Returns of Capital Can Occur. 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.
This information is only a summary of certain federal income tax
information about your investment. You should consult with your tax adviser
about the effect of an investment in the Fund on your particular tax situation.
Financial Highlights
The Financial Highlights Table is presented to help you understand the Fund's
financial performance for the Fund's first fiscal period. Certain information
reflects results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by KPMG LLP, the Fund's independent auditors, whose
report, along with the Fund's financial statements, is included in the Statement
of Additional Information, which is available on request.
<PAGE>
For More Information about Oppenheimer Capital Preservation Fund: The following
additional information about the Fund is available without charge upon request:
Statement of Additional Information
This document includes additional information about the Fund's investment
policies, risks, and operations. It is incorporated by reference into this
Prospectus (which means it is legally part of this Prospectus).
Annual and Semi-Annual Reports
Additional information about the Fund's investments and performance is available
in the Fund's Annual and Semi-Annual Reports to shareholders. The Annual Report
includes a discussion of market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year.
----------------------------------------------------------------------------
How to Get More Information:
----------------------------------------------------------------------------
You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports and other information about the Fund or your account:
By Telephone:
Call OppenheimerFunds Services toll-free:
1-800-525-7048
By Mail:
Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
On the Internet:
You can send us a request by e-mail or read or down-load documents on the
OppenheimerFunds web site: http://www.oppenheimerfunds.com You can also obtain
copies of the Statement of Additional Information and other Fund documents and
reports by visiting the SEC's Public Reference Room in Washington, D.C. (Phone
1.202.942.8090) or the SEC's Internet web site at http://www.sec.gov. Copies may
be obtained after payment of a duplicating fee by electronic request at the
SEC's e-mail address: [email protected] or by writing to the SEC's Public
Reference Section, Washington, D.C. 20549-0102.
No one has been authorized to provide any information about the Fund or to make
any representations about the Fund other than what is contained in this
Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a
solicitation of an offer to buy shares of the Fund, to any person in any state
or other jurisdiction where it is unlawful to make such an offer.
The Fund's shares are distributed by:
OppenheimerFunds Distributor, Inc.
The Fund's SEC File No. 811-8799
PR0755.001.0201 Printed on recycled paper.
--------
1 No commission will be paid on sales of Class A shares purchased with the
redemption proceeds of shares of another mutual fund 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, if the
purchase occurs more than thirty (30) days after the Oppenheimer funds are added
as an investment option under that plan.
<PAGE>
Oppenheimer Capital Preservation Fund
6803 South Tucson Way, Englewood, Colorado 80112
1.800.525.7048
Statement of Additional Information dated February 12, 2001
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated February 12, 2001. It should be read
together with the Prospectus. You can obtain the Prospectus 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 or by downloading it from the OppenheimerFunds Internet web site at
www.oppenheimerfunds.com.
Contents Page
About the Fund
Additional Information About the Fund's Investment Policies and Risks
Other Investment Techniques and Strategies......................
Investment Restrictions.........................................
How the Fund is Managed............................................
Organization and History........................................
Trustees and Officers of the Fund...............................
The Manager.....................................................
Brokerage Policies of the Fund.....................................
Distribution and Service Plans.....................................
Performance of the Fund............................................
About Your Account
How to Buy Shares..................................................
How to Sell Share..................................................
How to Exchange Shares.............................................
Dividends, Capital Gains and Taxes.................................
Additional Information about the Fund..............................
Financial Information About the Fund
Independent Auditors' Report.......................................
Financial Statements...............................................
Appendix A: Industry Classifications............................A-1
Appendix B: Special Sales Charge Arrangements and Waivers.......B-1
<PAGE>
25
ABOUT THE FUND
Additional Information About the Fund's Investment Policies and Risks
The investment objective, the principal investment policies and the main
risks of the Fund are described in the Prospectus. This Statement of Additional
Information contains supplemental information about those policies and risks and
the types of securities that the Fund's investment Manager, OppenheimerFunds,
Inc., can select for the Fund. Additional information is also provided about the
strategies that the Fund may use to try to achieve its objective.
The Fund's Investment Policies. The composition of the Fund's portfolio and the
techniques and strategies that the Fund's Manager may use in selecting portfolio
securities will vary over time. The Fund is not required to use all of the
investment techniques and strategies described below at all times in seeking its
goals. It may use some of the special investment techniques and strategies at
some times or not at all.
|X| Debt Securities. The Fund can invest in a variety of debt
securities to seek its objective. Foreign debt securities are subject to the
risks of foreign securities described above. In general, debt securities are
also subject to two additional types of risk: credit risk and interest rate
risk.
|_| Credit Risks. Credit risk relates to the ability of the issuer to
meet interest or principal payments or both as they become due. In general,
lower-grade, higher-yield bonds are subject to credit risk to a greater extent
that lower-yield, higher-quality bonds.
The Fund's debt investments can include high yield, non-investment-grade
bonds (commonly referred to as "junk bonds"). Investment-grade bonds are bonds
rated at least "Baa" by Moody's Investors Service, Inc. ("Moody's"), at least
"BBB" by Standard & Poor's Rating Services ("S&P") or that have comparable
ratings by another nationally-recognized rating organization.
In making investments in debt securities, the Manager may rely to some
extent on the ratings of ratings organizations or it may use its own research to
evaluate a security's credit-worthiness. If securities the Fund buys are
unrated, they are assigned a rating by the Manager of comparable quality to
bonds having similar yield and risk characteristics within a rating category of
a rating organization.
The Fund does not have investment policies establishing specific maturity
ranges for the Fund's investments, and they may be within any maturity range
(short, medium or long) depending on the Manager's evaluation of investment
opportunities available within the debt securities markets. The Fund may shift
its investment focus to securities of longer maturity as interest rates decline
and to securities of shorter maturity as interest rates rise.
|_| Interest Rate Risk. Interest rate risk refers to the fluctuations
in value of fixed-income securities resulting from the inverse relationship
between price and yield. For example, an increase in general interest rates will
tend to reduce the market value of already-issued fixed-income investments, and
a decline in general interest rates will tend to increase their value. In
addition, debt securities with longer maturities, which tend to have higher
yields, are subject to potentially greater fluctuations in value from changes in
interest rates than obligations with shorter maturities.
|_| Special Risks of Lower-Grade Securities. The Fund can invest
directly up to 10% of its net assets in lower-grade debt securities, if the
Manager believes it is consistent with the Fund's objective. Because lower-rated
securities tend to offer higher yields than investment grade securities, the
Fund may invest in lower-grade securities to try to achieve higher income.
"Lower-grade" debt securities are those rated below "investment grade"
which means they have a rating lower than "Baa" by Moody's or lower than "BBB"
by S&P or similar ratings by other rating organizations. If they are unrated,
and are determined by the Manager to be of comparable quality to debt securities
rated below investment grade, they are considered part of the Fund's portfolio
of lower-grade securities. The Fund can invest in securities rated as low as "C"
or "D" or which may be in default at the time the Fund buys them.
Some of the special credit risks of lower-grade securities are discussed
below. There is a greater risk that the issuer may default on its obligation to
pay interest or to repay principal than in the case of investment grade
securities. The issuer's low creditworthiness may increase the potential for its
insolvency. An overall decline in values in the high yield bond market is also
more likely during a period of a general economic downturn. An economic downturn
or an increase in interest rates could severely disrupt the market for high
yield bonds, adversely affecting the values of outstanding bonds as well as the
ability of issuers to pay interest or repay principal. In the case of foreign
high yield bonds, these risks are in addition to the special risk of foreign
investing discussed in the Prospectus and in this Statement of Additional
Information.
To the extent they can be converted into stock, convertible securities may
be less subject to some of these risks than non-convertible high yield bonds,
since stock may be more liquid and less affected by some of these risk factors.
While securities rated "Baa" by Moody's or "BBB" by S&P are investment
grade and are not regarded as junk bonds, those securities may be subject to
special risks, and have some speculative characteristics.
Shares of Underlying Oppenheimer Funds. The Fund can invest in various
Oppenheimer funds. The Prospectus contains a brief description of Oppenheimer
Limited-Term Government Fund ("Limited-Term Government Fund"), Oppenheimer Bond
Fund ("Bond Fund"), Oppenheimer U.S. Government Trust ("U.S. Government Trust"),
Oppenheimer Strategic Income Fund ("Strategic Income Fund"), and Oppenheimer
Money Market Fund, Inc. ("Money Market Fund") (collectively referred to as the
"underlying funds"), including each underlying funds investment objective. Set
forth below is supplemental information about the types of securities each
underlying fund may invest in, as well as strategies each underlying fund may
use to try to achieve its objective. For more complete information about each
underlying fund's investment policies and strategies, please refer to each
underlying fund's prospectus. You may obtain a copy of each underlying fund's
prospectus by calling 1.800.525.7048.
o U.S. Government Securities. Each of the underlying Funds may purchase
U.S.
Government securities. These include obligations issued or guaranteed by the
U.S. Government or any of its agencies or instrumentalities. These may include
direct obligations of the U.S. Treasury, such as Treasury bills, notes and
bonds. Other U.S. Government Securities are supported by the full faith and
credit of the United States, such as pass-through certificates issued by the
Government National Mortgage Association. Others may be supported by the right
of the issuer to borrow from the U.S. Treasury, such as securities of Federal
Home Loan Banks. Others may be supported only by the credit of the
instrumentality, such as obligations of the Federal National Mortgage
Association.
o Mortgage-Backed Securities. Limited-Term Government Fund, Bond Fund,
U.S.
Government Trust and Strategic Income Fund may purchase mortgage-backed
securities and collateralized mortgage obligations issued or guaranteed by the
U.S. government or its agencies or instrumentalities. Bond Fund may also
purchase mortgage-backed securities and collateralized mortgage obligations
issued by private issuers. Limited-Term Government Fund, Bond Fund, U.S.
Government Trust and Strategic Income Fund may also invest in "stripped"
mortgage-backed securities, CMOs or other securities issued by agencies or
instrumentalities of the U.S. Government, and Bond Fund may invest in
private-issuer stripped securities. Limited-Term Government Fund, Bond Fund,
U.S. Government Trust and Strategic Income Fund may also enter into "forward
roll" transactions with mortgage backed securities. In a forward roll
transaction, the fund sells mortgage-backed securities it holds to banks or
other buyers and simultaneously agrees to repurchase a similar security from
that party at a later date at an agreed-upon price.
o Asset-Backed Securities. Bond Fund, Strategic Income Fund and Money
Market Fund
may invest in asset-backed securities (securities that represent interests in
pools of consumer loans and other trade receivables, similar to mortgage-backed
securities).
o Zero Coupon Securities. Bond Fund and Strategic Income Fund may invest
in zero
coupon securities (securities which may be issued by the U.S. government, its
agencies or instrumentalities or by private issuers, that are offered at a
substantial discount from their face value and do not pay interest but mature at
face value), and Strategic Income Fund and Bond Fund may invest in zero coupon
corporate securities (which are similar to U.S. Government zero coupon Treasury
securities but are issued by companies).
o Debt Securities of Domestic Companies. Bond Fund and Strategic Income
Fund may
invest in debt securities of U.S. companies. Those corporate debt securities may
be rated as low as "D" by S&P or "C" by Moody's. Bond Fund may invest up to 35%
of its assets in lower-grade securities (often called junk bonds) and Strategic
Income Fund may invest up to 100% of its assets in junk bonds.
o Debt Securities of Foreign Governments and Companies. Bond Fund and
Strategic
Income Fund may invest in debt securities issued or guaranteed by foreign
companies, "supranational" entities such as the World Bank, and foreign
governments or their agencies. These foreign securities may include debt
obligations such as government bonds, debentures issued by companies and notes.
Some of these debt securities may have variable interest rates or "floating"
interest rates that change in different market conditions.
o Preferred Stocks. Bond Fund and Strategic Income Fund may invest in
preferred stocks.
Preferred stocks, unlike common stocks, generally offers a stated dividend rate
payable from the corporation's earnings.
o Participation Interests. Strategic Income Fund may acquire
participation interests in
loans that are made to U.S. or foreign companies. They may be interests in,
or assignments of, the loan and are acquired from banks or brokers that have
made the loan or are members of the lending syndicate.
o Short-term Debt Securities. In addition to U.S. Government securities,
the Money
Market Fund will invest in the following types of money market securities: (i)
bank obligations, such as time deposits, certificates of deposit and bankers'
acceptances, of a domestic bank or foreign bank with total assets of at least $1
billion, (ii) commercial paper, (iii) corporate obligations, (iv) other money
market obligations other than those listed above if they are subject to
repurchase agreements or guaranteed as to their principal and interest by a
domestic bank having total assets in excess of $500 million or by a corporation
whose commercial paper may be purchased by the fund, and (v) U.S.
dollar-denominated short-term investments that the Money Market Fund's Board of
Directors determines present minimal credit risk and which are of "high quality"
as determined by a nationally-recognized statistical rating organization. Money
Market Fund is required to purchase only those securities that the fund's
manager, under Board-approved procedures, has determined have minimal credit
risks and have a high credit rating.
The investment techniques and strategies used by the underlying funds
include the following:
Each underlying fund may invest in illiquid and restricted securities, and
repurchase agreements. Limited-Term Government Fund, U.S. Government Trust,
Strategic Income Fund and Bond Fund may purchase securities on a "when-issued"
and delayed delivery basis (securities that have been created and for which a
market exists, but which are not available for immediate delivery), and hedging
instruments, including certain kinds of futures contracts and put and call
options, and options on futures, or enter into interest rate swap agreements.
Bond Fund and Strategic Income Fund may enter into foreign currency exchange
contracts. None of the underlying funds use hedging instruments for speculative
purposes. Limited-Term Government Fund, U.S. Government Trust, Strategic Income
Fund and Bond Fund may also invest in derivative investments (a
specially-designed investment whose performance is linked to the performance of
another investment or security, such as an option, future or index).
Limited-Term Government Fund and U.S. Government Trust may enter into reverse
repurchase agreements and Bond Fund and U.S. Government Trust may lend their
portfolio securities, subject to certain limitations, to brokers, dealers and
other financial institutions.
Wrap Agreements. Wrap Agreements are structured with a number of different
features. Wrap Agreements purchased by the Fund are of three basic types: (1)
non-participating, (2) participating and (3) "hybrid". In addition, the Wrap
Agreements will either be of fixed-maturity or open-end maturity ("evergreen").
The Fund enters into particular types of Wrap Agreements depending upon their
respective cost to the Fund and the Wrap Provider's creditworthiness, as well as
upon other factors. Under most circumstances, it is anticipated that the Fund
will enter into participating or hybrid Wrap Agreements of open-end maturity.
Under a non-participating Wrap Agreement, the Wrap Provider becomes
obligated to make a payment to the Fund whenever the Fund sells Covered Assets
at a price below Book Value to meet withdrawals of a type covered by the Wrap
Agreement (a "Benefit Event"). Conversely, the Fund becomes obligated to make a
payment to the Wrap Provider whenever the Fund sells Covered Assets at a price
above their Book Value in response to a Benefit Event. In neither case is the
Crediting Rate adjusted at the time of the Benefit Event. Accordingly, under
this type of Wrap Agreement, while the Fund is protected against decreases in
the market value of the Covered Assets below Book Value, it does not realize
increases in the market value of the Covered Assets above Book Value; those
increases are realized by the Wrap Providers.
Under a participating Wrap Agreement, the obligation of the Wrap Provider
or the Fund to make payments to each other typically does not arise until all of
the Covered Assets have been liquidated. Instead of payments being made on the
occurrence of each Benefit Event, the obligation to pay is a factor in the
periodic adjustment of the Crediting Rate. A participating Wrap Agreement may
require that any accrued gains left in the Fund that are not distributed through
the Crediting Rate prior to the liquidation of all Covered Assets will be paid
to the Wrap Provider.
Under a hybrid Wrap Agreement, the obligation of the Wrap Provider or the
Fund to make payments does not arise until withdrawals exceed a specified
percentage of the Covered Assets, after which time payment covering the
difference between market value and Book Value will occur.
A fixed-maturity Wrap Agreement terminates at a specified date, at which
time settlement of any difference between Book Value and market value of the
Covered Assets occurs. A fixed-maturity Wrap Agreement tends to ensure that the
Covered Assets provide a relatively fixed rate of return over a specified period
of time through bond immunization, which targets the duration of the Covered
Assets to the remaining life of the Wrap Agreement.
An evergreen Wrap Agreement has no fixed maturity date on which payment
must be made, and the rate of return on the Covered Assets accordingly tends to
vary. Unlike the rate of return under a fixed-maturity Wrap Agreement, the rate
of return on assets covered by an evergreen Wrap Agreement tends to more closely
track prevailing market interest rates and thus tends to rise when interest
rates rise and fall when interest rates fall. An evergreen Wrap Agreement may be
converted into a fixed-maturity Wrap Agreement that will mature in the number of
years equal to the duration of the Covered Assets.
Wrap Providers are banks, insurance companies and other financial
institutions. The number of Wrap Providers have been increased in recent years.
There are currently approximately 19 Wrap Providers rated in the top two
long-term rating categories by Moody's, S&P or another nationally recognized
statistical rating organization. The cost of Wrap Agreements is typically 0.10%
to 0.25% per dollar of Covered Asset per annum. The Fund will expense the cost
of the Wrap Agreements.
As described in the Prospectus, the Wrap Agreements are considered
illiquid securities. Therefore, the value of all Wrap Agreements and other
illiquid securities will not exceed 15% of the Fund's net assets. If the value
of all Wrap Agreements and other illiquid securities exceeds 15% of the Fund's
net assets at any time, the Fund's net asset value may decrease and the Fund's
investment Manager, OppenheimerFunds, Inc., will take steps to reduce the value
of the Wrap Agreements to 15% or less of net assets.
If a Wrap Agreement is terminated by the Wrap Provider, normally, the Wrap
Provider will be required to make a single sum payment equal to the positive
value of the terminating Wrap Provider's share of the Covered Assets on a
mutually agreed to maturity date that will not be earlier than the effective
date of termination, plus a number of years equal to the duration of the Fund on
the date of termination. If the value of the Wrap Agreement on the maturity date
is zero or less, no payment will be required by the Wrap Provider. However, the
Wrap Agreements may provide the Wrap Providers with the ability to terminate the
Wrap Agreements with no further obligation to the Fund if the Manager allows
distributions from the Fund other than for benefit sensitive payments to plan
participants, if the Fund's Manager or the Fund's objective or investment
policies are changed without the consent of the Wrap Provider, the Fund's assets
are invested in securities other than as set forth in the Prospectus, someone
other than the Manager exercises investment discretion over the Fund, the Wrap
fees remain unpaid for a stated period of time, the Fund is terminated or
amended or its administrative practices or applicable law are changed in a
manner that may materially alter the Wrap Provider's duties, rights, obligations
or liabilities or materially alter deposits to or withdrawals from the Fund, the
Manager permits plans to invest in the Fund that do not meet the Wrap
Agreement's stated underwriting standards, or the Fund's Investment Company Act
registration lapses or is suspended.
If, to effectuate a redemption payment, the Fund is required to liquidate
all Covered Assets, the Wrap Provider may be obligated to pay to the Fund all or
some of the difference between the market value and corresponding Book Value of
such Covered Assets (if market value is less than Book Value). If, on the other
hand, the market value of the liquidated Covered Assets is greater than the
corresponding Book Value, the Fund may be obligated to pay all or some of the
difference to the Wrap Provider.
Because it is anticipated that each Wrap Agreement will cover all Covered
Assets up to a specified dollar amount, if more than one Wrap Provider becomes
obligated to pay to the Fund the difference between Book Value and the market
value of the Covered Assets, each Wrap Provider will be obligated to pay a
pro-rata amount in proportion to the maximum dollar amount of coverage provided.
Thus, the Fund will not have the option of choosing which Wrap Agreement to draw
upon in any such payment situation. However, if a portion of a Wrap Agreement is
to be assigned as a payment-in-kind to a Plan, the Fund will have the discretion
to choose to allocate the payment to a single Wrap Agreement. In that
circumstance, the Fund expects to address subsequent requests for such
assignments to a different Wrap Provider until each Wrap Provider has made
roughly its pro rata share of such assignments.
The terms of a Wrap Agreement may require that the Covered Assets have a
specified duration or maturity, consist of specified types of securities or be
of a specified credit quality. The Fund will purchase Wrap Agreements whose
criteria in this regard are consistent with the Fund's investment objectives and
policies as set forth in the Prospectus, although in some cases the Wrap
Agreement may require more restrictive investment objectives and policies than
otherwise permitted by the Prospectus and Statement of Additional Information.
o Risks of Investing in Wrap Agreements. In the event of the default of a
Wrap
Provider, the Fund could potentially lose the Book Value protections provided by
the Wrap Agreements with that Wrap Provider. However, the impact of such a
default on the Fund as a whole may be minimal or non-existent if the market
value of the Covered Assets thereunder is greater than their Book Value at the
time of the default, because the Wrap Provider would have no obligation to make
payments to the Fund under those circumstances. In addition, the Fund may be
able to obtain another Wrap Agreement from another Wrap Provider to provide Book
Value protections with respect to those Covered Assets. The cost of the
replacement Wrap Agreement might be higher than the initial Wrap Agreement due
to market conditions or if the market value of those Covered Assets is less than
their Book Value at the time of entering into the replacement agreement. Such
cost would also be in addition to any premiums previously paid to the defaulting
Wrap Provider. If the Fund were unable to obtain a replacement Wrap Agreement,
participants redeeming Shares might experience losses if the market value of the
Fund's assets no longer covered by the Wrap Agreement is below Book Value. The
combination of the default of a Wrap Provider and an inability to obtain a
replacement agreement could render the Fund unable to achieve its investment
objective of seeking to maintain a stable value per Share.
With respect to payments made under the Wrap Agreements between the Fund
and the Wrap Provider, some Wrap Agreements, as noted in the Fund's prospectus,
provide that payments may be due upon disposition of the Covered Assets or upon
termination of the Wrap Agreement. In none of these cases, however, would the
terms of the Wrap Agreements specify which Covered Assets are to be disposed of
or liquidated. Moreover, because it is anticipated that each Wrap Agreement will
cover all Covered Assets up to a specified dollar amount, if more than one Wrap
Provider becomes obligated to pay to the Fund the difference between Book Value
and market value, each Wrap Provider will pay a pro-rata amount in proportion to
the maximum dollar amount of coverage provided. Thus, the Fund will not have the
option of choosing which Wrap Agreement to draw upon in any such payment
situation. In the event of termination of a Wrap Agreement or conversion of an
evergreen Wrap Agreement to a fixed maturity, some Wrap Agreements may require
that the duration of some portion of the Fund's portfolio securities be reduced
to correspond to the fixed maturity or termination date. That may adversely
effect the yield of the Fund.
The Wrap Agreements typically provide that either the Wrap Provider or the
Fund may terminate the Wrap Agreement upon specified notice to the other party.
If a Wrap Agreement is terminated the Fund intends to purchase a new Wrap
Agreement from another financial institution on terms substantially similar to
those of the terminated Wrap Agreement. However, there may be certain
circumstances in which substitute Wrap Agreements are unavailable or are
available only on terms the Fund considers disadvantageous.
In such circumstances, the Wrap Agreements permit the Fund to convert the
terminating Wrap Agreement into a maturing Wrap Agreement. The maturity period
for a terminating Wrap Agreement will approximate the investment duration of the
Fund at that time. During that maturity period the terminating Wrap Agreement
will apply to a distinct investment portfolio within the Fund. That distinct
portfolio will be managed to a declining investment duration, as required by the
Wrap Agreement. The terminating Wrap Provider will continue to be responsible
for paying its proportionate share of any payments required to satisfy
redemption requests. The terminating Wrap Agreement will have a distinct
Crediting Rate, reflecting its distinct investment portfolio. The Fund's overall
Crediting Rate will reflect a blending of the Crediting Rate on the terminating
Wrap Agreement and the Crediting Rate on the remaining Wrap Agreements.
Other Securities the Fund May Purchase. From time to time, when the Manager
determines that it would be advantageous to the Fund, the Fund may invest in any
of the securities described below either exclusively or in addition to its
investment in the underlying funds. The Wrap Agreements the Fund purchases may
contain certain investment restrictions which limit the Fund's ability to invest
in some or all of the following:
High-Yield, Lower-Grade Debt Securities of U.S. Issuers. The Fund can purchase a
variety of lower-grade, high-yield debt securities of U.S. issuers, including
bonds, debentures, notes, preferred stocks, loan participation interests,
structured notes, asset-backed securities, among others, to seek high current
income. These securities are sometimes called "junk bonds." The Fund has no
requirements as to the maturity of the debt securities it can buy, or as to the
market capitalization range of the issuers of those securities. The Fund will
not invest more than 10% of its net assets in high yield, lower-grade debt
securities.
Lower-grade debt securities are those rated below "Baa" by Moody's or
lower than "BBB" by S&P or similar ratings by other nationally-recognized rating
organizations. The Fund can invest in securities rated as low as "C" or "D" or
which are in default at the time the Fund buys them. While securities rated
"Baa" by Moody's or "BBB" by S&P are considered "investment grade," they have
some speculative characteristics.
The Manager does not rely solely on ratings issued by rating organizations
when selecting investments for the Fund. The Fund can buy unrated securities
that offer high current income. The Manager may assign a rating to an unrated
security that is equivalent to the rating of a rated security that the Manager
believes offers comparable yields and risks.
While investment-grade securities are subject to risks of non-payment of
interest and principal, generally, higher yielding lower-grade bonds, whether
rated or unrated, have greater risks than investment-grade securities. They may
be subject to greater market fluctuations and risk of loss of income and
principal than investment-grade securities. There may be less of a market for
them and therefore they may be harder to sell at an acceptable price. There is a
relatively greater possibility that the issuer's earnings may be insufficient to
make the payments of interest and principal due on the bonds. These risks mean
that the Fund may not achieve the expected income from lower-grade securities.
Foreign Debt Securities. The Fund can buy a variety of debt securities issued by
foreign governments and companies, as well as "supra-national" entities, such as
the World Bank. They can include bonds, debentures, and notes, including
derivative investments called "structured" notes, described below. The Fund will
not invest 25% or more of its total assets in debt securities of any one foreign
government or in debt securities of companies in any one industry. The Fund has
no requirements as to the maturity range of the foreign debt securities it can
buy, or as to the market capitalization range of the issuers of those
securities.
The Fund's foreign debt investments can be denominated in U.S. dollars or
in foreign currencies. The Fund will buy foreign currency only in connection
with the purchase and sale of foreign securities and not for speculation.
The Fund can buy "Brady Bonds," which are U.S.-dollar denominated debt
securities collateralized by zero-coupon U.S. Treasury securities. They are
typically issued by emerging markets countries and are considered speculative
securities with higher risks of default.
The debt obligations of foreign governments and entities may or may not be
supported by the full faith and credit of the foreign government. The Fund may
buy securities issued by certain "supra-national" entities, which include
entities designated or supported by governments to promote economic
reconstruction or development, international banking organizations and related
government agencies. Examples are the International Bank for Reconstruction and
Development (commonly called the "World Bank"), the Asian Development bank and
the Inter-American Development Bank.
The governmental members of these supra-national entities are
"stockholders" that typically make capital contributions and may be committed to
make additional capital contributions if the entity is unable to repay its
borrowings. A supra-national entity's lending activities may be limited to a
percentage of its total capital, reserves and net income. There can be no
assurance that the constituent foreign governments will continue to be able or
willing to honor their capitalization commitments for those entities.
The Fund can invest in U.S. dollar-denominated "Brady Bonds." These
foreign debt obligations may be fixed-rate par bonds or floating-rate discount
bonds. They are generally collateralized in full as to repayment of principal at
maturity by U.S. Treasury zero-coupon obligations that have the same maturity as
the Brady Bonds. Brady Bonds can be viewed as having three or four valuation
components: (i) the collateralized repayment of principal at final maturity;
(ii) the collateralized interest payments; (iii) the uncollateralized interest
payments; and (iv) any uncollateralized repayment of principal at maturity.
Those uncollateralized amounts constitute what is called the "residual risk."
If there is a default on collateralized Brady Bonds resulting in
acceleration of the payment obligations of the issuer, the zero-coupon U.S.
Treasury securities held as collateral for the payment of principal will not be
distributed to investors, nor will those obligations be sold to distribute the
proceeds. The collateral will be held by the collateral agent to the scheduled
maturity of the defaulted Brady Bonds. The defaulted bonds will continue to
remain outstanding, and the face amount of the collateral will equal the
principal payments which would have then been due on the Brady Bonds in the
normal course. Because of the residual risk of Brady Bonds and the history of
defaults with respect to commercial bank loans by public and private entities of
countries issuing Brady Bonds, Brady Bonds are considered speculative
investments.
|_| Risks of Foreign Investing. Investments in foreign securities may
offer special opportunities for investing but also present special additional
risks and considerations not typically associated with investments in domestic
securities. Some of these additional risks are:
o reduction of income by foreign taxes;
o fluctuation in value of foreign investments due to changes in currency
rates or currency control regulations (for example, currency blockage);
o transaction charges for currency exchange;
o lack of public information about foreign issuers;
o lack of uniform accounting, auditing and financial reporting standards
in foreign countries comparable to those applicable to domestic issuers;
o less volume on foreign exchanges than on U.S. exchanges;
o greater volatility and less liquidity on foreign markets than in the
U.S.;
o less governmental regulation of foreign issuers, stock exchanges and
brokers than in the U.S.;
o greater difficulties in commencing lawsuits;
o higher brokerage commission rates than in the U.S.;
o increased risks of delays in settlement of portfolio transactions or
loss of certificates for portfolio securities;
o possibilities in some countries of expropriation, confiscatory taxation,
political, financial or social instability or adverse diplomatic
developments; and
o unfavorable differences between the U.S. economy and foreign economies.
