As filed with the Securities and Exchange Commission on August 31, 1999
1933 Act File No. 333-82579
1940 Act File No. 811-9373
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-2
(Check appropriate box or boxes)
[X] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[x] Pre-Effective Amendment No. 1
[ ] Post-Effective Amendment No. __
and/or
[X] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[ ] Amendment No. __
OPPENHEIMER SENIOR FLOATING RATE FUND
Exact Name of Registrant Specified in Charter
Two World Trade Center
New York, New York 10048
Address of Principal Executive Offices (Number, Street, City, State, Zip Code)
(212) 323-0200
Registrant's Telephone Number, Including Area Code
Andrew J. Donohue, Esq.
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048
Name and Address (Number, Street, State, Zip Code) of Agent for Service
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Registration
Statement.
If any securities being registered on this form will be offered on a delayed or
continuous basis in reliance on Rule 415 under the Securities Act of 1933, other
than securities offered in connection with a dividend reinvestment plan, check
the following box. [X]
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
Proposed Maximum Proposed Maximum
Title of Securities Amount Being Price Per Aggregate Offering Amount of
Being Registered Registered Unit(1) Price(1) Registration Fee(2)
<S> <C> <C> <C> <C>
================================= =============== ===================== ====================== =====================
Shares of Beneficial Interest
(Par Value $.001 per share) of
Class A 100,000 $10 $1,000,000.00 $278.00
================================= =============== ===================== ====================== =====================
================================= =============== ===================== ====================== =====================
Shares of Beneficial Interest
(Par Value $.001 per share) of
Class B 6,000,000 $10 $60,000,000.00 $16,680.00
================================= =============== ===================== ====================== =====================
================================= =============== ===================== ====================== =====================
Shares of Beneficial Interest
(Par Value $.001 per share) of
Class C 3,900,000 $10 $39,000,000.00 $10,7842.00
================================= =============== ===================== ====================== =====================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457 under the Securities Act of 1933.
(2) $166.80 of which was previously paid.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the Registration Statement shall
become effective on such date as the Securities and Exchange Commission, acting
pursuant to Section 8(a), may determine.
<PAGE>
OPPENHEIMER SENIOR FLOATING RATE FUND
CROSS-REFERENCE SHEET
PART A
<TABLE>
<CAPTION>
Item No. Caption Location(s) in Prospectus
<S> <C> <C>
1. Outside Front Cover........................................ Outside front cover
2. Cover Pages; Other Offering Information.................... Cover pages
3. Fee Table and Synopsis..................................... Fees and Expenses of the Fund; A
Brief Overview of the Fund
4. Financial Highlights....................................... Not applicable
5. Plan of Distribution....................................... A Brief Overview of the Fund; How to
Buy Shares
6. Selling Shareholders....................................... Not applicable
7. Use of Proceeds............................................ Use of Proceeds of the Fund's Offering
8. General Description of the Registrant...................... Main Risks of Investing in the Fund;
The Fund and Its Investments;
Additional Information About the Fund
9. Management................................................. How the Fund is Managed
10. Capital Stock, Long-Term Debt, and Other Securities........ Dividends, Capital Gains and Taxes
11. Defaults and Arrears on Senior Securities.................. Not applicable
12. Legal Proceedings.......................................... Not applicable
13. Table of Contents of the Statement of Additional Information Table of Contents of the Statement of
Additional Information
</TABLE>
<PAGE>
PART B
<TABLE>
<CAPTION>
Additional Location in Statement
Item No. Caption of Additional Information
<S> <C> <C>
14. Cover Page............................................... Cover page
15. Table of Contents........................................ Cover page
16. General Information and History.......................... About the Fund -- How the Fund is
Managed -- Organization and History
17. Investment Objective and Policies........................ About the Fund -- Additional
Information About the Fund's Investment
Policies and Risks
18. Management............................................... About the Fund -- How the Fund is
Managed -- Trustees and Officers, The
Manager
19. Control Persons and Principal Holders of Securities...... How the Fund is Managed - Major
Shareholders
20. Investment Advisory and Other Services................... About the Fund -- How the Fund is
Managed -- The Manager
21. Brokerage Allocation and Other Practices................. About the Fund -- Brokerage Policies of
the Fund
22. Tax Status............................................... About Your Account -- Dividends,
Capital Gains and Taxes
23. Financial Statements..................................... Financial Information About the Fund
</TABLE>
PART C
Information required to be included in Part C is set forth
under the appropriate item, so numbered, in Part C of this
Registration Statement.