In the past, 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.
|_| Special Risks of Emerging Markets. Emerging and developing markets
abroad may also offer special opportunities for investing but have greater risks
than more developed foreign markets, such as those in Europe, Canada, Australia,
New Zealand and Japan. There may be even less liquidity in their securities
markets, and settlements of purchases and sales of securities may be subject to
additional delays. They are subject to greater risks of limitations on the
repatriation of income and profits because of currency restrictions imposed by
local governments. Those countries may also be subject to the risk of greater
political and economic instability, which can greatly affect the volatility of
prices of securities in those countries. The Manager will consider these factors
when evaluating securities in these markets, because the selection of those
securities must be consistent with the Fund's investment objective.
|_| Risks of Conversion to Euro. On January 1, 1999, eleven countries in
the European Union adopted the euro as their official currency. However, their
current currencies (for example, the franc, the mark, and the lire) will also
continue in use until January 1, 2002. After that date, it is expected that only
the euro will be used in those countries. A common currency is expected to
confer some benefits in those markets, by consolidating the government debt
market for those countries and reducing some currency risks and costs. But the
conversion to the new currency will affect the Fund operationally and also has
potential risks, some of which are listed below. Among other things, the
conversion will affect:
o issuers in which the Fund invests, because of changes in the competitive
environment from a consolidated currency market and greater operational
costs from converting to the new currency. This might depress securities
values. o vendors the Fund depends on to carry out its business, such as
its Custodian (which holds the foreign securities the Fund buys), the
Manager (which must price the Fund's investments to deal with the
conversion to the euro) and brokers, foreign markets and securities
depositories. If they are not prepared, there could be delays in
settlements and additional costs to the Fund. o exchange contracts and
derivatives that are outstanding during the transition to the euro. The
lack of currency rate calculations between the affected currencies and the
need to update the Fund's contracts could pose extra costs to the Fund.
The Manager is upgrading (at its expense) its computer and bookkeeping
systems to deal with the conversion. The Fund's Custodian has advised the
Manager of its plans to deal with the conversion, including how it will update
its record keeping systems and handle the redenomination of outstanding foreign
debt. The Fund's portfolio manager will also monitor the effects of the
conversion on the issuers in which the Fund invests. The possible effect of
these factors on the Fund's investments cannot be determined with certainty at
this time, but they may reduce the value of some of the Fund's holdings and
increase its operational costs.
|X| Mortgage-Related Securities. Mortgage-related securities are a form of
derivative investment collateralized by pools of commercial or residential
mortgages. Pools of mortgage loans are assembled as securities for sale to
investors by government agencies or entities or by private issuers. These
securities include collateralized mortgage obligations ("CMOs"), mortgage
pass-through securities, stripped mortgage pass-through securities, interests in
real estate mortgage investment conduits ("REMICs") and other real-estate
related securities.
Mortgage-related securities that are issued or guaranteed by agencies or
instrumentalities of the U.S. government have relatively little credit risk
(depending on the nature of the issuer) but are subject to interest rate risks
and prepayment risks, as described in the Prospectus.
As with other debt securities, the prices of mortgage-related securities
tend to move inversely to changes in interest rates. The Fund can buy
mortgage-related securities that have interest rates that move inversely to
changes in general interest rates, based on a multiple of a specific index.
Although the value of a mortgage-related security may decline when interest
rates rise, the converse is not always the case.
In periods of declining interest rates, mortgages are more likely to be
prepaid. Therefore, a mortgage-related security's maturity can be shortened by
unscheduled prepayments on the underlying mortgages. Therefore, it is not
possible to predict accurately the security's yield. The principal that is
returned earlier than expected may have to be reinvested in other investments
having a lower yield than the prepaid security. Therefore, these securities may
be less effective as a means of "locking in" attractive long-term interest
rates, and they may have less potential for appreciation during periods of
declining interest rates, than conventional bonds with comparable stated
maturities.
Prepayment risks can lead to substantial fluctuations in the value of a
mortgage-related security. In turn, this can affect the value of the Fund's
shares. If a mortgage-related security has been purchased at a premium, all or
part of the premium the Fund paid may be lost if there is a decline in the
market value of the security, whether that results from interest rate changes or
prepayments on the underlying mortgages. In the case of stripped
mortgage-related securities, if they experience greater rates of prepayment than
were anticipated, the Fund may fail to recoup its initial investment on the
security.
During periods of rapidly rising interest rates, prepayments of
mortgage-related securities may occur at slower than expected rates. Slower
prepayments effectively may lengthen a mortgage-related security's expected
maturity. Generally, that would cause the value of the security to fluctuate
more widely in responses to changes in interest rates. If the prepayments on the
Fund's mortgage-related securities were to decrease broadly, the Fund's
effective duration, and therefore its sensitivity to interest rate changes,
would increase.
As with other debt securities, the values of mortgage-related securities
may be affected by changes in the market's perception of the creditworthiness of
the entity issuing the securities or guaranteeing them. Their values may also be
affected by changes in government regulations and tax policies.
|_| Collateralized Mortgage Obligations. CMOs are multi-class
bonds that are backed by pools of mortgage loans or mortgage pass-through
certificates. They may be collateralized by:
(1) pass-through certificates issued or guaranteed by Ginnie Mae, Fannie
Mae, or Freddie Mac,
(2) unsecuritized mortgage loans insured by the Federal Housing
Administration or guaranteed by the Department of Veterans' Affairs,
(3) unsecuritized conventional mortgages, (4) other mortgage-related securities,
or (5) any combination of these.
Each class of CMO, referred to as a "tranche," is issued at a specific
coupon rate and has a stated maturity or final distribution date. Principal
prepayments on the underlying mortgages may cause the CMO to be retired much
earlier than the stated maturity or final distribution date. The principal and
interest on the underlying mortgages may be allocated among the several classes
of a series of a CMO in different ways. One or more tranches may have coupon
rates that reset periodically at a specified increase over an index. These are
floating rate CMOs, and typically have a cap on the coupon rate. Inverse
floating rate CMOs have a coupon rate that moves in the reverse direction to an
applicable index. The coupon rate on these CMOs will increase as general
interest rates decrease. These are usually much more volatile than fixed rate
CMOs or floating rate CMOs.
|X| U.S. Government Securities. These are securities issued or guaranteed
by the U.S. Treasury or other government agencies or federally-chartered
corporate entities referred to as "instrumentalities." The obligations of U.S.
government agencies or instrumentalities in which the Fund may invest may or may
not be guaranteed or supported by the "full faith and credit" of the United
States. "Full faith and credit" means generally that the taxing power of the
U.S. government is pledged to the payment of interest and repayment of principal
on a security. If a security is not backed by the full faith and credit of the
United States, the owner of the security must look principally to the agency
issuing the obligation for repayment. The owner might not be able to assert a
claim against the United States if the issuing agency or instrumentality does
not meet its commitment. The Fund will invest in securities of U.S. government
agencies and instrumentalities only if the Manager is satisfied that the credit
risk with respect to the agency or instrumentality is minimal.
|_| U.S. Treasury Obligations. These include Treasury bills
(maturities of one year or less when issued), Treasury notes (maturities of from
one (1) to ten (10) years), and Treasury bonds (maturities of more than ten (10)
years). Treasury securities are backed by the full faith and credit of the
United States as to timely payments of interest and repayments of principal.
They also can include U. S. Treasury securities that have been "stripped" by a
Federal Reserve Bank, zero-coupon U.S. Treasury securities described below, and
Treasury Inflation-Protection Securities ("TIPS").
|_| Treasury Inflation-Protection Securities. The Fund can buy
these U.S. Treasury securities, called "TIPS," that are designed to provide an
investment vehicle that is not vulnerable to inflation. The interest rate paid
by TIPS is fixed. The principal value rises or falls semi-annually based on
changes in the published Consumer Price Index. If inflation occurs, the
principal and interest payments on TIPS are adjusted to protect investors from
inflationary loss. If deflation occurs, the principal and interest payments will
be adjusted downward, although the principal will not fall below its face amount
at maturity.
|_| Obligations Issued or Guaranteed by U.S. Government Agencies or
Instrumentalities. These include direct obligations and mortgage-related
securities that have different levels of credit support from the government.
Some are supported by the full faith and credit of the U.S. government, such as
Government National Mortgage Association pass-through mortgage certificates
(called "Ginnie Maes"). Some are supported by the right of the issuer to borrow
from the U.S. Treasury under certain circumstances, such as Federal National
Mortgage Association bonds ("Fannie Maes"). Others are supported only by the
credit of the entity that issued them, such as Federal Home Loan Mortgage
Corporation obligations ("Freddie Macs").
|_| U.S. Government Mortgage-Related Securities. The Fund
can invest in a variety of mortgage-related securities that are issued by
U.S. government agencies or instrumentalities, some of which are described
below.
|_| GNMA Certificates. The Government National Mortgage Association
("GNMA") is a wholly-owned corporate instrumentality of the United States within
the U.S. Department of Housing and Urban Development. GNMA's principal programs
involve its guarantees of privately-issued securities backed by pools of
mortgages. Ginnie Maes are debt securities representing an interest in one or a
pool of mortgages that are insured by the Federal Housing Administration or the
Farmers Home Administration or guaranteed by the Veterans Administration
The Ginnie Maes in which the Fund invests are of the "fully modified
pass-through" type. They provide that the registered holders of the Ginnie Maes
will receive timely monthly payments of the pro-rata share of the scheduled
principal payments on the underlying mortgages, whether or not those amounts are
collected by the issuers. Amounts paid include, on a pro rata basis, any
prepayment of principal of such mortgages and interest (net of servicing and
other charges) on the aggregate unpaid principal balance of the Ginnie Maes,
whether or not the interest on the underlying mortgages has been collected by
the issuers.
The Ginnie Maes purchased by the Fund are guaranteed as to timely payment
of principal and interest by GNMA. In giving that guaranty, GNMA expects that
payments received by the issuers of Ginnie Maes on account of the mortgages
backing the Ginnie Maes will be sufficient to make the required payments of
principal of and interest on those Ginnie Maes. However if those payments are
insufficient, the guaranty agreements between the issuers of the Ginnie Maes and
GNMA require the issuers to make advances sufficient for the payments. If the
issuers fail to make those payments, GNMA will do so.
Under Federal law, the full faith and credit of the United States is
pledged to the payment of all amounts that may be required to be paid under any
guaranty issued by GNMA as to such mortgage pools. An opinion of an Assistant
Attorney General of the United States, dated December 9, 1969, states that such
guaranties "constitute general obligations of the United States backed by its
full faith and credit." GNMA is empowered to borrow from the United States
Treasury to the extent necessary to make any payments of principal and interest
required under those guaranties.
Ginnie Maes are backed by the aggregate indebtedness secured by the
underlying FHA-insured, FMHA-insured or VA-guaranteed mortgages. Except to the
extent of payments received by the issuers on account of such mortgages, Ginnie
Maes do not constitute a liability of those issuers, nor do they evidence any
recourse against those issuers. Recourse is solely against GNMA. Holders of
Ginnie Maes (such as the Fund) have no security interest in or lien on the
underlying mortgages.
Monthly payments of principal will be made, and additional prepayments of
principal may be made, to the Fund with respect to the mortgages underlying the
Ginnie Maes owned by the Fund. All of the mortgages in the pools relating to the
Ginnie Maes in the Fund are subject to prepayment without any significant
premium or penalty, at the option of the mortgagors. While the mortgages on
1-to-4-family dwellings underlying certain Ginnie Maes have a stated maturity of
up to thirty (30) years, it has been the experience of the mortgage industry
that the average life of comparable mortgages, as a result of prepayments,
refinancing and payments from foreclosures, is considerably less.
|_| Federal Home Loan Mortgage Corporation Certificates
("FHLMC"). FHLMC, a corporate instrumentality of the United States, issues FHLMC
Certificates representing interests in mortgage loans. FHLMC guarantees to each
registered holder of a FHLMC Certificate timely payment of the amounts
representing a holder's proportionate share in: (i) interest payments less
servicing and guarantee fees, (ii) principal prepayments and (iii) the ultimate
collection of amounts representing the holder's
proportionate interest in
principal payments on the mortgage loans in the pool represented
by the FHLMC Certificate, in each case whether or not such amounts are
actually received.
The obligations of FHLMC under its guarantees are obligations solely of
FHLMC and are not backed by the full faith and credit of the United States.
|_| Federal National Mortgage Association (Fannie Mae)
Certificates. Fannie Mae, a federally-chartered and privately-owned corporation,
issues Fannie Mae Certificates which are backed by a pool of mortgage loans.
Fannie Mae guarantees to each registered holder of a Fannie Mae Certificate that
the holder will receive amounts representing the holder's proportionate interest
in scheduled principal and interest payments, and any principal prepayments, on
the mortgage loans in the pool represented by such Certificate, less servicing
and guarantee fees, and the holder's proportionate interest in the full
principal amount of any foreclosed or other liquidated mortgage loan. In each
case the guarantee applies whether or not those amounts are actually received.
The obligations of Fannie Mae under its guarantees are obligations solely of
Fannie Mae and are not backed by the full faith and credit of the United States
or any of its agencies or instrumentalities other than Fannie Mae.
|_| Zero-Coupon U.S. Government Securities. The Fund may buy
zero-coupon U.S. government securities. These will typically be U.S. Treasury
Notes and Bonds that have been stripped of their unmatured interest coupons,
the coupons themselves, or certificates representing interests in those
stripped debt obligations and coupons.
Zero-coupon securities do not make periodic interest payments and are sold
at a deep discount from their face value at maturity. The buyer recognizes a
rate of return determined by the gradual appreciation of the security, which is
redeemed at face value on a specified maturity date. This discount depends on
the time remaining until maturity, as well as prevailing interest rates, the
liquidity of the security and the credit quality of the issuer. The discount
typically decreases as the maturity date approaches.
Because zero-coupon securities pay no interest and compound semi-annually
at the rate fixed at the time of their issuance, their value is generally more
volatile than the value of other debt securities that pay interest. Their value
may fall more dramatically than the value of interest-bearing securities when
interest rates rise. When prevailing interest rates fall, zero-coupon securities
tend to rise more rapidly in value because they have a fixed rate of return.
The Fund's investment in zero-coupon securities may cause the Fund to
recognize income and make distributions to shareholders before it receives any
cash payments on the zero-coupon investment. To generate cash to satisfy those
distribution requirements, the Fund may have to sell portfolio securities that
it otherwise might have continued to hold or to use cash flows from other
sources such as the sale of Fund shares.
|X| Portfolio Turnover. "Portfolio turnover" describes the rate at which
the Fund trades its portfolio securities during its fiscal year. For example, if
a fund sold all of its securities during the year, its portfolio turnover rate
would have been 100%. The Fund's portfolio turnover rate will fluctuate from
year to year, but it is not expected that the Fund's portfolio turnover rate
will exceed 100%.
Increased turnover of the non-mutual fund securities the Fund may purchase
can result in higher brokerage and transaction costs for the Fund, which may
reduce its overall performance. The Fund incurs no brokerage and transaction
costs when it buys and sells shares of the underlying funds. Additionally, the
realization of capital gains from selling portfolio securities may result in
distributions of long-term capital gains to shareholders, since the Fund will
normally distribute all of its capital gains realized each year, to avoid excise
taxes under the Internal Revenue Code.
Other Investment Techniques and Strategies. In seeking its objective, the Fund
may from time to time use the types of investment strategies and investments
described below. It is not required to use all of these strategies at all times
and at times may not use them.
|X| Other Zero-Coupon Securities. The Fund may buy zero-coupon and delayed
interest securities, and "stripped" securities of corporations and of foreign
government issuers. These are similar in structure to zero-coupon and "stripped"
U.S. government securities, but in the case of foreign government securities may
or may not be backed by the "full faith and credit" of the issuing foreign
government. Zero-coupon securities issued by foreign governments and by
corporations will be subject to greater credit risks than U.S. government
zero-coupon securities.
|X| "Stripped" Mortgage-Related Securities. The Fund can invest in
stripped mortgage-related securities that are created by segregating the cash
flows from underlying mortgage loans or mortgage securities to create two or
more new securities. Each has a specified percentage of the underlying
security's principal or interest payments. These are a form of derivative
investment.
Mortgage securities may be partially stripped so that each class receives
some interest and some principal. However, they may be completely stripped. In
that case all of the interest is distributed to holders of one type of security,
known as an "interest-only" security, or "I/O," and all of the principal is
distributed to holders of another type of security, known as a "principal-only"
security or "P/O." Strips can be created for pass-through certificates or CMOs.
The yields to maturity of I/Os and P/Os are very sensitive to principal
repayments (including prepayments) on the underlying mortgages. If the
underlying mortgages experience greater than anticipated prepayments of
principal, the Fund might not fully recoup its investment in an I/O based on
those assets. If underlying mortgages experience less than anticipated
prepayments of principal, the yield on the P/Os based on them could decline
substantially.
|X| Preferred Stocks. Preferred stock, unlike common stock, has a
stated dividend rate payable from the corporation's earnings. Preferred
stock dividends may be cumulative or non-cumulative, participating, or
auction rate. "Cumulative" dividend provisions require all or a portion of
prior unpaid dividends to be paid.
If interest rates rise, the fixed dividend on preferred stocks may be less
attractive, causing the price of preferred stocks to decline. Preferred stock
may have mandatory sinking fund provisions, as well as call/redemption
provisions prior to maturity, which can be a negative feature when interest
rates decline. Preferred stock also generally has a preference over common stock
on the distribution of a corporation's assets in the event of liquidation of the
corporation. Preferred stock may be "participating" stock, which means that it
may be entitled to a dividend exceeding the stated dividend in certain cases.
The rights of preferred stock on distribution of a corporation's assets in the
event of a liquidation are generally subordinate to the rights associated with a
corporation's debt securities.
|X| Floating Rate and Variable Rate Obligations. Variable rate obligations
can have a demand feature that allows the Fund to tender the obligation to the
issuer or a third party prior to its maturity. The tender may be at par value
plus accrued interest, according to the terms of the obligations.
The interest rate on a floating rate demand note is adjusted automatically
according to a stated prevailing market rate, such as a bank's prime rate, the
ninety-one (91) day U.S. Treasury Bill rate, or some other standard. The
instrument's rate is adjusted automatically each time the base rate is adjusted.
The interest rate on a variable rate note is also based on a stated prevailing
market rate but is adjusted automatically at specified intervals of not less
than one (1) year. Generally, the changes in the interest rate on such
securities reduce the fluctuation in their market value. As interest rates
decrease or increase, the potential for capital appreciation or depreciation is
less than that for fixed-rate obligations of the same maturity. The Manager may
determine that an unrated floating rate or variable rate demand obligation meets
the Fund's quality standards by reason of being backed by a letter of credit or
guarantee issued by a bank that meets those quality standards.
Floating rate and variable rate demand notes that have a stated maturity
in excess of one year may have features that permit the holder to recover the
principal amount of the underlying security at specified intervals not exceeding
one (1) year and upon no more than thirty (30) days' notice. The issuer of that
type of note normally has a corresponding right in its discretion, after a given
period, to prepay the outstanding principal amount of the note plus accrued
interest. Generally the issuer must provide a specified number of days' notice
to the holder.
|X| "When-Issued" and "Delayed-Delivery" Transactions. The Fund may invest
in securities on a "when-issued" basis and may purchase or sell securities on a
"delayed-delivery" (or "forward-commitment") basis. When-issued and
delayed-delivery are terms that refer to securities whose terms and indenture
are available and for which a market exists, but which are not available for
immediate delivery.
When such transactions are negotiated, the price (which is generally
expressed in yield terms) is fixed at the time the commitment is made. Delivery
and payment for the securities take place at a later date (generally within
forty-five (45) days of the date the offer is accepted). The securities are
subject to change in value from market fluctuations during the period until
settlement. The value at delivery may be less than the purchase price. For
example, changes in interest rates in a direction other than that expected by
the Manager before settlement will affect the value of such securities and may
cause a loss to the Fund. During the period between purchase and settlement, no
payment is made by the Fund to the issuer and no interest accrues to the Fund
from the investment. No income begins to accrue to the Fund on a when-issued
security until the Fund receives the security at settlement of the trade.
The Fund will engage in when-issued transactions to secure what the
Manager considers to be an advantageous price and yield at the time of entering
into the obligation. When the Fund enters into a when-issued or delayed-delivery
transaction, it relies on the other party to complete the transaction. Its
failure to do so may cause the Fund to lose the opportunity to obtain the
security at a price and yield the Manager considers to be advantageous.
When the Fund engages in when-issued and delayed-delivery transactions, it
does so for the purpose of acquiring or selling securities consistent with its
investment objective and policies or for delivery pursuant to options contracts
it has entered into, and not for the purpose of investment leverage. Although
the Fund will enter into delayed-delivery or when-issued purchase transactions
to acquire securities, it may dispose of a commitment prior to settlement. If
the Fund chooses to dispose of the right to acquire a when-issued security prior
to its acquisition or to dispose of its right to delivery or receive against a
forward commitment, it may incur a gain or loss.
At the time the Fund makes the commitment to purchase or sell a security
on a when-issued or delayed-delivery basis, it records the transaction on its
books and reflects the value of the security purchased in determining the Fund's
net asset value. In a sale transaction, it records the proceeds to be received.
The Fund will identify on its books liquid assets at least equal in value to the
value of the Fund's purchase commitments until the Fund pays for the investment.
When-issued and delayed-delivery transactions can be used by the Fund as a
defensive technique to hedge against anticipated changes in interest rates and
prices. For instance, in periods of rising interest rates and falling prices,
the Fund might sell securities in its portfolio on a forward commitment basis to
attempt to limit its exposure to anticipated falling prices. In periods of
falling interest rates and rising prices, the Fund might sell portfolio
securities and purchase the same or similar securities on a when-issued or
delayed-delivery basis to obtain the benefit of currently higher cash yields.
|X| Participation Interests. The Fund may invest in participation
interests, subject to the Fund's limitation on investments in illiquid
investments. A participation interest is an undivided interest in a loan made by
the issuing financial institution in the proportion that the buyers
participation interest bears to the total principal amount of the loan. No more
than 5% of the Fund's net assets can be invested in participation interests of
the same borrower. The issuing financial institution may have no obligation to
the Fund other than to pay the Fund the proportionate amount of the principal
and interest payments it receives.
Participation interests are primarily dependent upon the creditworthiness
of the borrowing corporation, which is obligated to make payments of principal
and interest on the loan. There is a risk that a borrower may have difficulty
making payments. If a borrower fails to pay scheduled interest or principal
payments, the Fund could experience a reduction in its income. The value of that
participation interest might also decline, which could affect the net asset
value of the Fund's shares in the absence of the Wrap Agreements. If the issuing
financial institution fails to perform its obligations under the participation
agreement, the Fund might incur costs and delays in realizing payment and suffer
a loss of principal and/or interest.
|X| Repurchase Agreements. The Fund can acquire securities subject to
repurchase agreements. It might do so for liquidity purposes to meet anticipated
redemptions of Fund shares, or pending the investment of the proceeds from sales
of Fund shares, or pending the settlement of portfolio securities transactions,
or for temporary defensive purposes, as described below.
In a repurchase transaction, the Fund buys a security from, and
simultaneously resells it to, an approved vendor for delivery on an agreed-upon
future date. The resale price exceeds the purchase price by an amount that
reflects an agreed-upon interest rate effective for the period during which the
repurchase agreement is in effect. Approved vendors include U.S. commercial
banks, U.S. branches of foreign banks, or broker-dealers that have been
designated as primary dealers in government securities. They must meet credit
requirements set by the Fund's Board of Trustees from time to time.
The majority of these transactions run from day to day, and delivery
pursuant to the resale typically occurs within one (1) to five (5) days of the
purchase. Repurchase agreements having a maturity beyond seven days are subject
to the Fund's limits on holding illiquid investments. The Fund will not enter
into a repurchase agreement that causes more than 10% of its net assets to be
subject to repurchase agreements having a maturity beyond seven (7) days. There
is no limit on the amount of the Fund's net assets that may be subject to
repurchase agreements having maturities of seven (7) days or less.
Repurchase agreements, considered "loans" under the Investment Company
Act, are 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. 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 Manager will monitor the vendor's creditworthiness requirements to
confirm that the vendor is financially sound and will continuously monitor the
collateral's value.
|X| 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 Wrap Agreement is
considered to be an illiquid security. To enable the Fund to sell its holdings
of a restricted security not registered under the Securities Act of 1933, the
Fund may have to cause those securities to be registered. The expenses of
registering restricted securities may be negotiated by the Fund with the issuer
at the time the Fund buys the securities. When the Fund must arrange
registration because the Fund wishes to sell the security, a considerable period
may elapse between the time the decision is made to sell the security and the
time the security is registered so that the Fund could sell it. The Fund would
bear the risks of any downward price fluctuation during that period.
The Fund may also acquire restricted securities through private
placements. Those securities have contractual restrictions on their public
resale. Those restrictions might limit the Fund's ability to dispose of the
securities and might lower the amount the Fund could realize upon the sale. A
restricted security is one that has a contractual restriction on its resale or
which cannot be sold publicly until it is registered under the Securities Act of
1933. The Fund will not invest more than 15% of its net assets in illiquid or
restricted securities. The restriction applies on an ongoing basis. That
percentage restriction does not limit purchases of restricted securities that
are eligible for sale to qualified institutional purchasers under Rule 144A of
the Securities Act of 1933, if 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 holdings of that
security may be considered to be illiquid.
Illiquid securities include repurchase agreements maturing in more than
seven (7) days and participation interests that do not have puts exercisable
within seven (7) days.
|X| Forward Rolls. The Fund can enter into "forward roll" transactions
with respect to mortgage-related securities. In this type of transaction, the
Fund sells a mortgage-related security to a buyer and simultaneously agrees to
repurchase a similar security (the same type of security, and having the same
coupon and maturity) at a later date at a set price. The securities that are
repurchased will have the same interest rate as the securities that are sold,
but typically will be collateralized by different pools of mortgages (with
different prepayment histories) than the securities that have been sold.
Proceeds from the sale are invested in short-term instruments, such as
repurchase agreements. The income from those investments, plus the fees from the
forward roll transaction, are expected to generate income to the Fund in excess
of the yield on the securities that have been sold.
The Fund will only enter into "covered" rolls. To assure its future
payment of the purchase price, the Fund will identify on its books liquid assets
in an amount equal to the payment obligation under the roll.
These transactions have risks. During the period between the sale and the
repurchase, the Fund will not be entitled to receive interest and principal
payments on the securities that have been sold. It is possible that the market
value of the securities the Fund sells may decline below the price at which the
Fund is obligated to repurchase securities.
|X| Loans of Portfolio Securities. To raise cash for liquidity or income
purposes, the Fund can lend its portfolio securities to brokers, dealers and
other types of financial institutions approved by the Fund's Board of Trustees.
These loans are limited to not more than 25% of the value of the Fund's total
assets. The Fund currently does not intend to lend securities, but if it does
so, such loans will not likely exceed 5% of the Fund's total assets.
There are some risks in connection with securities lending. The Fund might
experience a delay in receiving additional collateral to secure a loan, or a
delay in recovery of the loaned securities if the borrower defaults. The Fund
must receive collateral for a loan. Under current applicable regulatory
requirements (which are subject to change), on each business day the loan
collateral must be at least equal to the value of the loaned securities. It must
consist of cash, bank letters of credit, securities of the U.S. government or
its agencies or instrumentalities, or other cash equivalents in which the Fund
is permitted to invest. To be acceptable as collateral, letters of credit must
obligate a bank to pay amounts demanded by the Fund if the demand meets the
terms of the letter. The terms of the letter of credit and the issuing bank both
must be satisfactory to the Fund.
When it lends securities, the Fund receives amounts equal to the dividends
or interest on loaned securities. It also receives one or more of (a) negotiated
loan fees, (b) interest on securities used as collateral, and (c) interest on
any short-term debt securities purchased with such loan collateral. Either type
of interest may be shared with the borrower. The Fund may also pay reasonable
finders', custodian and administrative fees in connection with these loans. 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.
|X| Borrowing for Leverage. The Fund has the ability to borrow from banks
on an unsecured basis to invest the borrowed funds in portfolio securities. This
speculative technique is known as "leverage." The Fund may borrow only from
banks. Under current regulatory requirements, borrowings can be made only to the
extent that the value of the Fund's assets, less its liabilities other than
borrowings, is equal to at least 300% of all borrowings (including the proposed
borrowing). If the value of the Fund's assets fails to meet this 300% asset
coverage requirement, the Fund will reduce its bank debt within three days to
meet the requirement. To do so, the Fund might have to sell a portion of its
investments at a disadvantageous time.
The Fund will pay interest on these loans, and that interest expense will
raise the overall expenses of the Fund and reduce its returns. If it does
borrow, its expenses will be greater than comparable funds that do not borrow
for leverage. Additionally, the Fund's net asset value per share might fluctuate
more than that of funds that do not borrow. Currently, the Fund does not
contemplate using this technique in the next year but if it does so, it will not
likely be to a substantial degree.
|X| Asset-Backed Securities. Asset-backed securities are fractional
interests in pools of assets, typically accounts receivable or consumer loans.
They are issued by trusts or special-purpose corporations. They are similar to
mortgage-backed securities, described above, and are backed by a pool of assets
that consist of obligations of individual borrowers. The income from the pool is
passed through to the holders of participation interests in the pools. The pools
may offer a credit enhancement, such as a bank letter of credit, to try to
reduce the risks that the underlying debtors will not pay their obligations when
due. However, the enhancement, if any, might not be for the full par value of
the security. If the enhancement is exhausted and any required payments of
interest or repayments of principal are not made, the Fund could suffer losses
on its investment or delays in receiving payment.
The value of an asset-backed security is affected by changes in the
market's perception of the asset backing the security, the creditworthiness of
the servicing agent for the loan pool, the originator of the loans, or the
financial institution providing any credit enhancement, and is also affected if
any credit enhancement has been exhausted. The risks of investing in
asset-backed securities are ultimately related to payment of consumer loans by
the individual borrowers. As a purchaser of an asset-backed security, the Fund
would generally have no recourse to the entity that originated the loans in the
event of default by a borrower. The underlying loans are subject to prepayments,
which may shorten the weighted average life of asset-backed securities and may
lower their return, in the same manner as in the case of mortgage-backed
securities and CMOs, described above. Unlike mortgage-backed securities,
asset-backed securities typically do not have the benefit of a security interest
in the underlying collateral.
|X| Derivatives. The Fund can invest in a variety of derivative
investments to seek income or for hedging purposes. Some derivative investments
the Fund can use are the hedging instruments described below in this Statement
of Additional Information.
Among the derivative investments the Fund can invest in are structured
notes called "index-linked" or "currency-linked" notes. Principal and/or
interest payments on index-linked notes depend on the performance of an
underlying index. Currency-indexed securities are typically short-term or
intermediate-term debt securities. Their value at maturity or the rates at which
they pay income are determined by the change in value of the U.S. dollar against
one or more foreign currencies or an index. In some cases, these securities may
pay an amount at maturity based on a multiple of the amount of the relative
currency movements. This type of index security offers the potential for
increased income or principal payments but at a greater risk of loss than a
typical debt security of the same maturity and credit quality.
Other derivative investments the Fund can use include "debt exchangeable
for common stock" of an issuer or "equity-linked debt securities" of an issuer.
At maturity, the debt security is exchanged for common stock of the issuer or it
is payable in an amount based on the price of the issuer's common stock at the
time of maturity. Both alternatives present a risk that the amount payable at
maturity will be less than the principal amount of the debt because the price of
the issuer's common stock might not be as high as the Manager expected.
|X| Hedging. Although the Fund does not anticipate the extensive use of
hedging instruments, the Fund can use hedging instruments. It is not obligated
to use them in seeking its objective. To attempt to protect against declines in
the market value of the Fund's portfolio, to permit the Fund to retain
unrealized gains in the value of portfolio securities that have appreciated, or
to facilitate selling securities for investment reasons, the Fund could:
|_| sell futures contracts,
|_| buy puts on such futures or on securities, or
|_| write covered calls on securities or futures. Covered calls may also
be used to increase the Fund's income, but the Manager does not expect
to engage extensively in that practice.
The Fund can use hedging to establish a position in the securities market
as a temporary substitute for purchasing particular securities. In that case,
the Fund would normally seek to purchase the securities and then terminate that
hedging position. The Fund might also use this type of hedge to attempt to
protect against the possibility that its portfolio securities would not be fully
included in a rise in value of the market. To do so the Fund could:
|_| buy futures, or
|_| buy calls on such futures or on securities.
The Fund is not obligated to use hedging instruments, even though it is
permitted to use them in the Manager's discretion, as described below. The
Fund's strategy of hedging with futures and options on futures will be
incidental to the Fund's activities in the underlying cash market. The
particular hedging instruments the Fund can use are described below. The Fund
may employ new hedging instruments and strategies when they are developed, if
those investment methods are consistent with the Fund's investment objective and
are permissible under applicable regulations governing the Fund.
|_| Futures. The Fund can buy and sell futures contracts that relate to
(1) broadly-based securities indices (these are referred to as "financial
futures"), (2) commodities (these are referred to as "commodity index futures"),
(3) debt securities (these are referred to as "interest rate futures"), and (4)
foreign currencies (these are referred to as "forward contracts").
A broadly-based bond index is used as the basis for trading bond index
futures. They may in some cases be based on bonds of issuers in a particular
industry or group of industries. A bond index assigns relative values to the
securities included in the index and its value fluctuates in response to the
changes in value of the underlying securities. A bond index cannot be purchased
or sold directly. These contracts obligate the seller to deliver, and the
purchaser to take, cash to settle the futures transaction. There is no delivery
made of the underlying securities to settle the futures obligation. Either party
may also settle the transaction by entering into an offsetting contract.
An interest rate future obligates the seller to deliver (and the purchaser
to take) cash or a specified type of debt security to settle the futures
transaction. Either party could also enter into an offsetting contract to close
out the position.
The Fund can invest a portion of its assets in commodity futures
contracts. Commodity futures may be based upon commodities within five (5) main
commodity groups: (1) energy, which includes crude oil, natural gas, gasoline
and heating oil; (2) livestock, which includes cattle and hogs; (3) agriculture,
which includes wheat, corn, soybeans, cotton, coffee, sugar and cocoa; (4)
industrial metals, which includes aluminum, copper, lead, nickel, tin and zinc;
and (5) precious metals, which includes gold, platinum and silver. The Fund may
purchase and sell commodity futures contracts, options on futures contracts and
options and futures on commodity indices with respect to these five main
commodity groups and the individual commodities within each group, as well as
other types of commodities.
No money is paid or received by the Fund on the purchase or sale of a
future. Upon entering into a futures transaction, the Fund will be required to
deposit an initial margin payment with the futures commission merchant (the
"futures broker"). Initial margin payments will be deposited with the Fund's
Custodian bank in an account registered in the futures broker's name. However,
the futures broker can gain access to that account only under specified
conditions. As the 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
daily.
At any time prior to 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 any additional cash must be paid
by or released to the Fund. Any loss or gain on the future is then realized by
the Fund for tax purposes. All futures transactions (other than forward
contracts) are effected through a clearinghouse associated with the exchange on
which the contracts are traded.
|_| Put and Call Options. The Fund may buy and sell certain kinds of put
options ("puts") and call options ("calls"). The Fund can 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 above.
|_| Writing Covered Call Options. The Fund can write (that is, sell)
covered calls. If the Fund sells 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 certain types of calls, the call may be covered by
segregating liquid assets to enable the Fund to satisfy its obligations if the
call is exercised. There is no limit on the amount of the Fund's total assets
that may be subject to covered calls the Fund writes.
When the Fund writes a call on a security, it receives cash (a premium).
The Fund agrees to sell the underlying security to a purchaser of a
corresponding call on the same security during the call period at a fixed
exercise price regardless of market price changes during the call period. The
call period is usually not more than nine months. The exercise price may differ
from the market price of the underlying security. The Fund has the risk of loss
that the price of the underlying security may decline during the call period.
That risk may be offset to some extent by the premium the Fund receives. If the
value of the investment does not rise above the call price, it is likely that
the call will lapse without being exercised. In that case the Fund would keep
the cash premium and the investment.
When the Fund writes a call on an index, it receives cash (a premium). If
the buyer of the call exercises it, the Fund will pay an amount of cash equal to
the difference between the closing price of the call and the exercise price,
multiplied by the specified multiple that determines the total value of the call
for each point of difference. If the value of the underlying investment does not
rise above the call price, it is likely that the call will lapse without being
exercised. In that case the Fund would keep the cash premium.
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 calls traded on exchanges or as to other acceptable escrow securities.
In that way, no margin will be required for such transactions. OCC will release
the securities on the expiration of the option or when the Fund enters into a
closing transaction.
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 will
establish a formula price at which the Fund will have the absolute right to
repurchase that OTC option. The formula price will 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 option is "in the money"). When the Fund writes an OTC option, it will
treat as illiquid (for purposes of its restriction on holding illiquid
securities) the mark-to-market value of any OTC option it holds, unless the
option is subject to a buy-back agreement by the executing broker.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." The Fund will
then realize a profit or loss, depending upon whether the net of the amount of
the option transaction costs and the premium received on the call the Fund wrote
is more or less than the price of the call the Fund purchases to close out the
transaction. The Fund may realize a profit if the call expires unexercised,
because the Fund will retain the underlying security and the premium it received
when it wrote the call. Any such profits are considered short-term capital gains
for Federal income tax purposes, as are the premiums on lapsed calls. When
distributed by the Fund they are taxable as ordinary income. If the Fund cannot
effect a closing purchase transaction due to the lack of a market, it will have
to hold the callable securities until the call expires or is exercised.
The Fund may also write calls on a futures contract without owning the
futures contract or securities deliverable under the contract. To do so, at the
time the call is written, the Fund must cover the call by segregating an
equivalent dollar amount of liquid assets. The Fund will segregate additional
liquid assets if the value of the segregated assets drops below 100% of the
current value of the future. Because of this segregation requirement, in no
circumstances would the Fund's receipt of an exercise notice as to that future
require the Fund to deliver a futures contract. It would simply put the Fund in
a short futures position, which is permitted by the Fund's hedging policies.
|_| Writing Put Options. The Fund can sell put options on securities,
broadly-based securities indices, foreign currencies and futures. 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. The Fund will not write puts if, as a result, more than 50% of
the Fund's net assets would be required to be segregated to cover such put
options.
If the Fund writes a put, the put must be covered by segregated liquid
assets. The premium the Fund receives from writing a put represents a profit, as
long as the price of the underlying investment remains equal to or above the
exercise price of the put. However, the Fund also assumes the obligation during
the option period to buy the underlying investment from the buyer of the put at
the exercise price, even if the value of the investment falls below the exercise
price.
If a put the Fund has written expires unexercised, the Fund realizes a
gain in the amount of the premium less the transaction costs incurred. If the
put is exercised, the Fund must fulfill its obligation to purchase the
underlying investment at the exercise price. That price will usually exceed the
market value of the investment at that time. In that case, the Fund may incur a
loss if it sells the underlying investment. That loss will be 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 the Fund incurred.
When writing a put option on a security, 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 Fund's obligation as the put writer continues, it may be
assigned an exercise notice by the broker-dealer through which the put was sold.
That notice will require the Fund to take delivery of the underlying security
and pay the exercise price. The Fund has no control over when it may be required
to purchase the underlying security, since it may be assigned an exercise notice
at any time prior to the termination of its obligation as the writer of the put.
That obligation terminates upon expiration of the put. It may also terminate if,
before it receives an exercise notice, the Fund effects a closing purchase
transaction by purchasing a put of the same series as it sold. Once the Fund has
been assigned an exercise notice, it cannot effect a closing purchase
transaction.
The Fund may decide to effect a closing purchase transaction to realize a
profit on an outstanding put option it has written or to prevent the underlying
security from being put. Effecting a closing purchase transaction will also
permit the Fund to write another put option on the security, or to sell the
security and use the proceeds from the sale for other investments. The Fund will
realize a profit or loss from a closing purchase transaction depending on
whether the cost of the transaction is less or more than the premium received
from writing the put option. Any profits 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 Calls and Puts. The Fund can purchase calls on
securities, broadly-based securities indices, foreign currencies and futures. It
may do so to protect against the possibility that the Fund's portfolio will not
participate in an anticipated rise in the securities market. When the Fund buys
a call (other than in a closing purchase transaction), it pays a premium. The
Fund then 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.
The Fund benefits only if it sells the call at a profit or if, during the
call period, the market price of the underlying investment is above the sum of
the call price plus the transaction costs and the premium paid for the call and
the Fund exercises the call. If the Fund does not exercise the call or sell it
(whether or not at a profit), the call will become worthless at its expiration
date. In that case the Fund will have paid the premium but lost the right to
purchase the underlying investment.
The Fund can buy puts on securities, broadly-based securities indices,
foreign currencies and futures, whether or not it owns the underlying
investment. When the Fund purchases a put, it pays a premium and, except as to
puts on indices, has the right to sell the underlying investment to a seller of
a put on a corresponding investment during the put period at a fixed exercise
price.
Buying a put on an investment the Fund does not own (such as an index or
future) permits the Fund either to resell the put or to buy the underlying
investment and sell it at the exercise price. The resale price will vary
inversely to 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 its expiration date.
Buying a put on securities or futures the Fund owns 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 date. In that case the Fund will have paid the
premium but lost the right to sell the underlying investment. However, the Fund
may sell the put prior to its expiration. That sale may or may not be at a
profit.
When the Fund purchases a call or put on an index or future, it pays a
premium, but settlement is in cash rather than by delivery of the underlying
investment to the Fund. Gain or loss depends on changes in the index in question
(and thus on price movements in the securities market generally) rather than on
price movements in individual securities or futures contracts.
The Fund may also purchase calls and puts on spread options. Spread
options pay the difference between two interest rates, two exchange rates or two
referenced assets. Spread options are used to hedge the decline in the value of
an interest rate, currency or asset compared to a reference or base interest
rate, currency or asset. The risks associated with spread options are similar to
those of interest rate options, foreign exchange options and debt or equity
options.
The Fund may buy a call or put 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.
|_| Buying and Selling Options on Foreign Currencies. The Fund can
buy and sell calls and puts on foreign currencies. They include puts and calls
that trade on a securities or commodities exchange or in the over-the-counter
markets or are quoted by major recognized dealers in such options. The Fund
could use these calls and puts to try to protect against declines in the dollar
value of foreign securities and increases in the dollar cost of foreign
securities the Fund wants to acquire.
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 those securities may be partially offset by purchasing calls or writing puts
on that foreign currency. If the Manager anticipates a decline in the dollar
value of a foreign currency, the decline in the dollar value of portfolio
securities denominated in that currency might be partially offset by writing
calls or purchasing puts on that foreign currency. However, the currency rates
could fluctuate in a direction adverse to the Fund's position. The Fund will
then have incurred option premium payments and transaction costs without a
corresponding benefit.
A call the Fund writes on a foreign currency 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 it can do so for additional cash consideration held in a
segregated account by its Custodian bank) upon conversion or exchange of other
foreign currency held in its portfolio.
The Fund could write a call on a foreign currency to provide a hedge
against a decline in the U.S. dollar value of a security which the Fund owns or
has the right to acquire and which is denominated in the currency underlying the
option. That decline might be one that occurs due to an expected adverse change
in the exchange rate. This is known as a "cross-hedging" strategy. In those
circumstances, the Fund covers the option by maintaining cash, U.S. government
securities or other liquid, high grade debt securities in an amount equal to the
exercise price of the option, in a segregated account with the Fund's Custodian
bank.
|_| Risks of Hedging with Options and Futures. 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.
The Fund's option activities could affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Fund might 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 could pay a brokerage commission each time it buys a call or put,
sells a call or put, or buys or sells an underlying investment in connection
with the exercise of a call or put. Those commissions could be higher on a
relative basis than the commissions for direct purchases or sales of the
underlying investments. Premiums paid for options are small in relation to the
market value of the underlying investments. 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 investment.
If a covered call written by the Fund is exercised on an investment that
has increased in value, the Fund will be required to sell the investment at the
call price. It will not be able to realize any profit if the investment has
increased in value above the call price.
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. The Fund might
experience losses if it could not close out a position because of an illiquid
market for the future or option.
There is a risk in using short hedging by selling futures or purchasing
puts on broadly-based indices or futures to attempt to protect against declines
in the value of the Fund's portfolio securities. The risk is that the prices of
the futures or the applicable index will correlate imperfectly with the behavior
of the cash prices of the Fund's securities. For example, it is possible that
while the Fund has used hedging instruments in a short hedge, the market might
advance and the value of the securities held in the Fund's portfolio might
decline. If that occurred, the Fund would lose money on the hedging instruments
and also experience a decline in the value of its portfolio securities. However,
while this could occur for a very brief period or to a very small degree, over
time the value of a diversified portfolio of securities will tend to move in the
same direction as the indices upon which the hedging instruments are based.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable index.
To compensate for the imperfect correlation of movements in the price of the
portfolio securities being hedged and movements in the price of the hedging
instruments, the Fund might use hedging instruments in a greater dollar amount
than the dollar amount of portfolio securities being hedged. It might do so if
the historical volatility of the prices of the portfolio securities being hedged
is more than the historical volatility of the applicable index.
The ordinary spreads between prices in the cash and futures markets are
subject to distortions, due to differences in the nature of those markets.
First, all participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities markets. Therefore,
increased participation by speculators in the futures market may cause temporary
price distortions.
The Fund can use hedging instruments to establish a position in the
securities markets as a temporary substitute for the purchase of individual
securities (long hedging) by buying futures and/or calls on such futures,
broadly-based indices or on securities. It is possible that when the Fund does
so the market might decline. If the Fund then concludes not to invest in
securities because of concerns that the market might decline further 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 securities purchased.
|_| 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 "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 a foreign currency. The Fund limits its exposure in foreign
currency exchange contracts in a particular foreign currency to the amount of
its assets denominated in that currency or a closely-correlated currency. The
Fund may also use "cross-hedging" where the Fund hedges against changes in
currencies other than the currency in which a security it holds is denominated.
Under a forward contract, one party agrees to purchase, and another party
agrees to sell, a specific currency at a future date. That date may be any fixed
number of days from the date of the contract agreed upon by the parties. The
transaction price is set at the time the contract is entered into. These
contracts are traded in the inter-bank market conducted directly among currency
traders (usually large commercial banks) and their customers.
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
the risk of 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.
Although forward contracts may reduce the risk of loss from a decline in the
value of the hedged currency, at the same time they limit any potential gain if
the value of the hedged currency increases.
When the Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, or when it anticipates receiving
dividend payments in a foreign currency, the Fund might desire to "lock-in" the
U.S. dollar price of the security or the U.S. dollar equivalent of the dividend
payments. To do so, the Fund could enter into a forward contract for the
purchase or sale of the amount of foreign currency involved in the underlying
transaction, in a fixed amount of U.S. dollars per unit of the foreign currency.
This is called a "transaction hedge." The transaction hedge will protect the
Fund against a loss from an adverse change in the currency exchange rates during
the period between the date on which the security is purchased or sold or on
which the payment is declared, and the date on which the payments are made or
received.
The Fund could also use forward contracts to lock in the U.S. dollar value
of portfolio positions. This is called a "position hedge." When the Fund
believes that foreign currency might suffer a substantial decline against the
U.S. dollar, it could enter into a forward contract to sell an amount of that
foreign currency approximating the value of some or all of the Fund's portfolio
securities denominated in that foreign currency. When the Fund believes that the
U.S. dollar might suffer a substantial decline against a foreign currency, it
could enter into a forward contract to buy that foreign currency for a fixed
dollar amount. Alternatively, the Fund could enter into a forward contract to
sell a different foreign currency for a fixed U.S. dollar amount if the Fund
believes that the U.S. dollar value of the foreign currency to be sold pursuant
to its 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.
That is referred to as a "cross hedge."
The Fund will cover its short positions in these cases by identifying to
its Custodian bank assets having a value equal to the aggregate amount of the
Fund's commitment under forward contracts. The Fund will not enter into forward
contracts or maintain a net exposure to such contracts if the consummation of
the contracts would obligate the Fund to deliver an amount of foreign currency
in excess of the value of the Fund's portfolio securities or other assets
denominated in that currency or another currency that is the subject of the
hedge.
However, to avoid excess transactions and transaction costs, the Fund may
maintain a net exposure to forward contracts in excess of the value of the
Fund's portfolio securities or other assets denominated in foreign currencies if
the excess amount is "covered" by liquid securities denominated in any currency.
The cover must be at least equal at all times to the amount of that excess. As
one alternative, the Fund may purchase a call option permitting the Fund to
purchase the amount of foreign currency being hedged by a forward sale contract
at a price no higher than the forward contract price. As another alternative,
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 contact price.
The precise matching of the amounts under forward contracts and the value
of the securities involved generally will not be possible because the future
value of securities denominated in foreign currencies will change as a
consequence of market movements between the date the forward contract is entered
into and the date it is sold. In some cases the Manager might decide to sell the
security and deliver foreign currency to settle the original purchase
obligation. If the market value of the security is less than the amount of
foreign currency the Fund is obligated to deliver, the Fund might have to
purchase additional foreign currency on the "spot" (that is, cash) market to
settle the security trade. If the market value of the security instead exceeds
the amount of foreign currency the Fund is obligated to deliver to settle the
trade, the Fund might have to sell on the spot market some of the foreign
currency received upon the sale of the security. There will be additional
transaction costs on the spot market in those cases.
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 to pay additional transactions costs. The use of forward
contracts in this manner might reduce the Fund's performance if there are
unanticipated changes in currency prices to a greater degree than if the Fund
had not entered into such contracts.
At or before the maturity of a forward contract requiring the Fund to sell
a currency, the Fund might sell a portfolio security and use the sale proceeds
to make delivery of the currency. In the alternative the Fund might retain the
security and offset its contractual obligation to deliver the currency by
purchasing a second contract. Under that contract the Fund will obtain, on the
same maturity date, the same amount of the currency that it is obligated to
deliver. Similarly, the Fund might close out a forward contract requiring it to
purchase a specified currency by entering into a second contract entitling it to
sell the same amount of the same currency on the maturity date of the first
contract. The Fund would realize a gain or loss as a result of entering into
such an offsetting forward contract under either circumstance. The gain or loss
will depend on the extent to which the exchange rate or rates between the
currencies involved moved between the execution dates of the first contract and
offsetting contract.
The costs 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 brokerage fees or commissions are involved.
Because these contracts are not traded on an exchange, the Fund must evaluate
the credit and performance risk of the counterparty under each forward contract.
Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund may convert foreign currency from time to time, and
will incur costs in doing so. 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 might
offer to sell a foreign currency to the Fund at one rate, while offering a
lesser rate of exchange if the Fund desires to resell that currency to the
dealer.
|_| Interest Rate Swap Transactions. The Fund can enter into interest rate
swap agreements. In an interest rate swap, the Fund and another party exchange
their right to receive or their obligation to pay interest on a security. For
example, they might swap the right to receive floating rate payments for fixed
rate payments. The Fund can enter into swaps only on securities that it owns.
The Fund will not enter into swaps with respect to more than 25% of its total
assets. Also, the Fund will segregate liquid assets (such as cash or U.S.
government securities) to cover any amounts it could owe under swaps that exceed
the amounts it is entitled to receive, and it will adjust that amount daily, as
needed.
Swap agreements entail both interest rate risk and credit risk. There is a
risk that, based on movements of interest rates in the future, the payments made
by the Fund under a swap agreement will be greater than the payments it
received. Credit risk arises from the possibility that the counterparty will
default. If the counterparty defaults, the Fund's loss will consist of the net
amount of contractual interest payments that the Fund has not yet received. The
Manager will monitor the creditworthiness of counterparties to the Fund's
interest rate swap transactions on an ongoing basis.
The Fund can enter into swap transactions with certain counterparties
pursuant to master netting agreements. A master netting agreement provides that
all swaps done between the Fund and that counterparty shall be regarded as parts
of an integral agreement. If amounts are payable on a particular date in the
same currency in respect of one or more swap transactions, the amount payable on
that date in that currency shall be the net amount. In addition, the master
netting agreement may provide that if one party defaults generally or on one
swap, the counterparty can terminate all of the swaps with that party. Under
these agreements, if a default results in a loss to one party, the measure of
that party's damages is calculated by reference to the average cost of a
replacement swap for each swap. It is measured by the mark-to-market value at
the time of the termination of each swap. The gains and losses on all swaps are
then netted, and the result is the counterparty's gain or loss on termination.
The termination of all swaps and the netting of gains and losses on termination
is generally referred to as "aggregation."
|_| Regulatory Aspects of Hedging Instruments. When using futures and
options on futures, the Fund is required to operate within certain guidelines
and restrictions with respect to the use of futures as established by the
Commodities Futures Trading Commission (the "CFTC"). In particular, the Fund is
exempted from registration with the CFTC as a "commodity pool operator" if the
Fund complies with the requirements of Rule 4.5 adopted by the CFTC. The Rule
does not limit the percentage of the Fund's assets that may be used for futures
margin and related options premiums for a bona fide hedging position. However,
under the Rule, the Fund must limit its aggregate initial futures margin and
related options premiums to not more than 5% of the Fund's net assets for
hedging strategies that are not considered bona fide hedging strategies under
the Rule. Under the Rule, the Fund must also use short futures and options on
futures solely for bona fide hedging purposes within the meaning and intent of
the applicable provisions of the Commodity Exchange Act.
Transactions in options by the Fund are subject to limitations established
by the option exchanges. The exchanges limit the maximum number of options that
may be written or held by a single investor or group of investors acting in
concert. Those limits apply 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 that 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.
Under the Investment Company Act, when the Fund purchases a future, it
must maintain cash or readily marketable short-term debt instruments in an
amount equal to the market value of the securities underlying the future, less
the margin deposit applicable to it.
|_| Tax Aspects of Certain Hedging Instruments. Certain foreign currency
exchange contracts in which the Fund may invest are treated as "Section 1256
contracts" under the Internal Revenue Code. In general, gains or losses relating
to Section 1256 contracts are characterized as 60% long-term and 40% short-term
capital gains or losses under the Code. However, foreign currency gains or
losses arising from Section 1256 contracts that are 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," and
unrealized gains or losses are treated as though they were realized. These
contracts also may be marked-to-market for purposes of determining 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 those transactions from this marked-to-market treatment.
Certain forward contracts the Fund enters into 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 that the 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, the following gains or losses are treated
as ordinary income or loss: (1) gains or losses attributable to fluctuations in
exchange rates that
occur between the time the Fund accrues interest or other receivables or
accrues expenses or other liabilities denominated in a foreign currency
and the time the Fund actually collects such receivables or pays such
liabilities, and
(2) gains or losses attributable to fluctuations in the value of a foreign
currency between the date of acquisition of a debt security denominated
in a foreign currency or foreign currency forward contracts and the date
of disposition.
Currency gains and losses are offset against market gains and losses on
each trade before determining a net "Section 988" gain or loss under the
Internal Revenue Code for that trade, which may increase or decrease the amount
of the Fund's investment income available for distribution to its shareholders.
|X| Temporary Defensive Investments. When market conditions are unstable,
or the Manager believes it is otherwise appropriate to reduce the Fund's
duration, the Fund can invest in a variety of debt securities for defensive
purposes. The Fund can also purchase these securities for liquidity purposes to
meet cash needs due to the redemption of Fund shares, or to hold while waiting
to reinvest cash received from the sale of other portfolio securities. The
Fund's temporary defensive investments can include the following short-term
(maturing in one year or less) dollar-denominated debt obligations: |_|
obligations issued or guaranteed by the U. S. government or its
instrumentalities or agencies,
|_| commercial paper (short-term, unsecured promissory notes) of domestic or
foreign companies,
|_| debt obligations of domestic or foreign corporate issuers,
|_| certificates of deposit and bankers' acceptances of domestic and
foreign banks having total assets in excess of $1 billion, and
|_| repurchase agreements.
Short-term debt securities would normally be selected for defensive or
cash management purposes because they can normally be disposed of quickly, are
not generally subject to significant fluctuations in principal value and their
value will be less subject to interest rate risk than longer-term debt
securities.
Investment Restrictions
|X| What Are "Fundamental Policies?" Fundamental policies are those
policies that the Fund has adopted to govern its investments that can be changed
only by the vote of a "majority" of the Fund's outstanding voting securities.
Under the Investment Company Act, a "majority" vote is defined as the vote of
the holders of the lesser of:
|_| 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 represented by proxy, or |_| more than 50% of the
outstanding shares.
The Fund's investment objectives are a fundamental policy. Other policies
described in the Prospectus or this Statement of Additional Information are
"fundamental" only if they are identified as such. The Fund's Board of Trustees
can change non-fundamental policies without shareholder approval. However,
significant changes to investment policies will be described in supplements or
updates to the Prospectus or this Statement of Additional Information, as
appropriate. The Fund's most significant investment policies are described in
the Prospectus.
|X| Does the Fund Have Additional Fundamental Policies? The following
investment restrictions are fundamental policies of the Fund.
(1) The Fund cannot concentrate investments. That means the Fund cannot
invest 25% or more of its total assets in any single industry. However, there is
no limitation on investments in affiliated funds and obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities;
(2) The Fund cannot buy securities issued or guaranteed by any one issuer
if more than 5% of its total assets would be invested in securities of that
issuer or if it would then own more than 10% of that issuer's voting securities.
This limitation applies to 75% of the Fund's total assets. The limit does not
apply to securities issued by the U.S. Government or any of its agencies or
instrumentalities;
(3) The Fund cannot purchase or sell real estate, commodities or commodity
contracts; however, the Fund may use hedging instruments approved by its Board
whether or not such hedging instruments are considered commodities or commodity
contracts;
(4) The Fund cannot underwrite securities except to the extent the Fund
may be deemed to be an underwriter in connection with the sale of securities
held in its portfolio;
(5) The Fund cannot lend money, except that the Fund may (a) lend its
portfolio securities, (b) purchase debt securities which are permitted by the
Fund's investment policies and restrictions, (c) enter into repurchase
agreements, and (d) lend money to other affiliated funds provided that no such
loan may be made if, as a result, the aggregate of such loans would exceed 33
1/3% of the value of its total assets (taken at market value at the time of such
loans) subject to obtaining all required authorizations and regulatory
approvals;
(6) The Fund cannot borrow money in excesss of one-third of the value of
its total assets. The Fund can borrow only from other affiliated funds and from
banks for temporary or emergency purposes, and the Fund can borrow only from
banks for investment purposes. The Fund can borrow only if it maintains a 300%
ratio of assets to borrowings at all times in the manner set forth in the
Investment Company Act of 1940;
(7) The Fund cannot issue "senior securities," but this does not prohibit
certain investment activities for which assets of the Fund are designated as
segregated, or margin, collateral or escrow arrangements are established, to
cover the related obligations. Examples of those activities include borrowing
money, reverse repurchase agreements, delayed-delivery and when-issued
arrangements for portfolio securities transactions, and contracts to buy or sell
derivatives, hedging instruments, options or futures.