<PAGE>
Oppenheimer Senior Floating Rate Fund
Prospectus dated September ____, 1999
Oppenheimer Senior Floating Rate Fund seeks as high a level of current income
and preservation of capital as is consistent with investing primarily in senior
floating rate loans and other debt securities. The Fund seeks to achieve its
goal primarily by investing at least 80% of its total assets in floating or
adjustable rate senior loans that are made to U.S. and foreign borrowers (these
are referred to as "Senior Loans"). Under normal market conditions the Fund can
also invest up to 20% of its total assets in other securities. The Fund is a
newly-organized, non-diversified closed-end management investment company that
continuously offers its shares. The Fund has three classes of shares: Class A
shares, Class B shares and Class C shares. Please refer to "How to Buy Shares."
The Fund can invest up to 100% of its assets in Senior Loans and other debt
securities that are high risk securities rated below investment grade or in
unrated securities deemed to be of comparable quality. These securities may be
considered speculative and involve risks that are greater than risks associated
with investment grade securities, including the possible loss of income and
principal. Please refer to "Main Risks of Investing in the Fund."
No market currently exists for the Fund's shares. The Fund does not currently
anticipate that a secondary market will develop for its shares. As a result, you
should consider the Fund's shares to be an illiquid investment. This means that
you may not be able to readily sell your shares. See "Illiquidity of the Fund's
Shares" and "Periodic Repurchase Offers."
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing. It also contains important
information about how to buy 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.
The Fund's Statement of Additional Information dated September , 1999, which the
Fund may amend from time to time, has been filed with the Securities and
Exchange Commission and is incorporated by reference into this Prospectus. The
Table of Contents of the Statement of Additional Information appears on page
____ of this Prospectus. For a free copy of the Statement of Additional
Information, call your investment representative or call the Fund's Distributor
at 1-800-525-7048 or write to the Distributor at the address on the inside back
cover.
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.
<PAGE>
<TABLE>
<CAPTION>
Price to the Public (2) Sales Load Proceeds to the Fund (4)
<S> <C> <C> <C>
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Per Class A share (1) $10.00 None $10.00
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Per Class B share $10.00 None (3) $10.00
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Per Class C share $10.00 None (3) $10.00
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Total $100,000,000.00 None $100,000,000.00
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>
(1) Class A shares will be available only upon the automatic conversion of Class
B shares.
(2) Class B and Class C shares are offered on a best efforts basis at a price of
$10.00 per share on the date of this Prospectus and will be offered continuously
at a price equal to net asset value after that date. The Fund will invest the
proceeds of the offering initially in short-term money market instruments and
other short-term debt obligations until it can invest the proceeds in a manner
consistent with its investment objective and policies, which the Fund estimates
will occur over a period of three months after the commencement of its offering,
subject to market conditions. No escrow arrangements have been established in
connection with the offering of shares.
(3) Class B shares and Class C shares are subject to an annual service fee, an
annual asset-based distribution fee, and an Early Withdrawal Charge. The
Distributor will pay sales commissions to participating dealers from its own
assets at the time of sale.
(4) This amount assumes the sale of all shares registered by the Fund in its
registration statement, and it excludes initial organizational and offering
expenses of the Fund, which OppenheimerFunds, Inc. has absorbed.
To provide shareholders with liquidity, the Fund will make quarterly
Repurchase Offers for a percentage (between 5% and 25%) of the Fund's shares at
net asset value. The repurchase price will be the net asset value determined as
of the close of business (currently 4:00 p.m. New York time) on the Repurchase
Pricing Date, normally the day a Repurchase Offer ends but not more than 14 days
after the Repurchase Offer ends. Each Repurchase Offer will last for a period
between three weeks and six weeks. The Fund will notify shareholders at the
beginning of each Repurchase Offer. The Fund's first Repurchase Offer is
expected to commence in January 2000, and a Repurchase Offer will be made every
three months after the end of the first Repurchase Offer. An Early Withdrawal
Charge may apply to Class B Shares held less than 5 years and Class C Shares
held less than one year that are accepted for repurchase. There is no guarantee
that the Fund will be able to repurchase all shares that are tendered in a
Repurchase Offer. See "Periodic Repurchase Offers."