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:
|_| purchase securities on margin. However, the Fund can make margin
deposits when using hedging instruments permitted by any of its other
policies.
|_| invest in companies for the purpose of acquiring control or management
of those companies.
Unless the Prospectus or this Statement of Additional Information states
that a percentage restriction applies on an ongoing basis, it applies only at
the time the Fund makes an investment. 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.
For purposes of the Fund's policy not to concentrate its investments, the
Fund has adopted the industry classifications set forth in Appendix A to this
Statement of Additional Information. That is not a fundamental policy.
How the Fund is Managed
Organization and History. The Fund is an open-end, diversified management
investment company with an unlimited number of authorized shares of beneficial
interest. The Fund was organized on June 2, 1998 as a Massachusetts business
trust.
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.
|X| Classes of Shares. 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 five (5) classes of
shares: Class A, Class B, Class C, Class N and Class Y. All classes invest in
the same investment portfolio. Only certain Plans may elect to purchase Class Y
shares. Each class of shares: o has its own dividends and distributions, o pays
certain expenses which may be different for the different classes, o may have a
different net asset value, o may have separate voting rights on matters in which
interests of one
class are different from interests of another class, and o votes as a
class on matters that affect that class alone.
Shares are freely transferable, and each share of each class has one vote
at shareholder meetings, with fractional shares voting proportionally on matters
submitted to the vote of shareholders. Each share of the Fund represents an
interest in the Fund proportionately equal to the interest of each other share
of the same class.
The Trustees are authorized to create new series and classes of shares.
The Trustees may reclassify unissued shares of the Fund into additional series
or classes of shares. The Trustees also may divide or combine the shares of a
class into a greater or lesser number of shares without changing the
proportionate beneficial interest of a shareholder in the Fund. Shares do not
have cumulative voting rights or preemptive or subscription rights. Shares may
be voted in person or by proxy at shareholder meetings.
|X| Meetings of Shareholders. 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. It will also do so 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.
If the Trustees receive a request from at least 10 shareholders 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 communication to all other
shareholders at the applicants' expense. The shareholders making the request
must have been shareholders for at least six months and must hold shares of the
Fund valued at $25,000 or more or constituting at least 1% of the Fund's
outstanding shares, whichever is less. The Trustees may also take other action
as permitted by the Investment Company Act.
|X| Shareholder and Trustee Liability. The Fund's Declaration of Trust
contains an express disclaimer of shareholder or Trustee liability for the
Fund's obligations. It also provides for indemnification and reimbursement of
expenses out of the Fund's property for any shareholder held personally liable
for its obligations. The Declaration of Trust also states that upon request, the
Fund shall assume the defense of any claim made against a shareholder for any
act or obligation of the Fund and shall satisfy any judgment on that claim.
Massachusetts law permits a shareholder of a business trust (such as the Fund)
to be held personally liable as a "partner" under certain circumstances.
However, the risk that a Fund shareholder will incur financial loss from being
held liable as a "partner" of the Fund is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations.
The Fund's contractual arrangements state that any person doing business
with the Fund (and each shareholder of the Fund) agrees under its Declaration of
Trust to look solely to the assets of the Fund for satisfaction of any claim or
demand that may arise out of any dealings with the Fund. Additionally, 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 and their
principal occupations and business affiliations and occupations during the past
five (5) years are listed below. Trustees denoted with an asterisk (*) below are
deemed to be "interested persons" of the Fund under the Investment Company Act.
All of the Trustees are Trustees or Directors of the following New York-based
Oppenheimer funds1:
Oppenheimer California Municipal Oppenheimer Large Cap Growth
Fund Fund
Oppenheimer Capital Appreciation Oppenheimer Money Market
Fund Fund, Inc.
Oppenheimer Capital Preservation Oppenheimer Multiple
Fund Strategies Fund
Oppenheimer Developing Markets Oppenheimer Multi-Sector
Fund Income Trust
Oppenheimer Discovery Fund Oppenheimer Multi-State
Oppenheimer Emerging Municipal Trust
Technologies Fund Oppenheimer Municipal Bond
Oppenheimer Enterprise Fund Fund
Oppenheimer Europe Fund Oppenheimer New York
Oppenheimer Global Fund Municipal Fund
Oppenheimer Global Growth & Oppenheimer Series Fund,
Income Fund Inc.
Oppenheimer Gold & Special Oppenheimer Trinity Core Fund
Minerals Fund Oppenheimer Trinity Growth
Oppenheimer Growth Fund Fund
Oppenheimer International Growth Oppenheimer Trinity Value
Fund Fund
Oppenheimer International Small Oppenheimer U.S. Government
Company Fund Trust
Oppenheimer World Bond Fund
Ms. Macaskill and Messrs. Spiro, Donohue, Wixted, Zack, Bishop and Farrar
respectively hold the same offices with the other New York-based Oppenheimer
funds as with the Fund. As of December 31, 2000, the Trustees and officers of
the Fund as a group owned of record or beneficially less than 1% of each class
of shares of the Fund. The foregoing statement does not reflect ownership of
shares of the Fund held of record by an employee benefit plan for employees of
the Manager, other than the shares beneficially owned under the plan by the
officers of the Fund listed above. Ms. Macaskill and Mr. Donohue are trustees of
that plan.
Leon Levy, Chairman of the Board of Trustees, Age: 75
280 Park Avenue, New York, NY 10017
General Partner of Odyssey Partners, L.P. (investment partnership) (since
1982) and Chairman of Avatar Holdings, Inc. (real estate development).
Robert G. Galli, Trustee, Age: 67
19750 Beach Road, Jupiter Island, FL 33469
A Trustee or Director of other Oppenheimer funds. Formerly he held the following
positions: Vice Chairman of the Manager, OppenheimerFunds, Inc. (October 1995 -
December 1997); Executive Vice President of the Manager (December 1977 - October
1995); Executive Vice President and director (April 1986 - October 1995) of
HarbourView Asset Management Corporation, an investment advisor subsidiary of
the Manager.
Dr. Phillip A. Griffiths, Trustee, Age: 61
97 Olden Lane, Princeton, New Jersey 08540
The Director of the Institute for Advanced Study, Princeton, N.J. (since 1991)
and a member of the National Academy of Sciences (since 1979); formerly (in
descending chronological order) a director of Bankers Trust Corporation (1994 to
June 1999), Provost and Professor of Mathematics at Duke University (1983-1991),
a director of Research Triangle Institute, Raleigh, N.C. (1983-1991), and a
Professor of Mathematics at Harvard University (1972-1983).
Benjamin Lipstein, Trustee, Age: 77
591 Breezy Hill Road, Hillsdale, N.Y. 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University.
Bridget A. Macaskill*, President and Trustee; Age: 52
Two World Trade Center, New York, New York 10048-0203
Chairman (since August 2000), Chief Executive Officer (since September 1995) and
a director (since December 1994) of the Manager; President (since September
1995) and a director (since October 1990) of Oppenheimer Acquisition Corp., the
Manager's parent holding company; President, Chief Executive Officer and a
director (since March 2000) of OFI Private Investments, Inc., an investment
adviser subsidiary of the Manager; Chairman and a director of Shareholder
Services, Inc. (since August 1994) and Shareholder Financial Services, Inc.
(since September 1995), transfer agent subsidiaries of the Manager; President
(since September 1995) and a director (since November 1989) of Oppenheimer
Partnership Holdings, Inc., a holding company subsidiary of the Manager;
President and a director (since October 1997) of OppenheimerFunds International
Ltd., an offshore fund management subsidiary of the Manager and of Oppenheimer
Millennium Funds plc; a director of HarbourView Asset Management Corporation
(since July 1991) and of Oppenheimer Real Asset Management, Inc. (since July
1996), investment adviser subsidiaries of the Manager; a director (since April
2000) of OppenheimerFunds Legacy Program, a charitable trust program established
by the Manager; a director of Prudential Corporation plc (a U.K. financial
service company); President and a trustee of other Oppenheimer funds; formerly
President of the Manager (June 1991 - August 2000).
Elizabeth B. Moynihan, Trustee, Age: 71
801 Pennsylvania Avenue, N.W., Washington, D.C. 20004
Author and architectural historian; a trustee of the Freer Gallery of Art
(Smithsonian Institution); Executive Committee of Board of Trustees of the
National Building Museum; a member of the Trustees Council, Preservation League
of New York State.
Kenneth A. Randall, Trustee, Age: 73
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Dominion Resources, Inc. (electric utility holding company),
Dominion Energy, Inc. (electric power and oil and gas producer), and Prime
Retail, Inc. (real estate investment trust); formerly President and Chief
Executive Officer of The Conference Board, Inc. (international economic and
business research) and a director of Lumbermens Mutual Casualty Company,
American Motorists Insurance Company and American Manufacturers Mutual Insurance
Company.
Edward V. Regan, Trustee, Age: 70
40 Park Avenue, New York, New York 10016
Chairman of Municipal Assistance Corporation for the City of New York; Senior
Fellow of Jerome Levy Economics Institute, Bard College; a director of Offit
Bank; a director of River Bank America (real estate manager); Trustee, Financial
Accounting Foundation (FASB and GASB); President, Baruch College of the City
University of New York; formerly New York State Comptroller and trustee, New
York State and Local Retirement Fund.
Russell S. Reynolds, Jr., Trustee, Age: 68
8 Sound Shore Drive, Greenwich, Connecticut 06830
Chairman of The Directorship Group Inc. (corporate governance consulting and
executive recruiting); a director of Professional Staff Limited (U.K.
temporary staffing company); a life trustee of International House
(non-profit educational organization); and a trustee of Greenwich Historical
Society.
Donald W. Spiro, Vice Chairman and Trustee, Age: 74
399 Ski Trail, Smoke Rise, New Jersey 07405
Formerly he held the following positions: Chairman Emeritus (August 1991 August
1999), Chairman (November 1987 - January 1991) and a director (January 1969 -
August 1999) of the Manager; President and Director of OppenheimerFunds
Distributor, Inc., a subsidiary of the Manager and the Fund's Director (July
1978 - January 1992).
Clayton K. Yeutter, Trustee, Age: 69
10475 E. Laurel Lane, Scottsdale, Arizona 85259
Of Counsel, Hogan & Hartson (a law firm); a director of Zurich Financial
Services (financial services), Zurich Allied AG and Allied Zurich p.l.c.
(insurance investment management); Caterpillar, Inc. (machinery), ConAgra,
Inc. (food and agricultural products), Farmers Insurance Company (insurance),
FMC Corp. (chemicals and machinery) and Texas Instruments, Inc.
(electronics); formerly (in descending chronological order), Counsellor to
the President (Bush) for Domestic Policy, Chairman of the Republican National
Committee, Secretary of the U.S. Department of Agriculture, and U.S. Trade
Representative.
John S. Kowalik, Vice President and Portfolio Manager, Age: 43 Two World Trade
Center, New York, New York 10048-0203 Senior Vice President of the Manager
(since July 1998) and of HarbourView Asset Management Corporation (since April
2000); an officer and portfolio manager of other Oppenheimer funds; formerly
Managing Director and Senior Portfolio Manager at Prudential Global Advisors
(June 1989 - June 1998).
Andrew J. Donohue, Secretary, Age: 50
Two World Trade Center, 34th Floor, New York, NY 10048-0203 Executive Vice
President (since January 1993), General Counsel (since October 1991) and a
director (since September 1995) of the Manager; Executive Vice President and
General Counsel (since September 1993) and a director (since January 1992) of
OppenheimerFunds Distributor, Inc.; Executive Vice President, General Counsel
and a director (since September 1995) of HarbourView Asset Management
Corporation, Shareholder Services, Inc., Shareholder Financial Services, Inc.
and Oppenheimer Partnership Holdings, Inc., of OFI Private Investments, Inc.
(since March 2000), and of PIMCO Trust Company (since May 2000); President and a
director of Centennial Asset Management Corporation (since September 1995) and
of Oppenheimer Real Asset Management, Inc. (since July 1996); Vice President and
a director (since September 1997) of OppenheimerFunds International Ltd. and
Oppenheimer Millennium Funds plc; a director (since April 2000) of
OppenheimerFunds Legacy Program; General Counsel (since May 1996) and Secretary
(since April 1997) of Oppenheimer Acquisition Corp.; an officer of other
Oppenheimer funds.
Brian W. Wixted, Treasurer; Age: 40
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President and Treasurer (since April 1999) of the Manager; Treasurer
of HarbourView Asset Management Corp., Shareholder Services, Inc., Shareholder
Financial Services, Inc. and Oppenheimer Partnership Holdings, Inc. (since April
1999); Assistant Treasurer of Oppenheimer Acquisition Corp. (since April 1999);
Assistant Secretary of Centennial Asset Management Corp. (since April 1999);
formerly President and Chief Operating Officer, Bankers Trust Company - Mutual
Fund Services Division (March 1995 - March 1999); Vice President and Chief
Financial Officer of CS First Boston Investment Management Corp. (September 1991
- March 1995); and Vice President and Accounting Manager, Merrill Lynch Asset
Management (November 1987 - September 1991).
Robert G. Zack, Assistant Secretary, Age: 51
Two World Trade Center, 34th Floor, New York, NY 10048-0203
Senior Vice President (since May 1985) and Associate General Counsel (since
May 1981) of the Manager; Assistant Secretary of Shareholder Services, Inc.
(since May 1985) and Shareholder Financial Services, Inc. (since November
1989); Assistant Secretary of OppenheimerFunds International Ltd. and
Oppenheimer Millennium Funds plc (since October 1997); an officer of other
Oppenheimer funds.
Robert J. Bishop, Assistant Treasurer, Age: 41
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund
Controller for the Manager.
Scott T. Farrar, Assistant Treasurer, Age: 34
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); Assistant
Treasurer of Oppenheimer Millennium Funds plc (since October 1997); an officer
of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
Remuneration of Trustees. The officers of the Fund and certain Trustees of
the Fund who are affiliated with the Manager (Ms. Macaskill) receives no salary
or fee from the Fund. Mr. Griffiths was not appointed to the Board until June 5,
1999. Mr. Spiro was affiliated with the Manager until July 31, 1999. The
remaining Trustees of the Fund received the compensation shown below. The
compensation from the Fund was paid during its fiscal period ended October 31,
2000. The compensation from all of the New York-based Oppenheimer funds
(including the Fund) was received as a director, trustee or member of a
committee of the boards of those funds during the calendar year 2000.
<PAGE>
---------------------------------------------------------------------
Total
Retirement Compensation
Benefits from all
Aggregate Accrued as New York
Trustee's Name Compensation Part based
And Position From Fund 1 of Fund Oppenheimer
Expenses Funds (24
Funds)2
---------------------------------------------------------------------
---------------------------------------------------------------------
Leon Levy None None $
Chairman
---------------------------------------------------------------------
---------------------------------------------------------------------
Robert G. Galli None None $3
Study Committee Member
---------------------------------------------------------------------
---------------------------------------------------------------------
Phillip A. Griffiths None None $
---------------------------------------------------------------------
---------------------------------------------------------------------
Benjamin Lipstein None None $
Study Committee
Chairman,
Audit Committee Member
---------------------------------------------------------------------
---------------------------------------------------------------------
Elizabeth B. Moynihan None None $
Study Committee Member
---------------------------------------------------------------------
---------------------------------------------------------------------
Kenneth A. Randall None None $
Audit Committee
Chairman
---------------------------------------------------------------------
---------------------------------------------------------------------
Edward V. Regan None None $
Proxy Committee
Chairman,
Audit Committee Member
---------------------------------------------------------------------
---------------------------------------------------------------------
Russell S. Reynolds, None None $
Jr.
Proxy Committee Member
---------------------------------------------------------------------
---------------------------------------------------------------------
Donald Spiro4 None None $
---------------------------------------------------------------------
---------------------------------------------------------------------
Clayton K. Yeutter3 None None $
Proxy Committee Member
---------------------------------------------------------------------
1Aggregate compensation includes fees, deferred compensation, if any, and
retirement plan benefits accrued for a Trustee.
2For the 2000 calendar year.
3Total compensation for the 2000 calendar year includes compensation received
for serving as Trustee or Director of 10 other Oppenheimer funds. 4Prior to
August 1, 1999, Mr. Spiro was not an independent Trustee.
Retirement Plan for Trustees. The Fund has adopted a retirement plan that
provides for payments to retired Trustees. Payments are up to 80% of the average
compensation paid during a Trustee's five years of service in which the highest
compensation was received. A Trustee must serve as trustee for any of the New
York-based Oppenheimer funds for at least fifteen (15) years to be eligible for
the maximum payment. Each Trustee's retirement benefits will depend on the
amount of the Trustee's future compensation and length of service. Therefore the
amount of those benefits cannot be determined at this time, nor can we estimate
the number of years of credited service that will be used to determine those
benefits.
Deferred Compensation Plan for Trustees. The Board of Trustees has adopted
a Deferred Compensation Plan for disinterested trustees that enables them to
elect to defer receipt of all or a portion of the annual fees they are entitled
to receive from the Fund. Under the plan, the compensation deferred by a Trustee
is periodically adjusted as though an equivalent amount had been invested in
shares of one or more Oppenheimer funds selected by the Trustee. The amount paid
to the Trustee under the plan will be determined based upon the performance of
the selected funds.
Deferral of Trustees' fees under the plan will not materially affect the
Fund's assets, liabilities or net income per share. The plan will not obligate
the Fund to retain the services of any Trustee or to pay any particular level of
compensation to any Trustee. Pursuant to an Order issued by the Securities and
Exchange Commission, the Fund may invest in the funds selected by the Trustee
under the plan without shareholder approval for the limited purpose of
determining the value of the Trustee's deferred fee account.
|X| Major Shareholders. As of December 31, 2000, the only persons who
owned of record or were known by the Fund to own beneficially 5% or more of the
Fund's outstanding Class A shares was:
IFTC, Trustees for the benefit of KDI PRECISION PRODUCTS, (401K PLAN) 801
PENNSYLVANIA AVE, KANSAS CITY, MO 64105-1307, which owned 463,032.597
Class A shares (representing approximately 97.85% of the Fund's
then-outstanding Class A shares).
OPPENHEIMERFUNDS INC., C/O VP FINANCIAL ANALYSIS, 6803 S. TUCSON WAY,
ENGLEWOOD, CO 80112-3924, which owned 101,350 Class B shares (representing
approximately 100% of the Fund's then-outstanding Class B shares).
RPSS TR, RELAX THE BACK CORP, (401K PLAN) 2102 ROSECRANS AVENUE, SUITE
1250, EL SEGUNDO, CA 90245-4774, which owned 1,428,109 Class C shares
(representing approximately 93.37% of the Fund's then-outstanding Class C
shares). Also, OPPENHEIMERFUNDS INC., C/O VP FINANCIAL ANALYSIS, 6803 S.
TUCSON WAY, ENGLEWOOD, CO 80112-3924, which owned 101.350 Class C shares
(representing approximately 6.63% of the Fund's then-outstanding Class C
shares).
OPPENHEIMERFUNDS, INC., C/O VP FINANCIAL ANALYSIS, 6803 S. TUCSON WAY,
ENGLEWOOD, CO 80112-3924, which owned 101.584 Class Y shares (representing
approximately 100% of the Fund's then-outstanding Class Y shares).
The Manager. The Manager is wholly-owned by Oppenheimer Acquisition Corp., a
holding company controlled by Massachusetts Mutual Life Insurance Company.
|X| Code of Ethics. The Fund, the Manager and the Distributor 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. Covered persons include persons with knowledge of
the investments and investment intentions of the Fund and other Funds advised by
the Manager. The Code of Ethics does permit personnel subject to the Code to
invest in securities, including securities that may be purchased or held by the
Fund, subject to a number of restrictions and controls. Compliance with the Code
of Ethics is carefully monitored and enforced by the Manager.
The Code of Ethics is an exhibit to the Fund's registration statement
filed with the Securities and Exchange Commission and can be reviewed and copied
at the SEC's Public Reference Room in Washington, D.C. You can obtain
information about the hours of operation of the Public Reference Room by calling
the SEC at 1-202-942-8090. The Code of Ethics can also be viewed as part of the
Fund's registration statement on the SEC's EDGAR database at the SEC's Internet
web site at http://www.sec.gov. Copies may be obtained, after paying a
duplicating fee, by electronic request at the following E-mail address:
[email protected]., or by writing to the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
The Investment Advisory Agreement. The Manager provides investment
advisory and management services to the Fund under an investment advisory
agreement between the Manager and the Fund. The Manager selects securities for
the Fund's portfolio and handles its day-to-day business. The portfolio manager
of the Fund is employed by the Manager and is the person who is principally
responsible for the day-to-day management of the Fund's portfolio. Other members
of the Manager's fixed-income Portfolio Team provide the portfolio manager with
counsel and support in managing the Fund's portfolio.
The agreement requires the Manager, at its expense, to provide the Fund
with adequate office space, facilities and equipment. It also requires the
Manager to provide and supervise the activities of all administrative and
clerical personnel required to provide effective administration for the Fund.
Those responsibilities include 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.
The Fund pays expenses not expressly assumed by the Manager under the
advisory agreement. The advisory agreement lists examples of expenses paid by
the Fund. The major categories 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 management fees paid by
the Fund to the Manager are calculated at the rates described in the Prospectus,
which are applied to the assets of the Fund as a whole. The fees are allocated
to each class of shares based upon the relative proportion of the Fund's net
assets represented by that class.
--------------------------------------------------------------
Fiscal Period ended Management Fees Paid to
10/31: OppenheimerFunds, Inc.
--------------------------------------------------------------
--------------------------------------------------------------
2000 $
--------------------------------------------------------------
The investment advisory agreement states that in the absence of willful
misfeasance, bad faith, gross negligence in the performance of its duties or
reckless disregard of its obligations and duties under the investment advisory
agreement, the Manager is not liable for any loss the Fund sustains for any
investment, adoption of any investment policy, or the purchase, sale or
retention of any security.
The 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 Manager may withdraw the right of the Fund to use the
name "Oppenheimer" as part of its name.
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 advisory agreement contains provisions relating
to the employment of broker-dealers to effect the Fund's portfolio transactions.
The Manager is authorized by the advisory agreement to employ broker-dealers,
including "affiliated" brokers, as that term is defined in the Investment
Company Act. The Manager may employ broker-dealers that the Manager thinks, in
its best judgment based on all relevant factors, will implement the policy of
the Fund to obtain, at reasonable expense, the "best execution" of the Fund's
portfolio transactions. "Best execution" means prompt and reliable execution at
the most favorable price obtainable. The Manager need not seek competitive
commission bidding. However, it is expected to be aware of the current rates of
eligible brokers and to minimize the commissions paid to the extent consistent
with the interests and policies of the Fund as established by its Board of
Trustees.
Under the investment advisory agreement, the Manager may select brokers
(other than affiliates) that provide brokerage and/or research services for the
Fund and/or the other accounts over which the Manager or its affiliates have
investment discretion. The commissions paid to such brokers may be higher than
another qualified broker would charge, if the Manager makes a good faith
determination that the commission is fair and reasonable in relation to the
services provided. Subject to those considerations, as a factor in selecting
brokers for the Fund's portfolio transactions, the Manager may also consider
sales of shares of the Fund and other investment companies for which the Manager
or an affiliate serves as investment adviser.
Brokerage Practices Followed by the Manager. The Manager allocates brokerage for
the Fund subject to the provisions of the investment advisory agreement and the
procedures and rules described above. Generally, the Manager's portfolio traders
allocate brokerage based upon recommendations from the Manager's portfolio
managers. In certain instances, portfolio managers may directly place trades and
allocate brokerage. In either case, the Manager's executive officers supervise
the allocation of brokerage.
Transactions in securities other than those for which an exchange is the
primary market are generally done with principals or market makers. In
transactions on foreign exchanges, the Fund may be required to pay fixed
brokerage commissions and therefore would not have the benefit of negotiated
commissions available in U.S. markets. Brokerage commissions are paid primarily
for transactions in listed securities or for certain fixed-income agency
transactions in the secondary market. Otherwise brokerage commissions are paid
only if it appears likely that a better price or execution can be obtained by
doing so. In an option transaction, the Fund ordinarily uses the same broker for
the purchase or sale of the option and any transaction in the securities to
which the option relates. Other funds advised by the Manager have investment
policies similar to those of the Fund. Those other funds may purchase or sell
the same securities as the Fund at the same time as the Fund, which could affect
the supply and price of the securities. If two or more funds advised by the
Manager purchase the same security on the same day from the same dealer, the
transactions under those 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 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
the Manager determines that a better price or execution can be obtained by using
the services of a broker. Purchases of portfolio securities from underwriters
include a commission or concession paid by the issuer to the underwriter.
Purchases from dealers include a spread between the bid and asked prices. The
Fund seeks to obtain prompt execution of these orders at the most favorable net
price. Purchases of shares of other Oppenheimer funds do not require the payment
of a commission, concession or spread.
The investment advisory agreement permits the Manager to allocate
brokerage for research services. 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. The investment research received for the commissions of
those other accounts may be useful both to the Fund and one or more of the
Manager's other accounts. Investment research may be supplied to the Manager by
a third party at the instance of a broker through which trades are placed.
Investment research services include information and analysis on
particular companies and industries as well as market or economic trends and
portfolio strategy, 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 in commission dollars.
The Board of Trustees permits the Manager to use stated commissions on
secondary fixed-income agency trades to obtain research if the broker represents
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 Board of Trustees permits the Manager to use concessions on fixed-price
offerings to obtain research, in the same manner as is permitted for agency
transactions.
The research services provided by brokers broadens the scope and
supplements the research activities of the Manager. That research provides
additional views and comparisons for consideration, and helps the Manager to
obtain market information for the valuation of securities that are either held
in the Fund's portfolio or are being considered for purchase. The Manager
provides information to the Board about the commissions paid to brokers
furnishing such services, together with the Manager's representation that the
amount of such commissions was reasonably related to the value or benefit of
such services.
----------------------------------------------------------------------
Fiscal Year Ended Total Brokerage Concessions Paid by the Fund1
10/31:
----------------------------------------------------------------------
----------------------------------------------------------------------
2000 $
----------------------------------------------------------------------
1. Amounts do not include spreads or concessions on principal transactions on a
net trade basis.
2. In the fiscal year ended 10/31/00, the amount of transactions directed to
brokers for research services was $_________ and the amount of the
concessions paid to broker-dealers for those services was $______.
3. In the fiscal year ended 10/31/00, the amount of transactions to brokers for
research services was $__________ and the amount of the commissions paid to
broker-dealers for those services was $______.
Distribution and Service Plans
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 classes of shares. The Distributor is not obligated to
sell a specific number of shares. Expenses normally attributable to sales are
borne by the Distributor.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares during the Fund's first fiscal year is
shown in the table below.
--------------------------------------------------------------------
Aggregate Class A Concessions Concessions Concessions
Fiscal Front-End Front-End on Class A on Class B on Class
Year Sales Sales Shares Shares C Shares
Ended Charges on Charges Advanced Advanced Advanced
10/31: Class A Retained by by by
Shares by Distributor1Distributor1Distributor1
Distributor
--------------------------------------------------------------------
--------------------------------------------------------------------
2000 $ $ $ $ $
--------------------------------------------------------------------
1. The Distributor advances concession payments to dealers for certain sales of
Class A shares and for sales of Class B and Class C shares from its own
resources at the time of sale.
--------------------------------------------------------------------
Fiscal Class A Class B Contingent Class C
Year Contingent Deferred Sales Contingent
Ended Deferred Sales Charges Retained Deferred Sales
10/31 Charges Retained by Distributor Charges Retained
by Distributor by Distributor
--------------------------------------------------------------------
--------------------------------------------------------------------
2000 $ $ $
--------------------------------------------------------------------
Distribution and Service Plans. The Fund has adopted a Service Plan for Class A
shares and Distribution and Service Plans for Class B, Class C and Class N
shares under Rule 12b-1 of the Investment Company Act. Under those plans the
Fund pays the Distributor for all or a portion of its costs incurred in
connection with the distribution and/or servicing of the shares of the
particular class.
Under the plans, the Manager and the Distributor may make payments to
affiliates and, in their sole discretion, from time to time may use their own
resources (at no direct cost to the Fund) to make payments to brokers, dealers
or other financial institutions for distribution and administrative services
they perform. The Manager may use its profits from the advisory fee it receives
from the Fund. In their sole discretion, the Distributor and the Manager may
increase or decrease the amount of payments they make from their own resources
to plan recipients.
Unless a plan is terminated as described below, the plan continues in
effect from year to year but only if the Fund's Board of Trustees and its
Independent Trustees specifically vote annually to approve its continuance.
Approval must be by a vote cast in person at a meeting called for the purpose of
voting on continuing the plan. A 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.
The Board of Trustees and the Independent Trustees must approve all
material amendments to a plan. An amendment to increase materially the amount of
payments to be made under a plan must be approved by shareholders of the class
affected by the amendment. Because Class B shares of the Fund automatically
convert into Class A shares after six (6) years, the Fund must obtain the
approval of both Class A and Class B shareholders for a proposed material
amendment to the Class A Plan that would materially increase payments under the
Plan. That approval must be by a "majority" (as defined in the Investment
Company Act) of the shares of each Class, voting separately by class.
While the Plans are in effect, the Treasurer of the Fund shall provide
separate written reports on the plans to the Board of Trustees at least
quarterly for its review. The Reports shall detail the amount of all payments
made under a plan and the purpose for which the payments were made. Those
reports are subject to the review and approval of the Independent Trustees.
Each Plan states 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 the selection and nomination process as long as the
final decision as to selection or nomination is approved by a majority of the
Independent Trustees.
Under the plan for a class, no payment will be made to any recipient in
any quarter in which the aggregate net asset value of all Fund shares of that
class held by the recipient for itself and its customers does not exceed a
minimum amount, if any, that may be set from time to time by a majority of the
Independent Trustees. The Board of Trustees has set no minimum amount of assets
to qualify for payments under the plans.
o Class A Service Plan Fees. Under the Class A Service Plan, the
Distributor currently uses the fees it receives from the Fund to pay brokers,
dealers and other financial institutions (they are referred to as "recipients")
for personal services and account maintenance services they provide for their
customers who hold Class A shares. The services 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. While the plan
permits the Board to authorize payments to the Distributor to reimburse itself
for services under the plan, the Board has not yet done so. The Distributor
makes payments to plan recipients quarterly at an annual rate not to exceed
0.25% of the average annual net assets consisting of Class A shares held in the
accounts of the recipients or their customers.
For the fiscal period ended October 31, 2000, $__ were paid under the
Class A Plan. Any unreimbursed expenses the Distributor incurs with respect to
Class A shares in any fiscal year cannot be recovered in subsequent years. The
Distributor may not use payments received under the Class A Plan to pay any of
its interest expenses, carrying charges, or other financial costs, or allocation
of overhead.
o Class B, Class C and Class N Service and Distribution Plan Fees. Under
the Class B and Class C plans, service fees and distribution fees, and with
respect to the Class N plan the distribution 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 Class B, Class C and
Class N plan provide for the Distributor to be compensated at a flat rate,
whether the Distributor's distribution expenses are more or less than the
amounts paid by the Fund under the plan during the period for which the fee is
paid. The types of services that Recipients provide are similar to the services
provided under the Class A service plan, described above.
Each Plan permits the Distributor to retain both the asset-based sales
charges and the service fees or to pay recipients the service fee on a quarterly
basis, without payment in advance. However, the Distributor currently intends to
pay the service fee to recipients in advance for the first year after the shares
are purchased. After the first year shares are outstanding, the Distributor
makes service fee payments quarterly on those shares. The advance payment is
based on the net asset value of shares sold. Shares purchased by exchange do not
qualify for the advance service fee payment. If Class B or Class C shares are
redeemed during the first year after their purchase, the recipient of the
service fees on those shares will be obligated to repay the Distributor a pro
rata portion of the advance payment of the service fee made on those shares.
The Distributor retains the asset-based sales charge on Class B and Class
N shares. The Distributor retains the asset-based sales charge on Class C shares
during the first year the shares are outstanding. It pays the asset-based sales
charge as an ongoing concession to the recipient on Class C shares outstanding
for a year or more. If a dealer has a special agreement with the Distributor,
the Distributor will pay the Class B and/or Class C service fee and the
asset-based sales charge to the dealer quarterly in lieu of paying the sales
concessions and service fee in advance at the time of purchase.
The asset-based sales charges on Class B, Class C and Class N shares allow
investors to buy 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, Class C and Class N shares. The payments are made to the
Distributor in recognition that the Distributor:
o pays sales concessions to authorized brokers and dealers at the time of
sale and pays service fees as described above,
o may finance payment of sales concessions and/or the advance of the
service fee payment to recipients under the plans, or may provide such
financing from its own resources or from the resources of an affiliate,
o employs personnel to support distribution of Class B, Class C and Class
N shares, and
o bears the costs of sales literature, advertising and prospectuses (other
than those furnished to current shareholders) and state "blue sky"
registration fees and certain other distribution expenses.
When Class B, Class C or Class N shares are sold without the designation
of a broker-dealer, the Distributor is automatically designated as the
broker-dealer of record. In those cases, the Distributor retains the service fee
paid on Class B and Class C shares and retains the asset-based sales charge paid
on Class B, Class C and Class N shares.
The Distributor's actual expenses in selling Class B, Class C and Class N
shares may be more than the payments it receives from the contingent deferred
sales charges collected on redeemed shares and from the Fund under the plans. If
either the Class B, Class C or Class N plan is terminated by the Fund, 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.
--------------------------------------------------------------------
Distribution Fees Paid to the Distributor in the Fiscal Year Ended
10/31/00*
--------------------------------------------------------------------
--------------------------------------------------------------------
Distributor's Distributor's
Aggregate Unreimbursed
Total Amount Unreimbursed Expenses as
Payments Retained by Expenses %
Class Under Plan Distributor Under Plan of Net
Assets
of Class
--------------------------------------------------------------------
--------------------------------------------------------------------
Class B Plan $ $ $ %
--------------------------------------------------------------------
--------------------------------------------------------------------
Class C Plan $ $ $ %
--------------------------------------------------------------------
* Class N shares were not offered for sale during the Fund's fiscal year ended
10/31/00.
All payments under the Class B 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.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses a variety of terms to
illustrate its performance. These terms include "standardized yield," "dividend
yield," "average annual total return," "cumulative total return," "average
annual total return at net asset value" and "total return at net asset value."
An explanation of how yields and total returns are calculated is set forth
below. The charts below show the Fund's performance as of the Fund's most recent
fiscal period. You can obtain current performance information by calling the
Fund's Transfer Agent at 1.800.525.7048 or by visiting the OppenheimerFunds
Internet web site at http://www.oppenheimerfunds.com.
The Fund's illustrations of its performance data in advertisements must
comply with rules of the Securities and Exchange Commission. Those rules
describe the types of performance data that may be used and how it is to be
calculated. In general, any advertisement by the Fund of its performance data
must include the average annual total returns for the advertised class of shares
of the Fund. Those returns must be shown 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 (or its submission for
publication). Certain types of yields may also be shown, provided that they are
accompanied by standardized average annual total returns.
Use of standardized performance calculations 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 the
Fund's performance information as a basis for comparison with other investments:
|_| Yields and total 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. Your account's performance will vary from the model
performance data if your dividends are received in cash, or you buy or sell
shares during the period, or you bought your shares at a different time and
price than the shares used in the model.
|_| The Fund's performance returns do not reflect the effect of taxes on
dividends and capital gains distributions.
|_| An investment in the Fund is not insured by the FDIC or any other
government agency.
|_| The principal value of the Fund's shares, and its yields and total
returns are not guaranteed and normally will fluctuate on a daily basis.
|_| When an investor's shares are redeemed, they may be worth more or less
than their original cost.
|_| Yields and total returns for any given past period represent
historical performance information and are not, and should not be considered, a
prediction of future yields or returns.
The performance of each class of shares is shown separately, because the
performance of each class of shares will usually be different. That is because
of the different kinds of expenses each class bears. The yields and total
returns of each class of shares of the Fund are affected by market conditions,
the quality of the Fund's investments, the maturity of those investments, the
types of investments the Fund holds, and its operating expenses that are
allocated to the particular class.
|X| Yields. The Fund uses a variety of different yields to illustrate its
current returns. Each class of shares calculates its yield separately because of
the different expenses that affect each class.
|_| Standardized Yield. The "standardized yield" (sometimes referred
to just as "yield") is shown for a class of shares for a stated thirty (30) day
period. It is not based on actual distributions paid by the Fund to shareholders
in the thirty (30) day period, but is a hypothetical yield based upon the net
investment income from the Fund's portfolio investments for that period. It may
therefore differ from the "dividend yield" for the same class of shares,
described below.
Standardized yield is calculated using the following formula set forth in
rules adopted by the Securities and Exchange Commission, designed to assure
uniformity in the way that all funds calculate their yields:
Standardized Yield = 2[(a-b 6
--- + 1) - 1]
cd
The symbols above represent the following factors:
a =dividends and interest earned during the thirty (30) day period.
b =expenses accrued for the period (net of any expense assumptions).
c =the average daily number of shares of that class outstanding during
the thirty (30) day period that were entitled to receive dividends.
d =the maximum offering price per share of that class on the last day of
the period, adjusted for undistributed net investment income.
The standardized yield for a particular thirty (30) day period may differ
from the yield for other periods. The SEC formula assumes that the standardized
yield for a thirty (30) day period occurs at a constant rate for a six (6) month
period and is annualized at the end of the six-month period. Additionally,
because each class of shares is subject to different expenses, it is likely that
the standardized yields of the Fund's classes of shares will differ for any
thirty (30) day period.
|_| Dividend Yield. The Fund may quote a "dividend yield" for each
class of its shares. Dividend yield is based on the dividends paid on a class of
shares during the actual dividend period. To calculate dividend yield, the
dividends of a class declared during a stated period are added together, and the
sum is multiplied by twelve (12) (to annualize the yield) and divided by the
maximum offering price on the last day of the dividend period. The formula is
shown below:
Dividend Yield = dividends paid x 12/maximum offering price (payment date)
The maximum offering price for Class A shares includes the current maximum
initial sales charge. The maximum offering price for Class B and Class C shares
is the net asset value per share, without considering the effect of contingent
deferred sales charges. There is no sales charge on Class Y shares. The Class A
dividend yield may also be quoted without deducting the maximum initial sales
charge.
------------------------------------------------------------------
The Fund's Yields for the 30-Day Periods Ended 10/31/00
------------------------------------------------------------------
------------------------------------------------------------------
Standardized Yield Dividend Yield
Class of
Shares
------------------------------------------------------------------
------------------------------------------------------------------
Without After Without After
Sales Sales Sales Sales
Charge Charge Charge Charge
------------------------------------------------------------------
------------------------------------------------------------------
Class A % % % %
------------------------------------------------------------------
------------------------------------------------------------------
Class B % N/A % N/A
------------------------------------------------------------------
------------------------------------------------------------------
Class C % N/A % N/A
------------------------------------------------------------------
------------------------------------------------------------------
Class Y % N/A % N/A
------------------------------------------------------------------
* Class N shares were not offered for sale during the Fund's fiscal year
ended 10/31/00.
|X| Total Return Information. There are different types of "total returns"
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
and that the investment is redeemed at the end of the period. Because of
differences in expenses for each class of shares, the total returns for each
class are separately measured. The cumulative total return measures the change
in value over the entire period (for example, ten (10) 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 actual year-by-year performance. The
Fund uses standardized calculations for its total returns as prescribed by the
SEC. The methodology is discussed below.
In calculating total returns for Class A shares, the current maximum sales
charge of 3.50% (as a percentage of the offering price) is deducted from the
initial investment ("P") (unless the return is shown without sales charge, as
described below). For Class B shares, payment of the applicable contingent
deferred sales charge is applied, depending on the period for which the return
is shown: 4.0% in the first year, 3.0% in the second year, 2.0% in the third and
fourth years, 1.0% in the fifth year and none thereafter. For Class C shares,
the 1% contingent deferred sales charge is deducted for returns for the one (1)
year period. Class Y shares are not subject to a sales charge.
|_| Average Annual Total Return. 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" in the formula) to achieve an Ending Redeemable Value
("ERV" in the formula) of that investment, according to the following formula:
1/n
ERV
--- - 1 = Average Annual Total Return
P
|_| Cumulative Total Return. 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
|_| Total Returns at Net Asset Value. From time to time the Fund may
also quote a cumulative or an average annual total return "at net asset value"
(without deducting sales charges) for Class A, Class B, Class C and Class N
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.
----------------------------------------------------------------------
The Fund's Total Returns for the Periods Ended 10/31/00
----------------------------------------------------------------------
----------------------------------------------------------------------
Cumulative Average Annual Total Returns
Class Total Returns
of (10 years or
Shares Life of Class)
----------------------------------------------------------------------
----------------------------------------------------------------------
1-Year 5-Year 10-Year
(or (or (or
life-of-class) life-of-class) life-of-class)
----------------------------------------------------------------------
----------------------------------------------------------------------
After WithoutAfter WithoutAfter Without After Without
Sales Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge Charge
----------------------------------------------------------------------
----------------------------------------------------------------------
Class A %(1) % %(1) % N/A N/A N/A N/A
----------------------------------------------------------------------
----------------------------------------------------------------------
Class B %1 %1 %1 %1 N/A N/A N/A N/A
----------------------------------------------------------------------
----------------------------------------------------------------------
Class C %1 %1 %1 %1 N/A N/A N/A N/A
----------------------------------------------------------------------
----------------------------------------------------------------------
Class Y %1 %1 %1 %1 N/A N/A N/A N/A
----------------------------------------------------------------------
1. Inception of Class A, Class B, Class C and Class Y: 9/27/99. * Class N shares
were not offered for sale during the Fund's fiscal year ended 10/31/00.
Other Performance Comparisons. The Fund compares its performance annually to
that of an appropriate broadly-based market index in its Annual Report to
shareholders. You can obtain that information by contacting the Transfer Agent
at the addresses or telephone numbers shown on the cover of this Statement of
Additional Information. The Fund may also compare its performance to that of
other investments, including other mutual funds, or use rankings of its
performance by independent ranking entities. Examples of these performance
comparisons are set forth below.
|X| Lipper Rankings. From time to time the Fund may publish the ranking of
the performance of its classes of shares by Lipper Analytical Services, Inc.
("Lipper"). Lipper is a widely-recognized independent mutual fund monitoring
service. Lipper monitors the performance of regulated investment companies,
including the Fund, and ranks their performance for various periods based on
categories based on investment styles. 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 into consideration.
Lipper also publishes "peer-group" indices of the performance of all mutual
funds in a category that it monitors and averages of the performance of the
funds in particular categories.
|X| Morningstar Ratings and Rankings. From time to time the Fund may
publish the ranking and/or star rating of the performance of its classes of
shares by Morningstar, Inc. ("Morningstar"), an independent mutual fund
monitoring service. Morningstar rates and ranks mutual funds in broad investment
categories: domestic stock funds, international stock funds, taxable bond funds
and municipal bond funds. The Fund is included in the taxable bond funds
category.
Morningstar proprietary star ratings reflect historical risk-adjusted
total investment return. Investment return measures a fund's (or class's) one-,
three-, five- and ten-year average annual total returns (depending on the
inception of the fund or class) in excess of ninety (90) day U.S. Treasury bill
returns after considering the fund's sales charges and expenses. Risk is
measured by a fund's (or class's) performance below ninety (90) day U.S.
Treasury bill returns. Risk and investment return are combined to produce star
ratings reflecting performance relative to the other funds in the fund's
category. Five stars is the "highest" ranking (top 10% of funds in a category),
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 rating is the fund's (or class's) overall rating, which is the
fund's 3-year rating, or its combined 3- and 5-year rating (weighted 60%/40%,
respectively), or its combined 3-, 5-, and 10-year ranking (weighted
40%/30%/30%, respectively), depending on the inception date of the fund (or
class). Ratings are subject to change monthly.
The Fund may also compare its total return ranking to that of other funds
in its Morningstar category, in addition to its star ratings. Those total return
rankings are percentages from one percent to one hundred percent and are not
risk adjusted. For example, if a fund is in the 94th percentile, that means that
94% of the funds in the same category performed better than it did.
|X| Performance Rankings and Comparisons by Other Entities and
Publications. From time to time the Fund may include in its advertisements and
sales literature performance information about the Fund cited in newspapers and
other periodicals such as The New York Times, The Wall Street Journal, Barron's,
or similar publications. That information may include performance quotations
from other sources, including Lipper and Morningstar. The performance of the
Fund's classes of shares may be compared in publications to the performance of
various market indices or other investments, and averages, performance rankings
or other benchmarks prepared by recognized mutual fund statistical services.
Investors may also wish to compare the returns on the Fund's share classes
to the return on fixed-income investments available from banks and thrift
institutions. Those include certificates of deposit, ordinary interest-paying
checking and savings accounts, and other forms of fixed or variable time
deposits, and various other instruments such as Treasury bills. However, the
Fund's returns and share price are not guaranteed or insured by the FDIC or any
other agency and will fluctuate daily, while bank depository obligations may be
insured by the FDIC and may provide fixed rates of return. Repayment of
principal and payment of interest on Treasury securities is backed by the full
faith and credit of the U.S. government.
From time to time, the Fund may publish rankings or ratings of the Manager
or Transfer Agent, and of 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 and investor services
by third parties may include comparisons of their services to those provided by
other mutual fund families selected by the rating or ranking services. They may
be based upon the opinions of the rating or ranking service itself, using its
research or judgment, or based upon surveys of investors, brokers, shareholders
or others.
A B O U T Y O U R A C C O U N T
How to Buy Shares
Additional information is presented below about the methods that can be
used to buy shares of the Fund. Appendix B contains more information about the
special sales charge arrangements offered by the Fund, and the circumstances in
which sales charges may be reduced or waived for certain classes of investors.
AccountLink. When shares are purchased through AccountLink, each purchase must
be at least $25. Shares will be purchased two regular business days following
the regular business day you instruct the Distributor to initiate the Automated
Clearing House ("ACH") transfer to buy the shares. That instruction must be
received prior to the close of The New York Stock Exchange that day. Dividends
will begin to accrue on shares purchased with the proceeds of ACH transfers on
the business day after the shares are purchased. The Exchange normally closes at
4:00 P.M., but may close earlier on certain days. The proceeds of ACH transfers
are normally received by the Fund three (3) days after the transfers are
initiated. If the proceeds of the ACH transfer are not received on a timely
basis, the Distributor reserves the right to cancel the purchase order. The
Distributor and the Fund are not responsible for any delays in purchasing shares
resulting from delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales charge
rate may be obtained for Class A shares under Right of Accumulation and Letters
of Intent because of the economies of sales efforts and reduction in expenses
realized by the Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in Appendix B to this
Statement of Additional Information because the Distributor or dealer or broker
incurs little or no selling expenses.
|X| 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 for your joint accounts, or for trust or custodial
accounts on behalf of your children who are minors, and
|_|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, and
|_|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.
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. 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 reduced sales charge will apply only to current purchases. You must
request it when you buy shares.
|X| The Oppenheimer Funds. The Oppenheimer funds are those mutual
funds for which the Distributor acts as the distributor or the
sub-distributor and currently include the following:
Oppenheimer Limited-Term
Oppenheimer Bond Fund Government Fund
Oppenheimer California Municipal Oppenheimer Main Street California
Fund Municipal Fund
Oppenheimer Capital Appreciation Oppenheimer Main Street Growth &
Fund Income Fund
Oppenheimer Capital Preservation Oppenheimer Main Street
Fund Opportunity Fund
Oppenheimer Main Street Small Cap
Oppenheimer Capital Income Fund Fund
Oppenheimer Champion Income Fund Oppenheimer MidCap Fund
Oppenheimer Convertible Securities Oppenheimer Multiple Strategies
Fund Fund
Oppenheimer Developing Markets Fund Oppenheimer Municipal Bond Fund
Oppenheimer Disciplined Allocation
Fund Oppenheimer New York Municipal Fund
Oppenheimer New Jersey Municipal
Oppenheimer Disciplined Value Fund Fund
Oppenheimer Pennsylvania Municipal
Oppenheimer Discovery Fund Fund
Oppenheimer Quest Balanced Value
Oppenheimer Emerging Growth Fund Fund
Oppenheimer Emerging Technologies Oppenheimer Quest Capital Value
Fund Fund, Inc.
Oppenheimer Quest Global Value
Oppenheimer Enterprise Fund Fund, Inc.
Oppenheimer Quest Opportunity
Oppenheimer Europe Fund Value Fund
Oppenheimer Florida Municipal Fund Oppenheimer Quest Small Cap Fund
Oppenheimer Global Fund Oppenheimer Quest Value Fund, Inc.
Oppenheimer Global Growth & Income
Fund Oppenheimer Real Asset Fund
Oppenheimer Gold & Special Oppenheimer Senior Floating Rate
Minerals Fund Fund
Oppenheimer Growth Fund Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund,
Oppenheimer High Yield Fund Inc.
Oppenheimer Insured Municipal Fund Oppenheimer Trinity Core Fund
Oppenheimer Intermediate Municipal
Fund Oppenheimer Trinity Growth Fund
Oppenheimer International Bond Fund Oppenheimer Trinity Value Fund
Oppenheimer International Growth
Fund Oppenheimer U.S. Government Trust
Oppenheimer International Small
Company Fund Oppenheimer World Bond Fund
Limited-Term New York Municipal
Oppenheimer Large Cap Growth Fund Fund
Rochester Fund Municipals
and the following money market
funds:
Centennial New York Tax Exempt
Centennial America Fund, L. P. Trust
Centennial California Tax Exempt
Trust Centennial Tax Exempt Trust
Centennial Government Trust Oppenheimer Cash Reserves
Oppenheimer Money Market Fund,
Centennial Money Market Trust Inc.
There is an initial sales charge on the purchase of Class A shares of each
of the Oppenheimer funds except the money market funds. Under certain
circumstances described in this Statement of Additional Information, redemption
proceeds of certain money market fund shares may be subject to a contingent
deferred sales charge.
Letters of Intent. Under a Letter of Intent, if you purchase Class A shares or
Class A and Class B shares of the Fund and other Oppenheimer funds during a
thirteen (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. You can include purchases made
up to ninety (90) days before the date of the Letter.
A Letter of Intent is an investor's statement in writing to the
Distributor of the intention to purchase Class A shares or Class A and Class B
shares of the Fund (and other Oppenheimer funds) during a thirteen (13) month
period (the "Letter of Intent period"). At the investor's request, this may
include purchases made up to ninety (90) days prior to the date of the Letter.
The Letter states the investor's intention to make the aggregate amount of
purchases of shares which, when added to the investor's holdings of shares of
those funds, will equal or exceed the amount specified in the Letter. Purchases
made by reinvestment of dividends or distributions of capital gains and
purchases made at net asset value without sales charge do not count toward
satisfying the amount of the Letter.
A Letter enables an investor to count the Class A and Class B shares
purchased under the Letter to obtain the reduced sales charge rate on purchases
of Class A shares of the Fund (and other Oppenheimer funds) that applies under
the Right of Accumulation to current purchases of Class A shares. Each purchase
of Class A shares under the Letter will be made at the offering price (including
the sales charge) that applies to a single lump-sum purchase of shares in the
amount intended to be purchased under the Letter.
In submitting a Letter, the investor makes no commitment to purchase
shares. However, 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. That amount is described in "Terms of
Escrow," below (those terms may be amended by the Distributor 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 a Letter of Intent. If those terms are amended, as they may be from time to
time by the Fund, the investor agrees to be bound by the amended terms and that
those amendments will apply automatically to existing Letters of Intent.
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
total 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 Prospectus, the sales
charges paid will be adjusted to the lower rate. That adjustment will be made
only if and when the dealer returns to the Distributor the excess of the amount
of concessions allowed or paid to the dealer over the amount of concessions that
apply to the actual amount of purchases. The excess concessions 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.
The Transfer Agent will not hold shares in escrow for purchases of shares
of the Fund and other Oppenheimer funds by OppenheimerFunds prototype 401(k)
plans under a Letter of Intent. If the intended purchase amount under a Letter
of Intent 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 concessions paid to the broker-dealer or financial institution
of record for accounts held in the name of that plan.
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.
|X| 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 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 total minimum investment specified under the Letter is completed
within the thirteen (13) month Letter of Intent period, the escrowed shares will
be promptly released to the investor.
3. If, at the end of the thirteen (13) month Letter of Intent period the
total purchases pursuant to the Letter are less than the intended purchase
amount specified in the Letter, the investor must remit to the Distributor an
amount equal to the difference between the dollar amount of sales charges
actually paid and the amount of sales charges which would have been paid if the
total amount purchased had been made at a single time. That sales charge
adjustment will apply to any shares redeemed prior to the completion of the
Letter. If the difference in sales charges is not paid within twenty (20) days
after a request from the Distributor or the dealer, the Distributor will, within
sixty (60) 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 Class B shares acquired by exchange of either (1) 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
(2) 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.
Retirement Plans. Certain types of retirement plans are entitled to purchase
shares of the Fund without sales charge or at reduced sales charge rates, as
described in Appendix B to this Statement of Additional Information. Certain
special sales charge arrangements described in that Appendix apply to retirement
plans whose records are maintained on a daily valuation basis by Merrill Lynch
Pierce Fenner & Smith, Inc. or an independent record keeper that has a contract
or special arrangement with Merrill Lynch. If on the date the plan sponsor
signed the Merrill Lynch record keeping service agreement the plan has less than
$3 million in assets (other than assets invested in money market funds) invested
in applicable investments, then the retirement plan may purchase only Class B
shares of the Oppenheimer funds. Any retirement plans in that category that
currently invest in Class B shares of the Fund will have their Class B shares
converted to Class A shares of the Fund when the plan's applicable investments
reach $5 million.
Cancellation of Purchase Orders. Cancellation of purchase orders for the Fund's
shares (for example, when a purchase check is returned to the Fund unpaid)
causes a loss to be incurred when the net asset value of the Fund's shares on
the cancellation date is less than on the purchase date. That loss is equal to
the amount of the decline in the net asset value per share multiplied by the
number of shares in the purchase order. The investor is responsible for that
loss. If the investor fails to compensate the Fund for the loss, the Distributor
will do so. The Fund may reimburse the Distributor for that amount by redeeming
shares from any account registered in that investor's name, or the Fund or the
Distributor may seek other redress.
Classes of Shares. Each class of shares of the Fund represents an interest in
the same portfolio of investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class B,
Class C or Class N shares and the dividends payable on Class B, Class C or Class
N shares will be reduced by incremental expenses borne solely by that class.
Those expenses include the asset-based sales charges to which Class B, Class C
and Class N shares are subject.
The availability of different classes of shares permits an investor to
choose the method of purchasing shares that is more appropriate for the
investor. That may depend on the amount of the purchase, the length of time the
investor expects to hold shares, and other relevant circumstances. Class A
shares normally are sold subject to an initial sales charge. While Class B,
Class C and Class N shares have no initial sales charge, the purpose of the
deferred sales charge and asset-based sales charge on Class B, Class C and Class
N shares is the same as that of the initial sales charge on Class A shares - to
compensate the Distributor and brokers, dealers and financial institutions that
sell shares of the Fund. A salesperson who is entitled to receive compensation
from his or her firm for selling Fund shares may receive different levels of
compensation for selling one class of shares rather than another.
The Distributor will not accept any order in the amount of $500,000 or
more for Class B shares or $1 million or more for Class C shares on behalf of a
single investor (not including dealer "street name" or omnibus accounts). That
is because generally it will be more advantageous for that investor to purchase
Class A shares of the Fund.
|X| Class B Conversion. Under current interpretations of applicable
federal income tax law by the Internal Revenue Service, the conversion of Class
B shares to Class A shares after six (6) years is not treated as a taxable event
for the shareholder. If those laws or the IRS interpretation of those laws
should change, the automatic conversion feature may be suspended. In that event,
no further conversion of Class B shares would occur while that 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 shareholder, and absent such exchange, Class B shares might
continue to be subject to the asset-based sales charge for longer than six (6)
years.
|X| Allocation of Expenses. The Fund pays expenses related to its daily
operations, such as custodian fees, Trustees' fees, transfer agency fees, legal
fees and auditing costs. Those expenses are paid out of the Fund's assets and
are not paid directly by shareholders. However, those expenses reduce the net
asset value of shares, and therefore are indirectly borne by shareholders
through their investment.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's share classes recognizes two types of expenses.
General expenses that do not pertain specifically to any one class are allocated
pro rata to the shares of all classes. The allocation is based on the percentage
of the Fund's total assets that is represented by the assets of each class, and
then equally to each outstanding share within a given class. Such general
expenses include management fees, Wrap Agreement fees, legal, bookkeeping and
audit fees, printing and mailing costs of shareholder reports, Prospectuses,
Statements of Additional Information and other materials for current
shareholders, fees to unaffiliated Trustees, custodian expenses, share issuance
costs, organization and start-up costs, interest, taxes and brokerage
commissions, and non-recurring expenses, such as litigation costs.
Other expenses that are directly attributable to a particular class are
allocated equally to each outstanding share within that class. Examples of such
expenses include distribution and service plan (12b-1) fees, transfer and
shareholder servicing agent fees and expenses, and shareholder meeting expenses
(to the extent that such expenses pertain only to a specific class).
Determination of Net Asset Values Per Share. The net asset values per share of
each class of shares of the Fund are determined as of the close of business of
The New York Stock Exchange on each day that the Exchange is open. The
calculation is done 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
Exchange normally closes at 4:00 P.M., New York time, but may close earlier on
some other days (for example, in case of weather emergencies or on days falling
before a holiday). The Exchange's most recent annual announcement (which is
subject to change) states that it will close on New Year's Day, Presidents' Day,
Martin Luther King, Jr. Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. It may also close on other days.
Dealers other than Exchange members may conduct trading in certain
securities on days on which the Exchange is closed (including weekends and U.S.
holidays) or after 4:00 P.M. and a regular business day. The Fund's net asset
values will not be calculated on those days, and the value of some of the Fund's
portfolio securities may change significantly on those days, when shareholders
may not purchase or redeem shares. Additionally, trading on European and Asian
stock exchanges and over-the-counter markets normally is completed before the
close of The New York Stock Exchange.