The Fund has received an exemptive order from the Commission with
respect to the Fund's distribution fee arrangements, Early Withdrawal Charges
and multi-class structure. As a condition of that order, the Fund is required to
comply with certain regulations that would not otherwise apply to the Fund.
(OppenheimerFunds logo)
<PAGE>
CONTENTS
A B O U T T H E F U ND
Fees and Expenses of the Fund
A Brief Overview of the Fund
Main Risks of Investing in the Fund
Use of Proceeds of the Fund's Offering
The Fund and Its Investments
Performance Information
How the Fund Is Managed
A B O U T Y O U R A C C O U N T
How to Buy Shares
Special Investor Services
AccountLink
PhoneLink
OppenheimerFunds Internet Web Site
Retirement Plans
Periodic Repurchase Offers
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Additional Information About the Fund
Table of Contents of the Statement of Additional Information
Appendix A - Ratings Definitions
<PAGE>
A B O U T T H E F U N D
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. All shareholders therefore pay those expenses indirectly.
Shareholders pay other expenses directly, such as Early Withdrawal Charges and
account transaction charges. The following tables are provided to help you
understand the fees and expenses you may bear directly (shareholder transaction
expenses) or indirectly (annual expenses) if you buy and hold shares of the
Fund.
Shareholder Transaction Expenses
<TABLE>
<CAPTION>
Class A shares Class B shares Class C shares
<S> <C> <C> <C>
- -------------------------------------- --------------------- ------------------------- ----------------------------
- -------------------------------------- --------------------- ------------------------- ----------------------------
Sales Charge (Load) on purchases None 2 None None
(as % of offering price)1
- -------------------------------------- --------------------- ------------------------- ----------------------------
- -------------------------------------- --------------------- ------------------------- ----------------------------
Dividend Reinvestment Fees None None None
- -------------------------------------- --------------------- ------------------------- ----------------------------
- -------------------------------------- --------------------- ------------------------- ----------------------------
Early Withdrawal Charges (Load) (as
% of the lower of the original None 3%3 1%4
purchase price or repurchase price)
- -------------------------------------- --------------------- ------------------------- ----------------------------
</TABLE>
1. If a securities dealer handles your purchase transaction, it may charge you a
fee.
2. Class A shares are not currently offered for direct purchase by investors.
3. The 3% Early Withdrawal Charge applies to shares repurchased in the first
year after you bought them. The Early Withdrawal Charge is 2.0% for shares
repurchased during the second year after purchase, 1.5% during the third and
fourth years, and 1% during the fifth year. There is no Early Withdrawal Charge
after the fifth anniversary of purchase. Class B shares automatically convert to
Class A shares 72 months after purchase. See "How to Buy Shares" for details.
4. Applies to shares repurchased within 12 months after you bought them. See
"How to Buy Shares" for details.
<PAGE>
Annual Expenses1
(estimated as a % of average annual net assets attributable to shares)
<TABLE>
<CAPTION>
Class A shares Class B shares Class C shares
<S> <C> <C> <C>
- -------------------------------------- --------------------- ------------------------ ---------------------------
- -------------------------------------- --------------------- ------------------------ ---------------------------
Management Fees 2 0.53% 0.53% 0.53%
- -------------------------------------- --------------------- ------------------------ ---------------------------
- -------------------------------------- --------------------- ------------------------ ---------------------------
Distribution and/or Service Fees 3 0.25% 0.75% 0.75%
- -------------------------------------- --------------------- ------------------------ ---------------------------
- -------------------------------------- --------------------- ------------------------ ---------------------------
Interest Payments on Borrowed Funds 0.02% 0.02% 0.02%
- -------------------------------------- --------------------- ------------------------ ---------------------------
- -------------------------------------- --------------------- ------------------------ ---------------------------
Other Expenses 4 0.33% 0.33% 0.33%
- -------------------------------------- --------------------- ------------------------ ---------------------------
- -------------------------------------- --------------------- ------------------------ ---------------------------
Total Annual Expenses 1.13% 1.63% 1.63%
- -------------------------------------- --------------------- ------------------------ ---------------------------
</TABLE>
1. Because the Fund is a new fund without an operating history, this
information is based on estimated fees, expenses and net assets for the
current fiscal year ending 7/31/2000. Actual expenses may be different in
the current and future fiscal years.