Changes in the values of securities traded on foreign exchanges or markets
as a result of events that occur after the prices of those securities are
determined, but before the close of The New York Stock Exchange, will not be
reflected in the Fund's calculation of its net asset values that day unless the
Manager determines that the event is likely to effect a material change in the
value of the security. The Manager may make that determination, under procedures
established by the Board.
|X| Securities Valuation. The Fund's Board of Trustees has established
procedures for the valuation of the Fund's securities. In general those
procedures are as follows:
|_| Equity securities traded on a U.S. securities exchange or on NASDAQ
are valued as follows:
(1) if last sale information is regularly reported, they are valued at the
last reported sale price on the principal exchange on which they
are traded or on NASDAQ, as applicable, on that day, or
(2) if last sale information is not available on a valuation date, they
are valued at the last reported sale price preceding the valuation
date if it is within the spread of the closing "bid" and "asked"
prices on the valuation date or, if not, at the closing "bid" price
on the valuation date.
|_| Equity securities traded on a foreign securities exchange generally
are valued in one of the following ways:
(1) at the last sale price available to the pricing service approved by the
Board of Trustees, or
(2) at the last sale price obtained by the Manager from the report of
the principal exchange on which the security is traded at its last
trading session on or immediately before the valuation date, or
(3) at the mean between the "bid" and "asked" prices obtained from the
principal exchange on which the security is traded or, on the basis
of reasonable inquiry, from two market makers in the security.
|_| Long-term debt securities having a remaining maturity in excess of
sixty (60) days are valued based on the mean between the "bid" and "asked"
prices determined by a portfolio pricing service approved by the Fund's Board of
Trustees or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry.
|_| The following securities are valued at the mean between the "bid" and
"asked" 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: (1) debt instruments that have a
maturity of more than three hundred
ninety-seven (397) days when issued,
(2) debt instruments that had a maturity of three hundred ninety-seven (397)
days or less when issued and have a remaining maturity of more than
sixty (60) days, and
(3) non-money market debt instruments that had a maturity of three hundred
ninety-seven (397) days or less when issued and which have a remaining
maturity of sixty (60) days or less.
|_| The following securities are valued at cost, adjusted for
amortization of premiums and accretion of discounts:
(1) money market debt securities held by a non-money market fund that had a
maturity of less than three hundred ninety-seven (397) days when issued
that have a remaining maturity of sixty (60) days or less, and
(2) debt instruments held by a money market fund that have a remaining
maturity of three hundred ninety-seven (397) days or less.
|_| 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, a security may be priced at the mean between the "bid"
and "asked" prices provided by a single active market maker (which in certain
cases may be the "bid" price if no "asked" price is available).
In the case of U.S. government securities, mortgage-backed securities,
corporate bonds and foreign government securities, when last sale information is
not generally available, the Manager may use pricing services approved by the
Board of Trustees. The pricing service may use "matrix" comparisons to the
prices for comparable instruments on the basis of quality, yield, and maturity.
Other special factors may be involved (such as the tax-exempt status of the
interest paid by municipal securities). The Manager will monitor the accuracy of
the pricing services. That monitoring may include comparing prices used for
portfolio valuation to actual sales prices of selected securities.
The closing prices in the London foreign exchange market on a particular
business day that are provided to the Manager by a bank, dealer or pricing
service that the Manager has determined to be reliable are used to value foreign
currency, including forward contracts, and to convert to U.S. dollars securities
that are denominated in foreign currency.
Puts, calls, and futures are valued at the last sale 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, they shall be valued at the last sale
price on the preceding trading day if it is within the spread of the closing
"bid" and "asked" prices on the principal exchange or on NASDAQ on the valuation
date. If not, the 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 by the mean between "bid" and
"asked" prices obtained by the Manager from two active market makers. In certain
cases that may be at the "bid" price if no "asked" 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. An
equivalent credit is included in the liability section. The credit is adjusted
("marked-to-market") to reflect the current market value of the option. 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.
Pursuant to procedures adopted by the Fund's Board of Trustees, fair value
of a Wrap Agreement generally will be equal to the difference between the Book
Value and the market value of the Covered Assets. If the market value of the
Covered Assets is greater than their Book Value, the value of the Wrap Agreement
will be reflected as a liability of the Fund for valuation purposes in the
amount of the difference, i.e., a negative value, reflecting the potential
liability of the Fund to the provider of the Wrap Agreement. The Fund will
identify on its books assets equal to the amount of such potential liability.
If, upon liquidation of all Covered Assets the value of the Wrap Agreements is
zero or less, then the Wrap Providers will have no payment obligation to the
Fund under the Wrap Agreements. If the market value of the Covered Assets is
less than their Book Value, the value of the Wrap Agreement will be reflected as
an asset of the Fund in the amount of the difference, i.e., a positive value,
reflecting the potential liability of the provider of the Wrap Agreement to the
Fund. In performing its fair value determination, the Fund's Board expects to
consider the creditworthiness, willingness and ability of a provider of a Wrap
Agreement to pay amounts due under the Wrap Agreements. If the Board determines
that a provider of Wrap Agreements is unable to make such payments, the Board
may assign a fair value to the Wrap Agreement that is less than the difference
between the Book Value and the market value of the applicable Covered Assets. If
the Board were to materially discount the value of a Wrap Agreement, the Fund
may be unable to maintain a stable net asset value.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the Prospectus.
The information below provides additional information about the procedures and
conditions for redeeming shares.
Reinvestment Privilege. Within six (6) months of a redemption, a shareholder
may reinvest all or part of the redemption proceeds of:
|_| Class A shares purchased subject to an initial sales charge or Class A
shares on which
a contingent deferred sales charge was paid, or
|_| 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 in "How to Exchange Shares" below. Reinvestment
will be at the net asset value next computed after the Transfer Agent receives
the reinvestment order. The shareholder must ask the Transfer Agent for that
privilege at the time of reinvestment. This privilege does not apply to Class C,
Class N or Class Y shares. 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.
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 liquid securities from the
portfolio of the Fund and Wrap Agreements, in lieu of cash.
The Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act. Under that rule, the Fund is obligated to redeem shares solely in
cash up to the lesser of $250,000 or 1% of the net assets of the Fund during any
ninety (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 Fund will value securities and Wrap Agreements used to
pay redemptions in kind using the same method the Fund uses to value its
portfolio securities described above under "Determination of Net Asset Values
Per Share." That valuation will be made as of the time the redemption price is
determined.
To the extent that a redemption in-kind includes Wrap Agreements, the Fund
will assign to the redeeming Plan one or more Wrap Agreements issued by the Wrap
Providers covering the securities of the underlying funds that are distributed
in-kind. The terms and conditions of Wrap Agreements provided to a redeeming
Plan will be the same or substantially similar to the terms and conditions of
the Wrap Agreements held by the Fund. Wrap Agreements are not liquid securities
and may impose restrictions on termination or withdrawal, including notice
periods of one (1) year or more for non-participant directed withdrawals. The
maintenance of Wrap Agreements distributed in-kind may also require that a Plan
pay fees to the Wrap Provider directly, rather than through the Fund. Such fees
are anticipated to be comparable to the fees paid by the Fund with respect to
Covered Assets (typically 0.10% to 0.25% per dollar of Covered Assets). And, in
most circumstances the Wrap Agreements will be of value to the Plan only as long
as the Plan holds shares of the underlying funds.
A Wrap Provider, prior to the assignment of a Wrap Agreement to a Plan,
may require the Plan to represent and warrant that such assignment does not
violate any applicable laws. Moreover, the Wrap Provider may require the Plan to
obtain at its own expense the services of a qualified professional asset manager
acceptable to the Wrap Provider to manage the Covered Assets distributed in-kind
in conformity with the Wrap Agreement provisions. In the event a Wrap Agreement
cannot be assigned to the shareholder, the Fund in its discretion may satisfy
the redemption request through (a) a cash payment, (b) a redemption in-kind
consisting entirely of Covered Assets, (c) a combination of cash and Covered
Assets, or (d) the Fund may give the redeeming shareholder the opportunity to
choose between one of the foregoing options or providing the Fund with twelve
(12) months notice of its request for such redemption (which twelve (12) month
notice option would cause the redemption not to be subject to the redemption
fee).
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 $1,000 or such lesser amount as the
Board may fix. The Board will not cause the involuntary redemption of shares in
an account if the aggregate net asset value of such shares has fallen below the
stated minimum solely as a result of market fluctuations. If the Board exercises
this right, it may also fix the requirements for any notice to be given to the
shareholders in question (not less than thirty (30) days). The Board may
alternatively set requirements for the shareholder to increase the investment,
or set other terms and conditions so that the shares would not be involuntarily
redeemed.
Redemption Fee. As described in the prospectus, any redemption of Fund shares by
the plan sponsor without first providing the Fund's transfer agent at least
twelve (12) months prior written notice, will be subject to a 2% redemption fee
in addition to any applicable contingent deferred sales charge. If a plan (or
group of affiliated plans) holds less than 1% of the outstanding shares of the
Fund, and if any decision or action of an employer or plan sponsor which affects
a significant number of plan participants, such as, but not limited to, plant
closings, divestitures, partial plan termination, bankruptcy, layoff or early
retirement incentive programs, results in redemption of Fund shares without
twelve (12) months notice, then those redemptions may be subject to a redemption
fee. However, the redemption fee will not be assessed against any such
redemptions if, as a direct result of such decision or action by the employer or
plan sponsor, the affected Plan participants suffer an immediate, involuntary
loss of employment.
Transfers of Shares. A transfer of shares to a different registration is not an
event that triggers the payment of sales charges. Therefore, 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. It does not matter
whether the transfer occurs by absolute assignment, gift or bequest, as long as
it does not involve, directly or indirectly, a public sale of the shares. When
shares subject to a contingent deferred sales charge are transferred, the
transferred shares will remain subject to the contingent deferred sales charge.
It will be 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, Class C
or Class N 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 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: (1) state the reason for the distribution; (2)
state the owner's awareness of tax penalties if the distribution is
premature; and
(3) conform to the requirements of the plan and the Fund's other redemption
requirements.
Participants (other than self-employed persons) in
OppenheimerFunds-sponsored pension or profit-sharing plans with shares of the
Fund held in the name of the plan or its fiduciary may not directly request
redemption of their accounts. The plan administrator or fiduciary 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 and submitted to the Transfer Agent
before the distribution may be made. Distributions from retirement plans are
subject to withholding requirements under the Internal Revenue Code, and IRS
Form W-4P (available from the Transfer Agent) must be submitted to the Transfer
Agent with the distribution request, or the distribution may be delayed. Unless
the shareholder has provided the Transfer Agent with a certified tax
identification number, the Internal Revenue Code requires that tax be withheld
from any distribution even if the shareholder elects not to have tax withheld.
The Fund, the Manager, the Distributor, 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. Shareholders should contact their
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
an order placed by the dealer or broker. However, if the Distributor receives a
repurchase order from a dealer or broker after the close of The New York Stock
Exchange on a regular business day, it will be processed at that day's net asset
value if the order was received by the dealer or broker from its customers prior
to the time the Exchange closes. Normally, the Exchange closes at 4:00 P.M., but
may do so earlier on some days. Additionally, the order must have been
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 (3) business days after the shares have been
redeemed upon the Distributor's receipt of the required redemption documents in
proper form. The signature(s) of the registered owners on the redemption
documents must be guaranteed as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Plans owning shares of the Fund valued
at $5,000 or more can authorize the Transfer Agent to redeem shares (having a
value of at least $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 Plan 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. Payments must also be sent to the address of record for the account and
the address must not have been changed within the prior thirty (30) days.
Required minimum distributions from OppenheimerFunds-sponsored retirement plans
may not be arranged on this basis.
Payments are normally made by check, Plans having AccountLink privileges
(see "How To Buy Shares") may arrange to have Automatic Withdrawal Plan payments
transferred to the bank account designated on the Account Application or by
signature-guaranteed instructions sent to the Transfer Agent. Shares are
normally redeemed pursuant to an Automatic Withdrawal Plan three business days
before the payment transmittal 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. The
Fund reserves the right to amend, suspend or discontinue offering these plans at
any time without prior notice. Because of the sales charge assessed on Class A
share purchases, Plans should not make regular additional Class A share
purchases while participating in an Automatic Withdrawal Plan. Class B and Class
C shareholders should not establish withdrawal plans, because of the imposition
of the contingent deferred sales charge on such withdrawals (except where the
contingent deferred sales charge is waived as described in Appendix C, below).
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions that apply to such plans, as stated below.
These provisions may be amended from time to time by the Fund and/or the
Distributor. When adopted, any amendments will automatically apply to existing
Plans.
|X| Automatic Exchange Plans. Plans can authorize the Transfer Agent to
exchange a pre-determined amount of shares of the Fund for shares (of the same
class) of other Oppenheimer funds automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Exchange Plan. The minimum amount
that may be exchanged to each other fund account is $25. Instructions should be
provided on the OppenheimerFunds Application or signature-guaranteed
instructions. 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.
|X| Automatic Withdrawal Plans. Fund shares will be redeemed as necessary
to meet withdrawal payments. Shares acquired without a sales charge will be
redeemed first. 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
these plans should not be considered as a yield or income on your investment.
The Transfer Agent will administer the Plan's Automatic Withdrawal Plan as
agent for the shareholder(s) (the "Planholder") who executed the Plan
authorization and application submitted to the Transfer Agent. Neither the Fund
nor the Transfer Agent shall incur any liability to the Planholder for any
action taken or not taken by the Transfer Agent in good faith to administer the
Plan. Share 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.
Shares will be redeemed to make withdrawal payments at the net asset value
per share determined on the redemption date. Checks or AccountLink payments
representing the proceeds of Plan withdrawals will normally be transmitted three
business days prior to the date selected for receipt of the payment, according
to the choice specified in writing by the Planholder. Receipt of payment on the
date selected cannot be guaranteed.
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 after 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 to redeem all, or any part of, the
shares held under the Plan. That notice must be in proper form in accordance
with the requirements of the then-current Prospectus of the Fund. In that case,
the Transfer Agent will redeem the number of shares requested at the net asset
value per share in effect and will mail a check for the proceeds to the
Planholder.
The Planholder may terminate a Plan at any time by writing to the Transfer
Agent. The Fund may also give directions to the Transfer Agent to terminate a
Plan. The Transfer Agent will also terminate a Plan upon its receipt of evidence
satisfactory to it that the Planholder has died or is legally incapacitated.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that have
not been redeemed will be held in uncertificated form in the name of the
Planholder. The account will continue as a dividend-reinvestment, uncertificated
account unless and until proper instructions are received from the Planholder,
his or her executor or guardian, or another authorized person.
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. You can obtain a current list showing which funds offer which classes
by calling the Distributor at 1.800.525.7048.
|_| All of the Oppenheimer funds currently offer Class A, B and 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, and Centennial America
Fund, L.P., which only offer Class A shares.
|_| Oppenheimer Main Street California Municipal Fund currently offers
only Class A and Class B shares.
|_| Class B and Class C shares of Oppenheimer Cash Reserves are generally
available only by exchange from the same class of shares of other Oppenheimer
funds or through OppenheimerFunds-sponsored 401 (k) plans.
|_| Only certain Oppenheimer funds currently offer Class Y shares. Class Y
shares of Oppenheimer Real Asset Fund may not be exchanged for shares of any
other Fund.
|_| Class M shares of Oppenheimer Convertible Securities Fund may be
exchanged only for Class A shares of other Oppenheimer funds. They may not be
acquired by exchange of shares of any other Oppenheimer funds except Class A
shares of Oppenheimer Money Market Fund or Oppenheimer Cash Reserves acquired by
exchange of Class M shares.
|_| Class A shares of Senior Floating Rate Fund are not available by
exchange of Class A shares of other Oppenheimer funds. Class A shares of Senior
Floating Rate Fund that are exchanged for shares of the other Oppenheimer funds
may not be exchanged back for Class A shares of Senior Floating Rate Fund.
|_| Class X shares of Limited Term New York Municipal Fund can be
exchanged only for Class B shares of other Oppenheimer funds and no exchanges
may be made to Class X shares.
|_| Shares of Oppenheimer Capital Preservation Fund may not be exchanged
for shares of Oppenheimer Money Market Fund, Inc., Oppenheimer Cash Reserves or
Oppenheimer Limited-Term Government Fund. Only participants in certain
retirement plans may purchase shares of Oppenheimer Capital Preservation Fund,
and only those participants may exchange shares of other Oppenheimer funds for
shares of Oppenheimer Capital Preservation Fund.
Class A shares of Oppenheimer funds (other than the Fund) may be exchanged
at net asset value for shares of any money market fund offered by the
Distributor. 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. They may also be used to purchase shares of
Oppenheimer funds subject to a contingent deferred sales charge.
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 thirty (30) days 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.
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. If requested, they must
supply proof of entitlement to this privilege.
Shares of the Fund acquired by reinvestment of dividends or distributions
from any of the other Oppenheimer funds or from any unit investment trust for
which reinvestment arrangements have been made with the Distributor may be
exchanged at net asset value for shares of any of the Oppenheimer funds, except
Oppenheimer Money Market Fund, Inc., Oppenheimer Cash Reserves or Oppenheimer
Limited-Term Government Fund.
The Fund may amend, suspend or terminate the exchange privilege at any
time. Although the Fund may impose those changes at any time, it will provide
you of notice of those changes whenever it is required to do so by applicable
law. It may be required to provide sixty (60) days notice prior to materially
amending or terminating the exchange privilege. That sixty (60) day notice is
not required in extraordinary circumstances.
|X| How Exchanges Affect Contingent Deferred Sales Charges. No contingent
deferred sales charge is imposed on exchanges of shares of any class purchased
subject to a contingent deferred sales charge. However, when Class A shares
acquired by exchange of Class A shares of other Oppenheimer funds purchased
subject to a Class A contingent deferred sales charge are redeemed within
eighteen (18) months 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. The Class B contingent deferred sales charge is
imposed on Class B shares acquired by exchange if they are redeemed within six
(6) 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 twelve (12) months of the initial purchase
of the exchanged Class C shares. With respect to Class N shares, a 1% contingent
deferred sales charge will be imposed if the retirement plan (not including IRAs
and 403(b) plan) is terminated or Class N shares of all Oppenheimer funds are
terminated as an investment option of the plan and Class N shares are redeemed
within eighteen (18) months after the plan's first purchase of Class N shares of
any Oppenheimer fund or with respect to an individual retirement plan or 403(b)
plan, Class N shares are redeemed within eighteen (18) months of the plan's
first purchase of Class N shares of any Oppenheimer fund.
When Class B or Class C shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the imposition
of the Class B or the Class C contingent deferred sales charge will be followed
in determining the order in which the shares are exchanged. Before exchanging
shares, shareholders should take into account how the exchange may affect any
contingent deferred sales charge that might be imposed in the subsequent
redemption of remaining shares.
If Class B shares of an Oppenheimer fund are exchanged for Class B shares
of Oppenheimer Limited-Term Government Fund, Limited-Term New York Municipal
Fund or Oppenheimer Senior Floating Rate Fund and those shares acquired by
exchange are subsequently redeemed or repurchased by the fund, they will be
subject to the contingent deferred sales charge of the Oppenheimer fund from
which they were exchanged. The contingent deferred sales charge rates of Class B
shares of other Oppenheimer funds are typically higher for the same holding
period than for Class B shares of Oppenheimer Limited-Term Government Fund,
Limited-Term New York Municipal Fund and Oppenheimer Senior Floating Rate Fund.
They will not be subject to the contingent deferred sales charge of Oppenheimer
Limited-Term Government Fund, Limited-Term New York Municipal Fund or
Oppenheimer Senior Floating Rate Fund.
Shareholders owning shares of more than one class must specify which class
of shares they wish to exchange.
|X| Limits on Multiple Exchange Orders. The Fund reserves the right to
reject telephone or written exchange requests submitted in bulk by anyone on
behalf of more than one account. The Fund may accept requests for exchanges of
up to 50 accounts per day from representatives of authorized dealers that
qualify for this privilege.
|X| Telephone Exchange Requests. When exchanging shares by telephone, a
shareholder must have an existing account in the fund to which the exchange is
to be made. Otherwise, the investors must obtain a Prospectus of that fund
before the exchange request may be submitted. 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.
|X| Processing Exchange Requests. Shares to be exchanged are redeemed on
the regular business day the Transfer Agent receives an exchange request in
proper form (the "Redemption Date"). Normally, shares of the fund to be acquired
are purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five (5) 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 Fund may refuse the
request. When you exchange some or all of your shares from one fund to another,
any special account feature such as an Asset Builder Plan or Automatic
Withdrawal Plan, will be switched to the new fund account unless you tell the
Transfer Agent not to do so. However, special redemption and exchange features
such as Automatic Exchange Plans and Automatic Withdrawal Plans cannot be
switched to an account in Oppenheimer Senior Floating Rate Fund.
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.
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks. A shareholder should assure that the
fund selected is appropriate for his or her investment and should be aware of
the tax consequences of an exchange. For federal income tax purposes, an
exchange transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above, discusses some
of the tax consequences of reinvestment of redemption proceeds in such cases.
The Fund, the Distributor, and the Transfer Agent are unable to provide
investment, tax or legal advice to a shareholder in connection with an exchange
request or any other investment transaction.
Dividends, Capital Gains and Taxes
Dividends and Distributions. Dividends will be payable on shares held of
record at the time of the previous determination of net asset value, or as
otherwise described in "How to Buy Shares." Daily dividends will not be declared
or paid on newly purchased shares until such time as Federal Funds (funds
credited to a member bank's account at the Federal Reserve Bank) are available
from the purchase payment for such shares. Normally, purchase checks received
from investors are converted to Federal Funds on the next business day. Shares
purchased through dealers or brokers normally are paid for by the third business
day following the placement of the purchase order.
Shares redeemed through the regular redemption procedure will be paid
dividends through and including the day on which the redemption request is
received by the Transfer Agent in proper form. Dividends will be declared on
shares repurchased by a dealer or broker for three (3) business days following
the trade date (that is, up to and including the day prior to settlement of the
repurchase). If all shares in an account are redeemed, all dividends accrued on
shares of the same class in the account will be paid together with the
redemption proceeds.
The Fund has no fixed dividend rate for each class of shares and the rate
can change for Class A shares. There can be no assurance as to the payment of
any dividends or the realization of any capital gains. The dividends and
distributions paid by a class of shares will vary from time to time depending on
market conditions, the composition of the Fund's portfolio, and expenses borne
by the Fund or borne separately by a class. Dividends are calculated in the same
manner, at the same time, and on the same day for each class of shares. However,
dividends on Class B, Class C and Class N shares are expected to be lower than
dividends on Class A shares. That is because of the effect of the asset-based
sales charge on Class B, Class C and Class N shares. Those dividends will also
differ in amount as a consequence of any difference in the net asset values of
the different classes of shares.
Dividends, distributions and proceeds of the redemption of Fund shares
represented by checks returned to the Transfer Agent by the Postal Service as
undeliverable will be reinvested in shares of the Fund. Reinvestment will be
made 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.
Unclaimed accounts may be subject to state escheatment laws, and the Fund and
the Transfer Agent will not be liable to shareholders or their representatives
for compliance with those laws in good faith.
Tax Status of the Fund's Dividends and Distributions. The federal tax treatment
of the Fund's dividends and capital gains distributions is briefly highlighted
in the Prospectus.
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. If it
does not, the Fund must pay an excise tax on the amounts not distributed. It is
presently anticipated that the Fund will meet those requirements. However, the
Board of Trustees and the Manager might determine in a particular year that it
would be in the best interests 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.
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. 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 Internal Revenue Code contains a number of complex tests
relating to qualification which the Fund might not meet in any particular year.
If it did not so qualify, the Fund would be treated for tax purposes as an
ordinary corporation and receive no tax deduction for payments made to
shareholders.
If prior distributions made by the Fund must be re-characterized as a
non-taxable return of capital at the end of the fiscal year as a result of the
effect of the Fund's investment policies, they will be identified as such in
notices sent 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 above, except for Oppenheimer
Money Market Fund, Inc., Oppenheimer Cash Reserves or Oppenheimer Limited-Term
Government Fund. Reinvestment will be made without sales charge at the net asset
value per share in effect at the close of business on the payable date of the
dividend or distribution. To elect this option, the shareholder must notify the
Transfer Agent in writing and must have an existing account in the fund selected
for reinvestment. Otherwise the shareholder first must obtain a prospectus for
that fund and an application from the Distributor to establish an account.
Dividends and/or distributions from shares of certain other Oppenheimer funds
(other than Oppenheimer Cash Reserves) may be invested in shares of this Fund on
the same basis.
Additional Information About the Fund
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 shares of the other Oppenheimer
funds and is sub-distributor for funds managed by a subsidiary of the Manager.
The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer Agent, is a
division of the Manager. It is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for paying
dividends and distributions to shareholders. It also handles shareholder
servicing and administrative functions. It acts on an "at-cost" basis. It also
acts as shareholder servicing agent for the other Oppenheimer funds.
Shareholders should direct inquiries about their accounts to the Transfer Agent
at the address and toll-free numbers shown on the back cover.
The Custodian. Citibank, N.A. is the Custodian of the Fund's assets. The
Custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities and handling the delivery of such securities to and from
the Fund. It will be the practice of the Fund to deal with the custodian in a
manner uninfluenced by any banking relationship the Custodian may have with the
Manager and its affiliates. The Fund's cash balances with the custodian in
excess of $100,000 are not protected by Federal deposit insurance. Those
uninsured balances at times may be substantial. Independent Auditors. KPMG LLP
are the independent auditors of the Fund. They 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 and its affiliates.
<PAGE>
A-1
Appendix A
-------------------------------------------------------------------------------
Industry Classifications
-------------------------------------------------------------------------------
Aerospace/Defense Food and Drug Retailers
Air Transportation Gas Utilities
Asset-Backed Health Care/Drugs
Auto Parts and Equipment Health Care/Supplies & Services
Automotive Homebuilders/Real Estate
Bank Holding Companies Hotel/Gaming
Banks Industrial Services
Beverages Information Technology
Broadcasting Insurance
Broker-Dealers Leasing & Factoring
Building Materials Leisure
Cable Television Manufacturing
Chemicals Metals/Mining
Commercial Finance Nondurable Household Goods
Communication Equipment Office Equipment
Computer Hardware Oil - Domestic
Computer Software Oil - International
Conglomerates Paper
Consumer Finance Photography
Consumer Services Publishing
Containers Railroads & Truckers
Convenience Stores Restaurants
Department Stores Savings & Loans
Diversified Financial Shipping
Diversified Media Special Purpose Financial
Drug Wholesalers Specialty Printing
Durable Household Goods Specialty Retailing
Education Steel
Electric Utilities Telecommunications - Long Distance
Electrical Equipment Telephone - Utility
Electronics Textile, Apparel & Home
Furnishings
Energy Services Tobacco
Entertainment/Film Trucks and Parts
Environmental Wireless Services
Food
<PAGE>
-62-
<PAGE>
B-5
Appendix B
OppenheimerFunds Special Sales Charge Arrangements and Waivers
In certain cases, the initial sales charge that applies to purchases of Class A
shares1 of the Oppenheimer funds or the contingent deferred sales charge that
may apply to Class A, Class B, Class C or Class N shares may be waived.2 That is
because of the economies of sales efforts realized by OppenheimerFunds
Distributor, Inc., (referred to in this document as the "Distributor"), or by
dealers or other financial institutions that offer those shares to certain
classes of investors.
Not all waivers apply to all funds. For example, waivers relating to Retirement
Plans do not apply to Oppenheimer municipal funds, because shares of those funds
are not available for purchase by or on behalf of retirement plans. Other
waivers apply only to shareholders of certain funds.
For the purposes of some of the waivers described below and in the Prospectus
and Statement of Additional Information of the applicable Oppenheimer funds, the
term "Retirement Plan" refers to the following types of plans: (1) plans
qualified under Sections 401(a) or 401(k) of the Internal Revenue
Code,
(2) non-qualified deferred compensation plans, (3) employee benefit plans3 (4)
Group Retirement Plans4 (5) 403(b)(7) custodial plan accounts (6) Individual
Retirement Accounts ("IRAs"), including traditional IRAs,
Roth IRAs, SEP-IRAs, SARSEPs or SIMPLE plans
The interpretation of these provisions as to the applicability of a special
arrangement or waiver in a particular case is in the sole discretion of the
Distributor or the transfer agent (referred to in this document as the "Transfer
Agent") of the particular Oppenheimer fund. These waivers and special
arrangements may be amended or terminated at any time by a particular fund, the
Distributor, and/or OppenheimerFunds, Inc. (referred to in this document as the
"Manager"). Waivers that apply at the time shares are redeemed must be requested
by the shareholder and/or dealer in the redemption request.
--------------
1. Certain waivers also apply to Class M shares of Oppenheimer Convertible
Securities Fund.
2. In the case of Oppenheimer Senior Floating Rate Fund, a continuously-offered
closed-end fund, references to contingent deferred sales charges mean the
Fund's Early Withdrawal Charges and references to "redemptions" mean
"repurchases" of shares.
3. An "employee benefit plan" means any plan or arrangement, whether or not it
is "qualified" under the Internal Revenue Code, under which Class A shares of
an Oppenheimer fund or funds are purchased by a fiduciary or other
administrator for the account of participants who are employees of a single
employer or of affiliated employers. These may include, for example, medical
savings accounts, payroll deduction plans or similar plans. The fund accounts
must be registered in the name of the fiduciary or administrator purchasing
the shares for the benefit of participants in the plan.
4. The term "Group Retirement Plan" means any qualified or non-qualified
retirement plan for employees of a corporation or 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 (or who are eligible to participate in) the plan
purchase Class A shares of an Oppenheimer fund or funds through a single
investment dealer, broker or other financial institution designated by the
group. Such plans include 457 plans, SEP-IRAs, SARSEPs, SIMPLE plans and
403(b) plans other than plans for public school employees. The term "Group
Retirement Plan" also includes qualified retirement plans and non-qualified
deferred compensation plans and IRAs that purchase Class A shares of an
Oppenheimer fund or funds through a single investment dealer, broker or other
financial institution that has made special arrangements with the Distributor
enabling those plans to purchase Class A shares at net asset value but
subject to the Class A contingent deferred sales charge.
I. Applicability of Class A Contingent Deferred Sales Charges in Certain Cases
Purchases of Class A Shares of Oppenheimer Funds That Are Not Subject to Initial
Sales Charge but May Be Subject to the Class A Contingent Deferred Sales Charge
(unless a waiver applies).
There is no initial sales charge on purchases of Class A shares of any of
the Oppenheimer funds in the cases listed below. However, these purchases may be
subject to the Class A contingent deferred sales charge if redeemed within 18
months of the end of the calendar month of their purchase, as described in the
Prospectus (unless a waiver described elsewhere in this Appendix applies to the
redemption). Additionally, on shares purchased under these waivers that are
subject to the Class A contingent deferred sales charge, the Distributor will
pay the applicable commission described in the Prospectus under "Class A
Contingent Deferred Sales Charge."2 This waiver provision applies to: |_|
Purchases of Class A shares aggregating $1 million or more. |_| Purchases by a
Retirement Plan (other than an IRA or 403(b)(7)
custodial plan) that:
(1) buys shares costing $500,000 or more, or
(2) has, at the time of purchase, 100 or more eligible employees or
total plan assets of $500,000 or more, or
(3) certifies to the Distributor that it projects to have annual plan
purchases of $200,000 or more.
|_| Purchases by an OppenheimerFunds-sponsored Rollover IRA, if the
purchases are made:
(1) through a broker, dealer, bank or registered investment adviser that
has made special arrangements with the Distributor for those
purchases, or
(2) by a direct rollover of a distribution from a qualified Retirement
Plan if the administrator of that Plan has made special arrangements
with the Distributor for those purchases.
|_| Purchases of Class A shares by Retirement Plans that have any of the
following record-keeping arrangements:
(1) The record keeping is performed by Merrill Lynch Pierce Fenner & Smith,
Inc. ("Merrill Lynch") on a daily valuation basis for the
Retirement Plan. On the date the plan sponsor signs the
record-keeping service agreement with Merrill Lynch, the Plan must
have $3 million or more of its assets invested in (a) mutual
funds, other than those advised or managed by Merrill Lynch Asset
Management, L.P. ("MLAM"), that are made available under a Service
Agreement between Merrill Lynch and the mutual fund's principal
underwriter or distributor, and (b) funds advised or managed by
MLAM (the funds described in (a) and (b) are referred to as
"Applicable Investments").
(2) The record keeping for the Retirement Plan is performed on a daily
valuation basis by a record keeper whose services are provided
under a contract or arrangement between the Retirement Plan and
Merrill Lynch. On the date the plan sponsor signs the record
keeping service agreement with Merrill Lynch, the Plan must have
$3 million or more of its assets (excluding assets invested in
money market funds) invested in Applicable Investments.
(3) The record keeping for a Retirement Plan is handled under a service
agreement with Merrill Lynch and on the date the plan sponsor signs
that agreement, the Plan has 500 or more eligible employees (as
determined by the Merrill Lynch plan conversion manager).
|_| Purchases by a Retirement Plan whose record keeper had a cost-allocation
agreement with the Transfer Agent on or before May 1, 1999.
II. Waivers of Class A Sales Charges of Oppenheimer Funds
A. 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 (and no commissions are paid by the Distributor on such
purchases): |_| The Manager or its affiliates. |_| Present or former officers,
directors, trustees and employees (and their
"immediate families") of the Fund, the Manager and its affiliates, and
retirement plans established by them for their employees. The term
"immediate family" refers to one's spouse, children, grandchildren,
grandparents, parents, parents-in-law, brothers and sisters, sons- and
daughters-in-law, a sibling's spouse, a spouse's siblings, aunts,
uncles, nieces and nephews; relatives by virtue of a remarriage
(step-children, step-parents, etc.) are included.
|_| 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 which are
identified as such 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, banks or registered investment advisors that have
entered into an agreement with the Distributor providing specifically
for the use of shares of the Fund in particular investment products made
available to their clients. Those clients may be charged a transaction
fee by their dealer, broker, bank or advisor for the purchase or sale of
Fund shares.
|_| Investment advisors and financial planners who have entered into an
agreement for this purpose with the Distributor and who charge an
advisory, consulting or other fee for their services and buy shares for
their own accounts or the accounts of their clients.
|_| "Rabbi trusts" that buy shares for their own accounts, if the purchases
are made through a broker or agent or other financial intermediary that
has made special arrangements with the Distributor for those purchases.
|_| Clients of investment advisors or financial planners (that have entered
into an agreement for this purpose with the Distributor) 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 (or its successor) 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.
|_| A unit investment trust that has entered into an appropriate agreement
with the Distributor.
|_| Dealers, brokers, banks, or registered investment advisers that have
entered into an agreement with the Distributor to sell shares to defined
contribution employee retirement plans for which the dealer, broker or
investment adviser provides administration services.
|-|
<PAGE>
Retirement Plans and deferred compensation plans and trusts used to fund
those plans (including, for example, plans qualified or created under
sections 401(a), 401(k), 403(b) or 457 of the Internal Revenue Code), in
each case if those purchases are made through a broker, agent or other
financial intermediary that has made special arrangements with the
Distributor for those purchases.
|_| 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.
|_| A qualified Retirement Plan 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, if that arrangement was
consummated and share purchases commenced by December 31, 1996.
B. 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 sales charges (and no commissions are paid by the Distributor on such
purchases): |_| 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 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 through a broker-dealer that has entered into a special
agreement with the Distributor to allow the broker's customers to
purchase and pay for shares of Oppenheimer funds using the proceeds of
shares redeemed in the prior 30 days 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 shares of the Fund, and the Distributor may require
evidence of qualification for this waiver.
|_| Shares purchased with the proceeds of maturing principal units of any
Qualified Unit Investment Liquid Trust Series.
|_| Shares purchased by the reinvestment of loan repayments by a participant
in a Retirement Plan for which the Manager or an affiliate acts as
sponsor.
C. 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 account value adjusted annually.
|_| Involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (please refer to "Shareholder Account
Rules and Policies," in the applicable fund Prospectus).
|_| 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)
<PAGE>
To return contributions made due to a mistake of fact. (4) Hardship
withdrawals, as defined in the plan.3 (5) Under a Qualified Domestic Relations
Order, as defined in the Internal
Revenue Code, or, in the case of an IRA, a divorce or separation
agreement described in Section 71(b) of the Internal Revenue Code.
(6) To meet the minimum distribution requirements of the Internal
Revenue Code.
(7) To make "substantially equal periodic payments" as described in
Section 72(t) of the Internal Revenue Code.
(8) For loans to participants or beneficiaries. (9) Separation from service.4
(10)Participant-directed redemptions to purchase shares of a mutual
fund (other than a fund managed by the Manager or a subsidiary of
the Manager) if the plan has made special arrangements with the
Distributor.
(11)Plan termination or "in-service distributions," if the redemption
proceeds are rolled over directly to an OppenheimerFunds-sponsored
IRA.
|_| For distributions from Retirement Plans having 500 or more eligible
employees, except distributions due to termination of all of the
Oppenheimer funds as an investment option under the Plan.
|_| For distributions from 401(k) plans sponsored by broker-dealers that
have entered into a special agreement with the Distributor allowing this
waiver.
III. Waivers of Class B, Class C and Class N Sales Charges of Oppenheimer
Funds
The Class B, Class C and Class N contingent deferred sales charges will not be
applied to shares purchased in certain types of transactions or redeemed in
certain circumstances described below.
A. Waivers for Redemptions in Certain Cases.
The Class B, Class C and Class N contingent deferred sales charges will be
waived for redemptions of shares in the following cases: |_| Shares redeemed
involuntarily, as described in "Shareholder Account
Rules and Policies," in the applicable Prospectus.
|_| 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.
|_| Distributions from accounts for which the broker-dealer of record has
entered into a special agreement with the Distributor allowing this
waiver.
|_| Redemptions of Class B shares held by Retirement Plans whose records are
maintained on a daily valuation basis by Merrill Lynch or an independent
record keeper under a contract with Merrill Lynch.
|_| Redemptions of Class C shares of Oppenheimer U.S. Government Trust from
accounts of clients of financial institutions that have entered into a
special arrangement with the Distributor for this purpose.
|_| Redemptions requested in writing by a Retirement Plan sponsor of Class C
shares of an Oppenheimer fund in amounts of $1 million or more held by
the Retirement Plan for more than one year, if the redemption proceeds
are invested in Class A shares of one or more Oppenheimer funds.
|_| Distributions from Retirement 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 in an Oppenheimer fund.
(2) To return excess contributions made to a participant's account. (3) To
return contributions made due to a mistake of fact. (4) To make hardship
withdrawals, as defined in the plan.5 (5) To make distributions required under a
Qualified Domestic Relations
Order or, in the case of an IRA, a divorce or separation agreement
described in Section 71(b) of the Internal Revenue Code.
(6) To meet the minimum distribution requirements of the Internal
Revenue Code.
(7) To make "substantially equal periodic payments" as described in
Section 72(t) of the Internal Revenue Code.
(8) For loans to participants or beneficiaries.6 (9) On account of the
participant's separation from service.7 (10) Participant-directed redemptions to
purchase shares of a mutual fund
(other than a fund managed by the Manager or a subsidiary of the
Manager) offered as an investment option in a Retirement Plan if the
plan has made special arrangements with the Distributor.
(11) Distributions made on account of a plan termination or "in-service"
distributions, if the redemption proceeds are rolled over directly
to an OppenheimerFunds-sponsored IRA.
(12) Distributions from Retirement Plans having 500 or more eligible
employees, but excluding distributions made because of the Plan's
elimination as investment options under the Plan of all of the
Oppenheimer funds that had been offered.
(13) For distributions from a participant's account under an Automatic
Withdrawal Plan after the participant reaches age 59 1/2 , as long
as the aggregate value of the distributions does not exceed 10% of
the account's value, adjusted annually.
(14) Redemptions of Class B shares under an Automatic Withdrawal Plan for
an account other than a Retirement Plan, if the aggregate value of
the redeemed shares does not exceed 10% of the account's value,
adjusted annually.
|_| Redemptions of Class B shares or Class C shares under an Automatic
Withdrawal Plan from an account other than a Retirement Plan if the
aggregate value of the redeemed shares does not exceed 10% of the
account's value annually.
B. Waivers for Shares Sold or Issued in Certain Transactions.
The contingent deferred sales charge is also waived on Class B, Class C and
Class N 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.
|_| Shares issued in plans of reorganization to which the Fund is a party.
|_| Shares sold to present or former officers, directors, trustees or
employees (and their "immediate families" as defined above in Section
I.A.) of the Fund, the Manager and its affiliates and retirement plans
established by them for their employees.
<PAGE>
IV. Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer
Funds Who Were Shareholders of Former
Quest for Value Funds
The initial and contingent deferred sales charge rates and waivers for Class A,
Class B and Class C shares described in the Prospectus or Statement of
Additional Information of the Oppenheimer funds are modified as described below
for certain persons who were shareholders of the former Quest for Value Funds.
To be eligible, those persons must have been shareholders on November 24, 1995,
when OppenheimerFunds, Inc. became the investment advisor to those former Quest
for Value Funds. Those funds include:
<PAGE>
Oppenheimer Quest Value Fund, Oppenheimer Quest Small Cap
Inc. Value Fund
Oppenheimer Quest Balanced Oppenheimer Quest Global
Value Fund Value Fund
Oppenheimer Quest Opportunity
Value Fund
These arrangements also apply to shareholders of the following funds when
they merged (were reorganized) into various Oppenheimer funds on November 24,
1995:
Quest for Value U.S. Government Quest for Value New York
Income Fund Tax-Exempt Fund
Quest for Value Investment Quest for Value National
Quality Income Fund Tax-Exempt Fund
Quest for Value Global Income Quest for Value California
Fund Tax-Exempt Fund
All of the funds listed above are referred to in this Appendix as the
"Former Quest for Value Funds." The waivers of initial and contingent deferred
sales charges described in this Appendix apply to shares of an Oppenheimer fund
that are either: |_| acquired by such shareholder pursuant to an exchange of
shares of an
Oppenheimer fund that was one of the Former Quest for Value Funds, or
|_| purchased by such shareholder by exchange of shares of another
Oppenheimer fund that were acquired pursuant to the merger of any of the
Former Quest for Value Funds into that other Oppenheimer fund on
November 24, 1995.
A. Reductions or Waivers of Class A Sales Charges.
|X| Reduced Class A Initial Sales Charge Rates for Certain Former
Quest for Value Funds Shareholders.
Purchases by Groups and Associations. The following table sets forth the initial
sales charge rates for Class A shares purchased by members of "Associations"
formed for any purpose other than the purchase of securities. The rates in the
table apply if 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.
---------------------------------------------------------------------
Number of Initial Sales Initial Sales
Eligible Charge as a % Charge as a % Commission as %
Employees or of Offering of Net Amount of Offering
Members Price Invested Price
---------------------------------------------------------------------
---------------------------------------------------------------------
9 or Fewer 2.50% 2.56% 2.00%
---------------------------------------------------------------------
---------------------------------------------------------------------
At least 10 but 2.00% 2.04% 1.60%
not more than 49
---------------------------------------------------------------------
<PAGE>
For purchases by 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 in the applicable fund's Prospectus.
Purchases made under this arrangement qualify for the lower of either the
sales charge rate in the table based on the number of members of an Association,
or the sales charge rate that applies under the Right of Accumulation described
in the applicable fund's Prospectus and Statement of Additional Information.
Individuals who qualify under this arrangement for reduced sales charge rates as
members of Associations also may purchase shares for their individual or
custodial accounts at these reduced sales charge rates, upon request to the
Distributor.
|X| Waiver of Class A Sales Charges for Certain Shareholders. Class A
shares purchased by the following investors are not subject to any Class A
initial or contingent deferred sales charges:
|_| Shareholders 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 who acquired shares of any Former Quest for Value Fund
by merger of any of the portfolios of the Unified Funds.
|X| 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 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.
B. Class A, Class B and Class C Contingent Deferred Sales Charge Waivers.
|X| 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 an Oppenheimer fund. The
shares must have been acquired by the 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. Those shares must have been
purchased prior to March 6, 1995 in connection with: |_| 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 value, adjusted annually, and
|_| 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.
|X| 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 an Oppenheimer fund. The shares must have been acquired by the 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
Former Quest for Value Fund merged. Those shares must have been purchased on or
after March 6, 1995, but prior to November 24, 1995: |_| redemptions following
the death or disability of the shareholder(s) (as
evidenced by a determination of total disability by the U.S. Social
Security Administration);
|_| 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 value; adjusted annually, and
|_| 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 Oppenheimer fund described in this section if the proceeds are
invested in the same Class of shares in that fund or another Oppenheimer fund
within 90 days after redemption.
V. Special Sales Charge Arrangements for Shareholders of Certain
Oppenheimer Funds Who Were Shareholders of Connecticut Mutual Investment
Accounts, Inc.
The initial and contingent deferred sale charge rates and waivers for Class A
and Class B shares described in the respective Prospectus (or this Appendix) of
the following Oppenheimer funds (each is referred to as a "Fund" in this
section): o Oppenheimer U. S. Government Trust, o Oppenheimer Bond Fund, o
Oppenheimer Disciplined Value Fund and o Oppenheimer Disciplined Allocation Fund
are modified as described below for those Fund shareholders who were
shareholders of the following funds (referred to as the "Former Connecticut
Mutual Funds") on March 1, 1996, when OppenheimerFunds, Inc. became the
investment adviser to the Former Connecticut Mutual Funds:
Connecticut Mutual Liquid Account Connecticut Mutual Total
Return Account
Connecticut Mutual Government CMIA LifeSpan Capital
Securities Account Appreciation Account
Connecticut Mutual Income Account CMIA LifeSpan Balanced Account
Connecticut Mutual Growth Account CMIA Diversified Income Account
A. Prior Class A CDSC and Class A Sales Charge Waivers.
|_| Class A Contingent Deferred Sales Charge. Certain shareholders of a
Fund and the other Former Connecticut Mutual Funds are entitled to continue to
make additional purchases of Class A shares at net asset value without a Class A
initial sales charge, but subject to the Class A contingent deferred sales
charge that was in effect prior to March 18, 1996 (the "prior Class A CDSC").
Under the prior Class A CDSC, if any of those shares are redeemed within one
year of purchase, they will be assessed a 1% contingent deferred sales charge on
an amount equal to the current market value or the original purchase price of
the shares sold, whichever is smaller (in such redemptions, any shares not
subject to the prior Class A CDSC will be redeemed first).
Those shareholders who are eligible for the prior Class A CDSC are: (1)
persons whose purchases of Class A shares of a Fund and other Former
Connecticut Mutual Funds were $500,000 prior to March 18, 1996, as a
result of direct purchases or purchases pursuant to the Fund's policies
on Combined Purchases or Rights of Accumulation, who still hold those
shares in that Fund or other Former Connecticut Mutual Funds, and
(2) persons whose intended purchases under a Statement of Intention entered
into prior to March 18, 1996, with the former general distributor of
the Former Connecticut Mutual Funds to purchase shares valued at
$500,000 or more over a 13-month period entitled those persons to
purchase shares at net asset value without being subject to the Class A
initial sales charge.
Any of the Class A shares of a Fund and the other Former Connecticut
Mutual Funds that were purchased at net asset value prior to March 18, 1996,
remain subject to the prior Class A CDSC, or if any additional shares are
purchased by those shareholders at net asset value pursuant to this arrangement
they will be subject to the prior Class A CDSC.
|_| Class A Sales Charge Waivers. Additional Class A shares of a Fund may
be purchased without a sales charge, by a person who was in one (or more) of the
categories below and acquired Class A shares prior to March 18, 1996, and still
holds Class A shares: (1) any purchaser, provided the total initial amount
invested in the Fund or
any one or more of the Former Connecticut Mutual Funds totaled
$500,000 or more, including investments made pursuant to the
Combined Purchases, Statement of Intention and Rights of
Accumulation features available at the time of the initial purchase
and such investment is still held in one or more of the Former
Connecticut Mutual Funds or a Fund into which such Fund merged;
(2) any participant in a qualified plan, provided that the total initial
amount invested by the plan in the Fund or any one or more of the
Former Connecticut Mutual Funds totaled $500,000 or more;
(3) Directors of the Fund or any one or more of the Former Connecticut
Mutual Funds and members of their immediate families;
(4) employee benefit plans sponsored by Connecticut Mutual Financial
Services, L.L.C. ("CMFS"), the prior distributor of the Former
Connecticut Mutual Funds, and its affiliated companies;
(5) one or more members of a group of at least 1,000 persons (and
persons who are retirees from such group) engaged in a common
business, profession, civic or charitable endeavor or other
activity, and the spouses and minor dependent children of such
persons, pursuant to a marketing program between CMFS and such
group; and
(6) an institution acting as a fiduciary on behalf of an individual or
individuals, if such institution was directly compensated by the
individual(s) for recommending the purchase of the shares of the
Fund or any one or more of the Former Connecticut Mutual Funds,
provided the institution had an agreement with CMFS.
Purchases of Class A shares made pursuant to (1) and (2) above may be
subject to the Class A CDSC of the Former Connecticut Mutual Funds described
above.
Additionally, Class A shares of a Fund may be purchased without a sales
charge by any holder of a variable annuity contract issued in New York State by
Connecticut Mutual Life Insurance Company through the Panorama Separate Account
which is beyond the applicable surrender charge period and which was used to
fund a qualified plan, if that holder exchanges the variable annuity contract
proceeds to buy Class A shares of the Fund.
B. Class A and Class B Contingent Deferred Sales Charge Waivers.
In addition to the waivers set forth in the Prospectus and in this Appendix,
above, the contingent deferred sales charge will be waived for redemptions of
Class A and Class B shares of a Fund and exchanges of Class A or Class B shares
of a Fund into Class A or Class B shares of a Former Connecticut Mutual Fund
provided that the Class A or Class B shares of the Fund to be redeemed or
exchanged were (i) acquired prior to March 18, 1996 or (ii) were acquired by
exchange from an Oppenheimer fund that was a Former Connecticut Mutual Fund.
Additionally, the shares of such Former Connecticut Mutual Fund must have been
purchased prior to March 18, 1996: (1) by the estate of a deceased shareholder;
(2) upon the disability of a shareholder, as defined in Section 72(m)(7) of
the Internal Revenue Code;
(3) for retirement distributions (or loans) to participants or
beneficiaries from retirement plans qualified under Sections 401(a) or
403(b)(7)of the Code, or from IRAs, deferred compensation plans created
under Section 457 of the Code, or other employee benefit plans;
(4) as tax-free returns of excess contributions to such retirement or
employee benefit plans;
(5) in whole or in part, in connection with shares sold to any state,
county, or city, or any instrumentality, department, authority, or
agency thereof, that is prohibited by applicable investment laws from
paying a sales charge or commission in connection with the purchase of
shares of any registered investment management company;
(6) in connection with the redemption of shares of the Fund due to a
combination with another investment company by virtue of a merger,
acquisition or similar reorganization transaction;
(7) in connection with the Fund's right to involuntarily redeem or
liquidate the Fund;
(8) in connection with automatic redemptions of Class A shares and Class B
shares in certain retirement plan accounts pursuant to an Automatic
Withdrawal Plan but limited to no more than 12% of the original value
annually; or
(9) as involuntary redemptions of shares by operation of law, or under
procedures set forth in the Fund's Articles of Incorporation, or as
adopted by the Board of Directors of the Fund.
VI. Special Reduced Sales Charge for Former Shareholders of
Advance America Funds, Inc.
Shareholders of Oppenheimer Municipal Bond Fund, Oppenheimer U.S. Government
Trust, Oppenheimer Strategic Income Fund and Oppenheimer Equity Income Fund who
acquired (and still hold) shares of those funds as a result of the
reorganization of series of Advance America Funds, Inc. into those Oppenheimer
funds on October 18, 1991, and who held shares of Advance America Funds, Inc. on
March 30, 1990, may purchase Class A shares of those four Oppenheimer funds at a
maximum sales charge rate of 4.50%.
VII. Sales Charge Waivers on Purchases of Class M Shares of
Oppenheimer Convertible Securities Fund
Oppenheimer Convertible Securities Fund (referred to as the "Fund" in this
section) may sell Class M shares at net asset value without any initial sales
charge to the classes of investors listed below who, prior to March 11, 1996,
owned shares of the Fund's then-existing Class A and were permitted to purchase
those shares at net asset value without sales charge:
|_| the Manager and its affiliates,
|_| present or former officers, directors, trustees and employees (and their
"immediate families" as defined in the Fund's Statement of Additional
Information) of the Fund, the Manager and its affiliates, and retirement
plans established by them or the prior investment advisor of the Fund
for their employees,
|_| registered management investment companies or separate accounts of
insurance companies that had an agreement with the Fund's prior
investment advisor or 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 in the preceding section or financial institutions
that have entered into sales arrangements with those dealers or brokers
(and whose identity is made known to the Distributor) or with the
Distributor, but only if the purchaser certifies to the Distributor at
the time of purchase that the purchaser meets these qualifications,
|_| dealers, brokers, or registered investment advisors that had entered
into an agreement with the Distributor or the prior distributor of the
Fund specifically providing for the use of Class M shares of the Fund in
specific investment products made available to their clients, and
|_| dealers, brokers or registered investment advisors that had entered into
an agreement with the Distributor or prior distributor of the Fund's
shares to sell shares to defined contribution employee retirement plans
for which the dealer, broker, or investment advisor provides
administrative services.
<PAGE>
-------------------------------------------------------------------------------
Oppenheimer Capital Preservation Fund
-------------------------------------------------------------------------------
Internet Web Site:
www.oppenheimerfunds.com
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 Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian Bank
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
KPMG LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019-5820
------------
1 Ms. Macaskill and Mr. Griffiths are not Directors of Oppenheimer Money Market
Fund, Inc.; Mr. Griffiths is not a Trustee of Oppenheimer Discovery Fund. 2
However, that commission will not be paid on purchases of shares in amounts of
$1 million or more (including any right of accumulation) by a Retirement Plan
that pays for the purchase with the redemption proceeds of Class C shares of one
or more Oppenheimer funds held by the Plan for more than one year. 3 This
provision does not apply to IRAs. 4 This provision does not apply to 403(b)(7)
custodial plans if the participant is less than age 55, nor to IRAs. 5 This
provision does not apply to IRAs. 6 This provision does not apply to loans from
403(b)(7) custodial plans. 7 This provision does not apply to 403(b)(7)
custodial plans if the participant is less than age 55, nor to IRAs.
<PAGE>
OPPENHEIMER CAPITAL PRESERVATION FUND
FORM N-1A
PART C
OTHER INFORMATION
Item 23. Exhibits
(a) (i) Declaration of Trust dated 6/2/98: Previously filed with
Registrant's Initial Registration Statement, 6/5/98, and incorporated herein
by reference.
(ii) Amendment No. 1 to Declaration of Trust dated 3/18/99: Filed
with Pre-Effective Amendment No. 1 to the Registrant's Registration
Statement, 4/8/99, and incorporated herein by reference.
(b) By-Laws dated 6/2/98: Previously filed with Registrant's Initial
Registration Statement,
6/5/98, and incorporated herein by reference.
(c) (i) Specimen Class A Share Certificate: Filed with Pre-Effective
Amendment No. 1 to the Registrant's Registration Statement, 4/8/99, and
incorporated herein by reference.
(ii) Specimen Class B Share Certificate: Filed with Pre-Effective
Amendment No. 1 to the Registrant's Registration Statement, 4/8/99, and
incorporated herein by reference.
(iii) Specimen Class C Share Certificate: Filed with Pre-Effective
Amendment No. 1 to the Registrant's Registration Statement, 4/8/99, and
incorporated herein by reference.
(iv) Specimen Class Y Share Certificate: Filed with Pre-Effective Amendment
No. 1 to the
Registrant's Registration Statement, 4/8/99, and incorporated herein by
reference.
(v) Specimen Class N Share Certificate: Filed herewith.
(d) Investment Advisory Agreement dated 6/1/99: Filed with Pre-Effective
Amendment No. 2 to Registrant's Registration Statement, 9/17/99, and
incorporated herein by reference.
(e) (i) General Distributor's Agreement dated 4/6/99: Filed with
Registrant's Pre-Effective Amendment No. 1 to the Registrant's
Registration Statement, 4/8/99, and incorporated herein by reference.
(ii) Form of Dealer Agreement of OppenheimerFunds Distributor, Inc.:
Previously filed with Pre-Effective Amendment No. 2 to the Registration
Statement of Oppenheimer Trinity Value Fund (Reg. No. 333-79707),
8/25/99, and incorporated herein by reference.
(iii)Form of Agency Agreement of OppenheimerFunds Distributor, Inc.:
Previously filed with Pre-Effective Amendment No. 2 to the Registration
Statement of Oppenheimer Trinity Value Fund (Reg. No. 333-79707),
8/25/99, and incorporated herein by reference.
(iv) Form of Broker Agreement of OppenheimerFunds Distributor, Inc.:
Previously filed with Pre-Effective Amendment No. 2 to the Registration
Statement of Oppenheimer Trinity Value Fund (Reg. No. 333-79707),
8/25/99, and incorporated herein by reference.
(f) Form of Deferred Compensation Plan for Disinterested
Trustees/Directors:
(i) Retirement Plan for Non-Interested Trustees or Directors dated June
7, 1990:
Previously filed with Post-Effective Amendment No. 97 to the Registration
Statement of Oppenheimer Fund (File No. 2-14586), 8/30/90, 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.
(ii) Form of Deferred Compensation Plan for Disinterested
Trustees/Directors: Filed with Post-Effective Amendment No. 26 to the
Registration Statement of Oppenheimer Gold & Special Minerals Fund (Reg. No.
2-82590), 10/28/98, and incorporated by reference.
(g) Custody Agreement dated 9/17/99: Previously filed with
Registrant's Pre-Effective Amendment No. 2, 9/17/99, and incorporated herein
by reference.
(h) Not applicable.
(i) Opinion and Consent of Counsel dated 9/15/99: Previously filed with
Registrant's Pre-Effective Amendment No. 2 to Registrant's Registration
Statement, 9/17/99, and incorporated herein by reference.
(j) Independent Auditors' Consent: To be filed by amendment.
(k) Not applicable.
(l) Investment Letter dated 6/10/99 from OppenheimerFunds, Inc. to
Registrant: Previously filed with Registrant's Pre-Effective Amendment
No. 2, 9/17/99, and incorporated herein by reference.
(m) (i) Service Plan and Agreement for Class A shares dated 4/6/99: Filed with
Registrant's Pre-Effective Amendment No. 1 to the Registrant's
Registration Statement, 4/8/99, and incorporated herein by reference.
(ii) Distribution and Service Plan and Agreement for Class B shares dated
4/6/99: Filed with Registrant's Pre-Effective Amendment No. 2, 9/17/99,
and incorporated herein by reference.
(iii)Distribution and Service Plan and Agreement for Class C shares
dated 4/6/99: Filed with Registrant's Pre-Effective Amendment No. 1,
4/8/99, and incorporated herein by reference.
(iv) Distribution and Service Plan and Agreement for Class N shares dated
2/01/01: To be filed by amendment.
(n) Oppenheimer Funds Multiple Class Plan under Rule 18f-3 updated through
8/22/00: Previously filed with Post-Effective Amendment No. 62 to the
Registration Statement of Oppenheimer Money Market Fund, Inc. (Reg. No.
2-49887), 11/20/00, and incorporated herein by reference.
-- Powers of Attorney for all Trustees/Directors: Previously
filed with Pre-Effective Amendment No. 1 to the Registration Statement of
Oppenheimer Trinity Value Fund (Reg. No. 333-79707), 8/4/99, and incorporated
herein by reference.
Item 24. Persons Controlled by or Under Common Control with the Fund
None.
Item 25. Indemnification
Reference is made to the provisions of Article Seven of Registrant's
Amended and Restated Declaration of Trust filed as Exhibit 23(a) to this
Registration Statement, and incorporated herein by reference.