2. The management fee is based on a percentage of the Fund's average annual
net assets and is shown after a voluntary reduction by the Manager of 0.20%
of the management fee annually which may be withdrawn at any time. Without
that reduction, the estimated management fee for each class is 0.73% and
"Total Annual Operating Expenses" are estimated at 1.33% for Class A, and
1.83% for Class B and Class C.
3. Under the Fund's Distribution Plans, Class B shares and Class C shares pay
an annual distribution fee of 0.50% of average daily net assets (the Board
of Trustees can increase the fee to 0.75%). Class A shares are not subject
to any distribution fees. Each class of shares is subject to an annual
service fee of up to 0.25% of average annual net assets. Because the
distribution fees may be considered an asset-based sales charge, long-term
shareholders of Class C may pay more than the economic equivalent of the
maximum front-end sales charges permitted by the National Association of
Securities Dealers, Inc.
4. "Other expenses" include transfer agent fees, custodial expenses, and
accounting and legal expenses the Fund pays.
<PAGE>
EXAMPLES. These examples are intended to help you understand the cost of
investing in the Fund. The examples assume that you invest $1,000 in a class of
shares of the Fund for the time periods indicated and reinvest your dividends
and distributions.
The examples should not be considered a representation of future expenses, and
actual expenses may be greater or less than those shown.
The first example assumes that your shares are repurchased by the Fund
at the end of those periods. The second example assumes that you keep your
shares. Both examples also assume that your investment has a 5% return each year
and that a class's operating expenses remain the same as the estimated expenses
used in the Annual Fund Operating Expense table above. Based on these
assumptions your expenses would be as follows:
<TABLE>
<CAPTION>
Assuming you do not tender
shares for repurchase by the 1 Year 3 Years 5 Years 10 Years 1
Fund:
<S> <C> <C> <C> <C>
- ---------------------------------- --------------------- -------------------- ------------------- -------------------
Class A shares $115 $359 $622 $1,375
- ---------------------------------- --------------------- -------------------- ------------------- -------------------
- ---------------------------------- --------------------- -------------------- ------------------- -------------------
Class B shares $166 $514 $887 $1,678
- ---------------------------------- --------------------- -------------------- ------------------- -------------------
- ---------------------------------- --------------------- -------------------- ------------------- -------------------
Class C shares $166 $514 $887 $1,933
- ---------------------------------- --------------------- -------------------- ------------------- -------------------
Assuming you tender your shares
for repurchase by the Fund on
the last day of the period and 1 Year 3 Years 5 Years 10 Years 1
an Early Withdrawal Charge
applies:
- ---------------------------------- --------------------- -------------------- ------------------- -------------------
- ---------------------------------- --------------------- -------------------- ------------------- -------------------
Class A shares $115 $359 $622 $1,375
- ---------------------------------- --------------------- -------------------- ------------------- -------------------
- ---------------------------------- --------------------- -------------------- ------------------- -------------------
Class B shares $466 $664 $987 $1,678
- ---------------------------------- --------------------- -------------------- ------------------- -------------------
- ---------------------------------- --------------------- -------------------- ------------------- -------------------
Class C shares $266 $514 $887 $1,933
- ---------------------------------- --------------------- -------------------- ------------------- -------------------
</TABLE>
In the first example, the expenses of Class B and Class C do not include the
Early Withdrawal Charge. In the second example, expenses for Class B and Class C
include the applicable Early Withdrawal Charges.
1. Class B expenses for years seven through 10 are based on estimated Class A
expenses, since Class B shares automatically convert to Class A 72 months
after repurchase.
A Brief Overview of the Fund
This section summarizes information that is discussed in more detail later in
this Prospectus. You should carefully read the more detailed information. For a
more complete discussion of risks of investing in the Fund, please refer to
"Main Risks of Investing in the Fund," below.