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 26. - Business and Other Connections of the 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 investment
companies, including without limitation those described in Parts A and B hereof
and listed in Item 26(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.
Name and Current Position Other Business and Connections
with OppenheimerFunds, Inc. During the Past Two Years
Amy Adamshick,
Vice President
Charles E. Albers,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds (since April
1998); a Chartered Financial Analyst.
Edward Amberger,
Assistant Vice President None.
Janette Aprilante,
Assistant Vice President None.
Victor Babin,
Senior Vice President None.
Bruce L. Bartlett,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
George Batejan,
Executive Vice President/
Chief Information Officer Formerly Senior Vice President (until May 1998).
Connie Bechtolt,
Assistant Vice President None.
Kathleen Beichert,
Vice President None.
Rajeev Bhaman,
Vice President None.
Mark Binning
Assistant Vice President None.
Robert J. Bishop,
Vice President Vice President of Mutual Fund Accounting (since
May 1996); an officer of other Oppenheimer
funds.
John R. Blomfield,
Vice President None.
Chad Boll,
Assistant Vice President None
Scott Brooks,
Vice President None.
Bruce Burroughs,
Vice President
Adele Campbell,
Assistant Vice President & Assistant
Treasurer: Rochester Division Formerly, Assistant Vice President of Rochester
Fund Services, Inc.
Michael A. Carbuto,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; Vice President of
Centennial Asset Management Corporation.
John Cardillo,
Assistant Vice President None.
Elisa Chrysanthis
Assistant Vice President None.
H.C. Digby Clements,
Vice President: Rochester Division None.
O. Leonard Darling,
Vice Chairman, Executive Vice
President and Chief Investment
Officer and Director Chairman of the Board and a director (since
June 1999) and Senior Managing Director (since
December 1998) of HarbourView Asset Management
Corporation; a director (since March 2000) of
OFI Private Investments, Inc.; Trustee (1993)
of Awhtolia College - Greece; formerly Chief
Executive Officer of HarbourView Asset
Management Corporation (December 1998 - June
1999).
John Davis
Assistant Vice President EAB Financial (April 1998-February 1999).
Robert A. Densen,
Senior Vice President None.
Ruggero de'Rossi
Vice President Formerly, Chief Strategist at ING Barings (July
1998 - March 2000).
Sheri Devereux,
Vice President None.
Max Dietshe
Vice President Deloitte & Touche LLP (1989-1999).
Craig P. Dinsell
Executive Vice President None.
John Doney,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds.
Andrew J. Donohue,
Executive Vice President,
General Counsel and Director Executive Vice President (since September 1993)
and a director (since January 1992) of the
Distributor; Executive Vice President, General
Counsel (since September 1995) and a director
(since August 1994) of HarbourView Asset
Management Corporation, Shareholder Services,
Inc., Shareholder Financial Services, Inc. and
Oppenheimer Partnership Holdings, Inc., of OFI
Private Investments, Inc. (since March 2000),
and of PIMCO Trust Company (since May 2000);
President and a director of Centennial Asset
Management Corporation (since September 1995)
and of Oppenheimer Real Asset Management, Inc.
(since July 1996); Vice President and a
director (since September 1997) of
OppenheimerFunds International Ltd. and
Oppenheimer Millennium Funds plc; a director
(since April 2000) of OppenheimerFunds Legacy
Program, a charitable trust program established
by the Manager; General Counsel (since May
1996) and Secretary (since April 1997) of
Oppenheimer Acquisition Corp.; an officer of
other Oppenheimer funds.
Bruce Dunbar,
Vice President None.
Daniel Engstrom,
Assistant Vice President None.
Armond Erpf
Assistant Vice President None.
George Evans,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds.
Edward N. Everett,
Assistant Vice President None.
George Fahey,
Vice President None.
Leslie A. Falconio,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds (since 6/99).
Scott Farrar,
Vice President Assistant Treasurer of Oppenheimer Millennium
Funds plc (since October 1997); an officer of
other Oppenheimer funds.
Katherine P. Feld,
Vice President, Senior Counsel
and Secretary Vice President and Secretary of the
Distributor; Secretary and Director of
Centennial Asset Management Corporation; Vice
President and Secretary of Oppenheimer Real
Asset Management, Inc.; Secretary of
HarbourView Asset Management Corporation,
Oppenheimer Partnership Holdings, Inc.,
Shareholder Financial Services, Inc. and
Shareholder Services, Inc.
Ronald H. Fielding,
Senior Vice President; Chairman:
Rochester Division An officer, Director and/or portfolio manager
of certain Oppenheimer funds; presently he
holds the following other positions: Director
(since 1995) of ICI Mutual Insurance Company;
Governor (since 1994) of St. John's College;
Director (since 1994 - present) of
International Museum of Photography at George
Eastman House..
David Foxhoven,
Assistant Vice President Formerly Manager, Banking Operations Department
(July 1996 - November 1998).
Colleen Franca,
Assistant Vice President None.
Crystal French
Vice President None.
Dan Gangemi,
Vice President None.
Subrata Ghose
Assistant Vice President Formerly, Equity Analyst at Fidelity
Investments (1995 - March 2000).
Charles Gilbert,
Assistant Vice President None.
Alan Gilston,
Vice President None.
Jill Glazerman,
Vice President None.
Paul Goldenberg,
Vice President
Mikhail Goldverg
Assistant Vice President None.
Laura Granger,
Vice President
Jeremy Griffiths,
Executive Vice President,
Chief Financial Officer and
Director Chief Financial Officer, Treasurer and director
of Oppenheimer Acquisition Corp.; Executive
Vice President of HarbourView Asset Management
Corporation; President. Chief Executive Officer
and director of PIMCO Trust Company; director
of OppenheimerFunds, Legacy Program (charitable
trust program); Vice President of OFI Private
Investments, Inc. and a Member and Fellow of
the Institute of Chartered Accountants.
Robert Grill,
Senior Vice President None.
Robert Guy,
Senior Vice President None.
Robert Haley,
Assistant Vice President None.
Kelly Haney,
Assistant Vice President
Thomas B. Hayes,
Vice President None.
Dorothy Hirshman,
Assistant Vice President None
Merryl Hoffman,
Vice President and
Senior Counsel None
Merrell Hora,
Assistant Vice President None.
Scott T. Huebl,
Vice President None.
James Hyland,
Assistant Vice President Formerly Manager of Customer Research for
Prudential Investments (February 1998 - July
1999).
David Hyun,
Vice President Formerly portfolio manager, technology
analyst and research associate at Fred Alger
Management, Inc. (August 1993 - June 2000).
Steve Ilnitzki,
Senior Vice President Formerly Vice President of Product Management
at Ameritrade (until March 2000).
Kathleen T. Ives,
Vice President None.
William Jaume,
Vice President Senior Vice President (since April 2000) of
HarbourView Asset Management Corporation.
Frank Jennings,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds.
Andrew Jordan,
Assistant Vice President None.
Deborah Kaback,
Vice President and
Senior Counsel Senior Vice President and Deputy General
Counsel of Oppenheimer Capital (April
1989-November 1999).
Lewis Kamman
Vice President Senior Consultant for Bell Atlantic Network
Integration, Inc. (June 1997-December 1998).
Jennifer Kane
Assistant Vice President None.
Lynn Oberist Keeshan
Senior Vice President Formerly (until March 1999) Vice President,
Business Development and Treasury at Liz
Claiborne, Inc.
Thomas W. Keffer,
Senior Vice President None.
Erica Klein,
Assistant Vice President None.
Walter Konops,
Assistant Vice President None.
Avram Kornberg,
Senior Vice President None.
Jimmy Kourkoulakos,
Assistant Vice President. None.
John Kowalik,
Senior Vice President An officer and/or portfolio
manager for certain OppenheimerFunds.
Joseph Krist,
Assistant Vice President None.
Christopher Leavy
Senior Vice President Vice President and Portfolio
Manager at Morgan Stanley Investment Management
(1997-September 2000) and an Analyst and
Portfolio Manager at Crestar Asset Management
(1995-1997).
Michael Levine,
Vice President None.
Shanquan Li,
Vice President None.
Mitchell J. Lindauer,
Vice President and Assistant
General Counsel None.
Malissa Lischin
Assistant Vice President Formerly Associate Manager, Investment
Management Analyst at Prudential (1996 - March
2000).
David Mabry,
Vice President None.
Bridget Macaskill,
Chairman, Chief Executive Officer
and Director President, Chief Executive Officer and a
director (since March 2000) of OFI Private
Investments, Inc., an investment adviser
subsidiary of the Manager; Chairman and a
director of Shareholder Services, Inc. (since
August 1994) and Shareholder Financial
Services, Inc. (since September 1995), transfer
agent subsidiaries of the Manager; President
(since September 1995) and a director (since
October 1990) of Oppenheimer Acquisition Corp.,
the Manager's parent holding company; President
(since September 1995) and a director (since
November 1989) of Oppenheimer Partnership
Holdings, Inc., a holding company subsidiary of
the Manager; President and a director (since
October 1997) of OppenheimerFunds International
Ltd., an offshore fund management subsidiary of
the Manager and of Oppenheimer Millennium Funds
plc; a director of HarbourView Asset Management
Corporation (since July 1991) and of
Oppenheimer Real Asset Management, Inc. (since
July 1996), investment adviser subsidiaries of
the Manager; a director (since April 2000) of
OppenheimerFunds Legacy Program, a charitable
trust program established by the Manager; a
director of Prudential Corporation plc (a U.K.
financial service company); President and a
trustee of other Oppenheimer funds; formerly
President of the Manager (June 1991 - August
2000).
Steve Macchia,
Vice President None.
Marianne Manzolillo,
Assistant Vice President
Philip T. Masterson,
Vice President None.
Loretta McCarthy,
Executive Vice President None.
Lisa Migan,
Assistant Vice President None.
Andrew J. Mika
Senior Vice President Formerly a Second Vice President
for Guardian Investments (June 1990 - October
1999).
Joy Milan
Assistant Vice President None.
Denis R. Molleur,
Vice President and
Senior Counsel None.
Nikolaos Monoyios,
Vice President A Vice President and/or portfolio
manager of certain Oppenheimer funds.
Margaret Mudd
Assistant Vice President Formerly Vice President -
Syndications of Sanwa Bank California (January
1998 - September 1999).
John Murphy,
President, Chief Operating
Officer and Director President of MassMutual
Institutional Funds and the MML Series Funds
until September 2000.
Kenneth Nadler,
Vice President None.
David Negri,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Barbara Niederbrach,
Assistant Vice President None.
Robert A. Nowaczyk,
Vice President None.
Ray Olson,
Assistant Vice President None.
Gina M. Palmieri,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds (since June 1999).
Frank Pavlak,
Vice President Formerly. Branch Chief of Investment Company
Examinations at U.S. Securities and Exchange
Commission (January 1981 - December 1998).
James Phillips
Assistant Vice President None.
David Pellegrino
Vice President None.
Jane Putnam,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds.
Michael Quinn,
Assistant Vice President None.
Julie Radtke,
Vice President None.
Thomas Reedy,
Vice President Vice President (since April 1999) of
HarbourView Asset Management Corporation; an
officer and/or portfolio manager of certain
Oppenheimer funds.
John Reinhardt,
Vice President: Rochester Division None
David Robertson,
Senior Vice President
Jeffrey Rosen,
Vice President None.
Marci Rossell,
Vice President and Corporate Economist Economist with Federal
Reserve Bank of Dallas (April 1996 - March
1999).
Richard H. Rubinstein,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Lawrence Rudnick,
Assistant Vice President None.
James Ruff,
Executive Vice President President and director of the Distributor; Vice
President (since March 2000) of OFI Private
Investments, Inc.
Andrew Ruotolo
Executive Vice President President and director of Shareholder Services,
Inc.; formerly Chief Operations Officer for
American International Group (August
1997-September 1999).
Rohit Sah,
Assistant Vice President None.
Valerie Sanders,
Vice President None.
Kenneth Schlupp
Assistant Vice President Assistant Vice President (since March 2000) of
OFI Private Investments, Inc.
Jeff Schneider,
Vice President Formerly (until May 1999) Director, Personal
Decisions International.
Ellen Schoenfeld,
Vice President None.
Allan Sedmak
Assistant Vice President None.
Jennifer Sexton,
Vice President None.
Martha Shapiro,
Assistant Vice President None.
Connie Song,
Assistant Vice President None.
Richard Soper,
Vice President None.
Keith Spencer,
Vice President None.
Cathleen Stahl,
Vice President Assistant Vice President & Manager of Women &
Investing Program
Richard A. Stein,
Vice President: Rochester Division Assistant Vice President (since 1995) of
Rochester Capitol Advisors, L.P.
Arthur Steinmetz,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Jayne Stevlingson,
Vice President None.
Gregg Stitt,
Assistant Vice President None.
John Stoma,
Senior Vice President None.
Deborah Sullivan,
Assistant Vice President,
Assistant Counsel
Kevin Surrett,
Assistant Vice President Assistant Vice President of Product Development
At Evergreen Investor Services, Inc. (June 1995
-
May 1999).
James C. Swain,
Vice Chairman of the Board Chairman, CEO and Trustee,
Director or Managing Partner of the Denver-based
Oppenheimer Funds; formerly, President and
Director of Centennial Asset Management
Corporation and Chairman of the Board of
Shareholder Services, Inc.
Susan Switzer,
Assistant Vice President None.
Anthony A. Tanner,
Vice President: Rochester Division None.
Paul Temple,
Vice President Formerly (until May 2000) Director of Product
Development at Prudential.
Angela Uttaro,
Assistant Vice President None.
Mark Vandehey,
Vice President None.
Maureen VanNorstrand,
Assistant Vice President None.
Annette Von Brandis,
Assistant Vice President None.
Phillip Vottiero,
Vice President Chief Financial officer for the Sovlink Group
(April 1996 - June 1999).
Sloan Walker
Vice President
Teresa Ward,
Vice President None.
Jerry Webman,
Senior Vice President Senior Investment Officer, Director of Fixed
Income.
Barry Weiss,
Assistant Vice President Fitch, Inc. (1996 - January 2000)
Christine Wells,
Vice President None.
Joseph Welsh,
Assistant Vice President None.
Catherine White,
Assistant Vice President
William L. Wilby,
Senior Vice President Senior Investment Officer,
Director of International Equities; Senior Vice
President of HarbourView Asset Management
Corporation.
Donna Winn,
Senior Vice President Vice President (since March 2000) of OFI
Private Investments, Inc.
Brian W. Wixted,
Senior Vice President and
Treasurer Treasurer (since March 1999) of HarbourView
Asset Management Corporation, Shareholder
Services, Inc., Oppenheimer Real Asset
Management Corporation, Shareholder Financial
Services, Inc. and Oppenheimer Partnership
Holdings, Inc., of OFI Private Investments,
Inc. (since March 2000) and of OppenheimerFunds
International Ltd. and Oppenheimer Millennium
Funds plc (since May 2000); Treasurer and Chief
Financial Officer (since May 2000) of PIMCO
Trust Company; Assistant Treasurer (since March
1999) of Oppenheimer Acquisition Corp. and of
Centennial Asset Management Corporation; an
officer of other Oppenheimer funds; formerly
Principal and Chief Operating Officer, Bankers
Trust Company - Mutual Fund Services Division
(March 1995 - March 1999).
Carol Wolf,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; serves on
the Board of Chinese Children Adoption
International Parents Council, Supporters of
Children, and the Advisory Board of Denver
Children's Hospital
Oncology Department.
Kurt Wolfgruber
Senior Vice President Senior Investment Officer, Director of Domestic
Equities; member of the Investment Product
Review Committee and the Executive Committee of
HarbourView Asset Management Corporation;
formerly (until April 2000) a Managing Director
and Portfolio Manager at J.P. Morgan Investment
Management, Inc.
Caleb Wong,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds (since June 1999) .
Robert G. Zack,
Senior Vice President and
Assistant Secretary, Associate
General Counsel Assistant Secretary of Shareholder Services,
Inc. (since May 1985), Shareholder Financial
Services, Inc. (since November 1989),
OppenheimerFunds International Ltd. and
Oppenheimer Millennium Funds plc (since October
1997); an officer of other Oppenheimer funds.
Jill Zachman,
Assistant Vice President:
Rochester Division None.
Neal Zamore,
Vice President Director e-Commerce; formerly (until May 2000)
Vice President at GE Capital.
Mark Zavanelli,
Assistant Vice President None.
Arthur J. Zimmer,
Senior Vice President Senior Vice President (since April
1999) of HarbourView Asset Management
Corporation; Vice President of Centennial Asset
Management Corporation; an officer and/or
portfolio manager of certain Oppenheimer funds.
Susan Zimmerman,
Vice President None.
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 California Municipal Fund Oppenheimer Capital
Appreciation Fund Oppenheimer Capital Preservation Fund Oppenheimer
Developing Markets Fund Oppenheimer Discovery Fund Oppenheimer
Emerging Technologies Fund Oppenheimer Enterprise Fund Oppenheimer
Europe Fund Oppenheimer Global Fund Oppenheimer Global Growth &
Income Fund Oppenheimer Gold & Special Minerals Fund Oppenheimer
Growth Fund Oppenheimer International Growth Fund Oppenheimer
International Small Company Fund Oppenheimer Large Cap Growth Fund
Oppenheimer Money Market Fund, Inc. Oppenheimer Multi-Sector Income
Trust Oppenheimer Multi-State Municipal Trust Oppenheimer Multiple
Strategies Fund Oppenheimer Municipal Bond Fund Oppenheimer New York
Municipal Fund Oppenheimer Series Fund, Inc. Oppenheimer Trinity Core
Fund Oppenheimer Trinity Growth Fund Oppenheimer Trinity Value Fund
Oppenheimer U.S. Government Trust Oppenheimer World Bond Fund
Quest/Rochester Funds
Limited Term New York Municipal Fund
Oppenheimer Convertible Securities Fund
Oppenheimer MidCap Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest For Value Funds
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Rochester Fund Municipals
Denver-based Oppenheimer 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 Oppenheimer
Cash Reserves Oppenheimer Champion Income Fund Oppenheimer Capital
Income Fund Oppenheimer High Yield Fund Oppenheimer Integrity Funds
Oppenheimer International Bond Fund Oppenheimer Limited-Term
Government Fund Oppenheimer Main Street Opportunity Fund Oppenheimer
Main Street Small Cap Fund Oppenheimer Main Street Funds, Inc.
Oppenheimer Municipal Fund Oppenheimer Real Asset Fund Oppenheimer
Senior Floating Rate Fund Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc. Oppenheimer Variable Account
Funds Panorama Series Fund, Inc.
The address of OppenheimerFunds, Inc., OppenheimerFunds Distributor, Inc.,
HarbourView Asset Management Corp., Oppenheimer Partnership Holdings, Inc.,
Oppenheimer Acquisition Corp. and OFI Private Investments, Inc. is Two World
Trade Center, New York, New York 10048-0203.
The address of the New York-based Oppenheimer Funds, the Quest Funds, the
Rochester-based funds, 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 80112.
Item 27. 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
26(b) above (except Oppenheimer Multi-Sector Income Trust and Panorama Series
Fund, Inc.) and for MassMutual Institutional Funds.
(b) The directors and officers of the Registrant's principal underwriter are:
Name & Principal Positions & Offices Positions & Offices
Business Address with Underwriter with Registrant
Jason Bach Vice President None
31 Raquel Drive
Marietta, GA 30064
William Beardsley (2) Vice President None
Peter Beebe Vice President None
876 Foxdale Avenue
Winnetka, IL 60093
Douglas S. Blankenship Vice President None
17011 Woodbank
Spring, TX 77379
Kevin Brosmith Senior Vice President None.
856 West Fullerton
Chicago, IL 60614
Susan Burton(2) Vice President None
Robert Coli Vice President None
12 White Tail Lane
Bedminster, NJ 07921
William Coughlin Vice President None
1730 N. Clark Street
#3203
Chicago, IL 60614
Jeff Damia(2) Vice President None
Stephen Demetrovits(2) Vice President None
Christopher DeSimone Vice President None
5105 Aldrich Avenue South
Minneapolis, MN 55419
Michael Dickson Vice President None
21 Trinity Avenue
Glastonburg, CT 06033
Joseph DiMauro Vice President None
244 McKinley Avenue
Grosse Pointe Farms, MI 48236
Steven Dombrowser Vice President None
Andrew John Donohue(2) Executive Vice Secretary
President and Director
G. Patrick Dougherty (2) Vice President None
Cliff Dunteman Vice President None
940 Wedgewood Drive
Crystal Lake, IL 60014
Wendy H. Ehrlich Vice President None
4 Craig Street
Jericho, NY 11753
Kent Elwell Vice President None
35 Crown Terrace
Yardley, PA 19067
George Fahey Vice President None
9 Townview Ct.
Flemington, NJ 08822
Eric Fallon Vice President None
10 Worth Circle
Newton, MA 02158
Katherine P. Feld(2) Vice President and None
Corporate Secretary
Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697
Ronald H. Fielding(3) Vice President None
Brian Flahive Assistant Vice President None
John ("J") Fortuna(2) Vice President None
Ronald R. Foster Senior Vice President None
11339 Avant Lane
Cincinnati, OH 45249
Victoria Friece(1) Assistant Vice President None
Luiggino Galleto Vice President None
10302 Riesling Court
Charlotte, NC 28277
Michelle Gans Vice President None
18771 The Pines
Eden Prairie, MN 55347
L. Daniel Garrity Vice President None
27 Covington Road
Avondale Estates, GA 30002
Lucio Giliberti Vice President None
6 Cyndi Court
Flemington, NJ 08822
Ralph Grant(2) Senior Vice President/ None
National Sales Manager
Michael Guman Vice President None
3913 Pleasent Avenue
Allentown, PA 18103
Webb Heidinger Vice President None
90 Gates Street
Portsmouth, NH 03801
Phillip Hemery Vice President None
184 Park Avenue
Rochester, NY 14607
Brian Husch(2) Vice President None
Edward Hrybenko (2) Vice President None
Richard L. Hymes(2) Assistant Vice President None
Byron Ingram(1) Assistant Vice President None
Kathleen T. Ives(1) Vice President None
Eric K. Johnson Vice President None
28 Oxford Avenue
Mill Valley, CA 94941
Mark D. Johnson Vice President None
409 Sundowner Ridge Court
Wildwood, MO 63011
Elyse Jurman Vice President None
1194 Hillsboro Mile, #51
Hillsboro Beach, FL 33062
John Kavanaugh Vice President None
2 Cervantes Blvd., Apt. #301
San Francisco, CA 94123
Brian G. Kelly Vice President None
60 Larkspur Road
Fairfield, CT 06430
Michael Keogh(2) Vice President None
Lisa Klassen(1) Assistant Vice President None
Richard Klein Senior Vice President None
4820 Fremont Avenue So.
Minneapolis, MN 55409
Brent Krantz Vice President None
2609 SW 149th Place
Seattle, WA 98166
Oren Lane Vice President None
5286 Timber Bend Drive
Brighton, MI 48116
Dawn Lind Vice President None
21 Meadow Lane
Rockville Centre, NY 11570
James Loehle Vice President None
30 Wesley Hill Lane
Warwick, NY 10990
John Lynch (2) Vice President None
Michael Magee(2) Vice President None
Steve Manns Vice President None
1941 W. Wolfram Street
Chicago, IL 60657
Todd Marion Vice President None
3 St. Marks Place
Cold Spring Harbor, NY 11724
LuAnn Mascia(2) Assistant Vice President None
Theresa-Marie Maynier Vice President None
2421 Charlotte Drive
Charlotte, NC 28203
Anthony Mazzariello Vice President None
704 Beaver Road
Leetsdale, PA 15056
John McDonough Vice President None
3812 Leland Street
Chevy Chase, MD 20815
Kent McGowan Vice President None
18424 12th Avenue West
Lynnwood, WA 98037
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
Denise-Marie Nakamura Vice President None
4111 Colony Plaza
Newport Beach, CA 92660
John Nesnay Vice President None
9511 S. Hackberry Street
Highlands Ranch, CO 80126
Kevin Neznek(2) Vice President None
Chad V. Noel Vice President None
2408 Eagleridge Drive
Henderson, NV 89014
Raymond Olson(1) Assistant Vice President None
& Treasurer
Alan Panzer Assistant Vice President None
925 Canterbury Road, Apt. #848
Atlanta, GA 30324
Kevin Parchinski Vice President None
8409 West 116th Terrace
Overland Park, KS 66210
Gayle Pereira Vice President None
2707 Via Arboleda
San Clemente, CA 92672
Brian Perkes Vice President None
8734 Shady Shore Drive
Frisco, TX 75034
Charles K. Pettit Vice President None
22 Fall Meadow Drive
Pittsford, NY 14534
Bill Presutti(2) Vice President None
Steve Puckett Vice President None
5297 Soledad Mountain Road
San Diego, CA 92109
Elaine Puleo(2) Senior Vice President None
Minnie Ra Vice President None
100 Dolores Street, #203
Carmel, CA 93923
Dustin Raring Vice President None
184 South Ulster
Denver, CO 80220
Michael Raso Vice President None
16 N. Chatsworth Ave.
Apt. 301
Larchmont, NY 10538
Douglas Rentschler Vice President None
677 Middlesex Road
Grosse Pointe Park, MI 48230
Michelle Simone - Ricter(2) Assistant Vice President None
Ruxandra Risko(2) Vice President None
David Robertson(2) Senior Vice President, None
Director of Variable
Accounts
Kenneth Rosenson Vice President None
26966 W. Malibu
Cove Colony Drive
Malibu, CA 90265
James Ruff(2) President & Director None
William Rylander (2) Vice President None
Alfredo Scalzo Vice President None
9616 Lale Chase Island Way
Tampa, FL 33626
Michael Sciortino Vice President None
785 Beau Chene Drive
Mandeville, LA 70471
Eric Sharp Vice President None
862 McNeill Circle
Woodland, CA 95695
Kristen Sims (2) Vice President None
Douglas Smith Vice President None
808 South 194th Street
Seattle,WA 98148
David Sturgis Vice President None
81 Surrey Lane
Boxford, MA 01921
Brian Summe Vice President None
239 N. Colony Drive
Edgewood, KY 41017
Michael Sussman(2) Vice President None
Andrew Sweeny Vice President None
5967 Bayberry Drive
Cincinnati, OH 45242
George Sweeney Senior Vice President None
5 Smokehouse Lane
Hummelstown, PA 17036
Scott McGregor Tatum Vice President None
704 Inwood
Southlake, TX 76092
Martin Telles(2) Senior Vice President None
David G. Thomas Vice President None
2200 North Wilson Blvd.
Suite 102-176
Arlington, VA 22201
Tanya Valency (2) Assistant Vice President None
Mark Vandehey(1) Vice President None
Brian Villec (2) Vice President None
Andrea Walsh(1) Vice President None
Suzanne Walters(1) Assistant Vice President None
Michael Weigner Vice President None
5722 Harborside Drive
Tampa, FL 33615
Donn Weise Vice President None
3249 Earlmar Drive
Los Angeles, CA 90064
Marjorie Williams Vice President None
6930 East Ranch Road
Cave Creek, AZ 85331
Cary Wozniak Vice President None
18808 Bravata Court
San Diego, CA 92128
Gregor Yuska(2) Vice President None
(1)6803 South Tucson Way, Englewood, CO 80112
(2)Two World Trade Center, New York, NY 10048
(3)350 Linden Oaks, Rochester, NY 14623
(c) Not applicable.
Item 28. 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 29. Management Services
Not applicable
Item 30. Undertakings
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or 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 12th day of December, 2000.
OPPENHEIMER CAPITAL PRESERVATION FUND
By: /s/ Bridget A. Macaskill*
------------------------------
Bridget A. Macaskill, 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 on
the dates indicated:
Signatures Title Date
/s/ Leon Levy* Chairman of the
-------------------------- Board of Trustees December 12, 2000
Leon Levy
/s/ Donald W. Spiro* Vice Chairman and
-------------------------- Trustee
December 12, 2000
Donald W. Spiro
/s/ Robert G. Galli* Trustee December 12, 2000
--------------------------
Robert G. Galli
/s/ Phillip A. Griffiths Trustee
December 12, 2000
--------------------------
Phillip A. Griffiths
/s/ Benjamin Lipstein* Trustee December 12, 2000
--------------------------
Benjamin Lipstein
/s/ Bridget A. Macaskill* President,
-------------------------- Principal Executive
Bridget A. Macaskill Officer, Trustee December 12, 2000
/s/ Elizabeth B. Moynihan* Trustee December 12, 2000
---------------------------
Elizabeth B. Moynihan
/s/ Kenneth A. Randall* Trustee December 12, 2000
---------------------------
Kenneth A. Randall
/s/ Edward V. Regan* Trustee December 12, 2000
---------------------------
Edward V. Regan
/s/ Russell S. Reynolds, Jr.* Trustee
December 12, 2000
-----------------------------
Russell S. Reynolds, Jr.
/s/ Pauline Trigere* Trustee December 12, 2000
-----------------------------
Pauline Trigere
/s/ Brian W. Wixted* Chief Financial and December 12, 2000
----------------------------- Accounting Officer
Brian W. Wixted and Treasurer
/s/ Clayton K. Yeutter* Trustee December 12, 2000
-----------------------------
Clayton K. Yeutter
*By: /s/ Robert G. Zack
--------------------------------
Robert G. Zack, Attorney-in-Fact
<PAGE>
OPPENHEIMER CAPITAL PRESERVATION FUND
EXHIBIT INDEX
Exhibit No. Description
23(c)(v) Specimen Class N Share Certificate
n1a\755\755ptc_Feb01