What is the Fund? The Fund is a closed-end, management investment company,
organized as a Massachusetts business trust. The Fund is non-diversified. That
means that under the Investment Company Act of 1940, the Fund is not limited in
the amount of assets that it may invest in any single issuer of securities.
However, the Fund intends to diversify its assets to the extent required under
the Internal Revenue Code so that it can qualify as a "regulated investment
company" for tax purposes. See "Dividends, Capital Gains and Taxes."
What is the Fund's Investment Objective? The Fund seeks as high a level of
current income and preservation of capital as is consistent with investing
primarily in senior floating rate loans and other debt securities.
What does the Fund Invest In? Under normal market conditions the Fund will
invest at least 80% of its total assets in collateralized floating (sometimes
referred to as "adjustable") rate senior loans made to U.S. and foreign
borrowers that are corporations, partnerships or other business entities (these
are referred to as "Senior Loans" in this Prospectus). The Fund will do so
either as an original lender or as purchaser of an assignment of a loan or a
participation interest in a loan. Loans to foreign borrowers must be
dollar-denominated and payable in U.S. dollars. Senior Loans pay interest at
rates that float above (or are adjusted periodically based on) a benchmark that
reflects current interest rates, such as the prime rate offered by one or more
major U.S. banks (referred to as "Prime Rate"), the certificate of deposit
("CD") rate, or the London Inter-Bank Offered Rate (referred to as "LIBOR").
The Fund can also invest up to 20% of its total assets in cash and
other securities, such as unsecured floating rate senior loans, secured or
unsecured fixed-rate loans, collateralized loan obligations, and
investment-grade short-term debt obligations, under normal market conditions.
The Fund can use derivative instruments, including options, futures contracts,
asset-backed securities, interest rate swaps and total return swaps, to hedge
its portfolio. The Fund can borrow money and use other techniques to manage its
cash flow and to finance repurchase offers. The Fund will not borrow money for
purposes of investment leverage.
The Fund's investments in debt obligations, including Senior Loans,
must either be rated "B" or higher (at the time the Fund buys them) by a rating
organization such as Standard & Poor's or Moody's, or, if unrated, determined by
the Manager to be of comparable quality. See "Does The Fund Have Credit Quality
Standards for Senior Loans," below. Some of these investments involve high risk,
as described in "Special Risks of Lower-Grade Securities," below.
What are the Main Risks of Investing in the Fund? The Fund is subject to a
number of investment risks, described in "Main Risks of Investing in the Fund,"
below. In summary, the Fund's investments in debt securities are subject to
interest rate risk, the risk of fluctuation in price from changes in prevailing
interest rates, although investments in floating rate loans are expected to be
less affected by changes in short-term interest rates than fixed-rate debt
securities. Also, the Fund invests mainly in debt obligations that are subject
to credit risks, including the risk that the borrower will not pay interest and
will not repay the principal amount of the obligation in a timely manner.
Although the Fund's investments in Senior Loans must be collateralized, the
Fund's other investments need not be collateralized. The risk of default is
greater in the case of the lower-grade obligations in which the Fund can invest
without limit. Most Senior Loans and many of the Fund's other investments are
illiquid, which may make it difficult for the Fund to dispose of them at an
acceptable price when it wants to.
There are other risks of investing in the Fund. The Fund is
non-diversified, which means that it can invest a greater amount of its assets
in one issuer's debt, and therefore it will be exposed to greater risks than
funds that diversify their investments over a wider range of issuers. The Fund's
shares are illiquid, which means that investors may not be able to sell their
shares when they want to. The Fund is a new Fund, with no operating history.
Unlike an open-end mutual fund, the Fund does not redeem its shares daily. No
market currently exists for the Fund's shares and the Fund does not anticipate
that a secondary market will develop for its shares. The Fund does not intend to
list shares on any national securities exchange or arrange for the quotation of
the price of its shares on any over-the-counter market. Even though the Fund
will make quarterly tender offers to repurchase a portion of its shares to try
to provide liquidity to shareholders, you should consider an investment in the
Fund to be illiquid.
Who is the Fund Designed For? The Fund is designed primarily for investors
seeking high current income from a fund that will invest primarily in senior
loan obligations that may have higher risks than conventional debt securities.
The Fund's investment strategy allows investors to participate in the corporate
loan market, which may be difficult for individuals to invest in directly
because Senior Loans have very large minimum investments, typically $5 million
or more. Since the Fund's income level will fluctuate, it is not designed for
investors needing an assured level of current income. The Fund does not seek
capital appreciation.
The Fund is designed as a long-term investment and not as a short-term
trading vehicle. It may be appropriate for a portion of an investor's overall
investment portfolio. However, the Fund is not a complete investment program.
Because of the limited liquidity of Fund shares through Repurchase Offers, the
Fund may not be an appropriate investment for retirement plans whose owners need
to make periodic distributions at a fixed level. The Fund is not an appropriate
investment for investors needing ready access to their money, since Fund shares
are not redeemable daily and are not traded in a secondary market.
How Can I Buy Shares? The Fund's Distributor, OppenheimerFunds Distributor,
Inc., intends to offer the Fund's Class B and Class C shares in a continuous
public offering through securities dealers. The initial offering price for Class
B and Class C shares on the date of this Prospectus is $10.00 per share, and
after that date the offering price will be equal to the net asset value per
share of the respective class calculated each regular business day. The minimum
initial investment is $1,000 ($250 for retirement accounts). Minimum subsequent
investments are $25.
The Distributor reserves the right to waive any minimum investment
requirements and to refuse any order for the purchase of shares. The Distributor
may suspend the continuous offering of shares at any time. The Fund's Class A
shares may not be purchased directly at this time. They are available only upon
the automatic conversion of Class B shares of the Fund.
How Do the Fund's Repurchase Offers Provide Liquidity? The Fund intends to make
quarterly Tender Offers to repurchase shares from shareholders. The Fund may
impose an Early Withdrawal Charge on Class B and Class C shares if you sell your
shares within specified time periods after purchasing them. That Early
Withdrawal Charge may be waived in certain circumstances. See "How to Buy
Shares."
Each quarter the Fund will offer to repurchase between 5% and 25% of
its outstanding shares. In response to each Repurchase Offer, shareholders may
choose to tender some or all of their shares to the Fund for repurchase. Shares
accepted for repurchase will be repurchased at a price equal to the net asset
value per share. Each Repurchase Offer will last for a period between three
weeks and six weeks. The Fund will notify shareholders in writing at the
beginning of each Repurchase Offer. If more shares are tendered than the amount
of the Repurchase Offer, the repurchases will be pro-rated. There can be no
assurance that the Fund will be able to repurchase all shares that you tender.
Please refer to "Periodic Repurchase Offers" below for details.
Are There Any Sales Charges for Investing in the Fund? There are no initial
sales charges for buying shares of the Fund. However, if you tender shares for
repurchase and if your shares are repurchased by the Fund, in some cases you may
be subject to Early Withdrawal Charges that apply to Class B and Class C shares:
o If your Class B shares are repurchased by the Fund within five years of the
end of the month in which you originally purchased them, the Early Withdrawal
Charge is 3% for repurchases during the first year; 2% during the second year;
1.5% during the third and fourth years; 1% during the fifth year. There is no
Early Withdrawal Charge for repurchases after five years.
o If your Class C shares are repurchased by the Fund within 12
months of the end of the month in which you originally purchased
them, you will pay a 1% Early Withdrawal Charge.
The Fund may waive the Early Withdrawal Charge in specified
transactions and for certain classes of investors described in Appendix C to the
Statement of Additional Information. The Fund does not currently charge any
other repurchase fee, but the Board of Trustees could impose that type of fee in
the future, to help cover Fund expenses.
The Early Withdrawal Charge is based on the lesser of the then current
net asset value or the original purchase price of the repurchased shares. The
Early Withdrawal Charge does not apply to shares purchased by reinvesting
dividends or capital gains distributions. Please refer to "How to Buy Shares"
and "Periodic Repurchase Offers."
Who Manages the Fund? OppenheimerFunds, Inc. is the Fund's investment advisor
(and is referred to as the "Manager" in this Prospectus). The Fund's portfolio
managers are employed by the Manager.
Main Risks of Investing in the Fund.
All investments carry risks to some degree. The Fund's investments in Senior
Loans and other debt securities are subject to changes in their value from a
number of factors. They include changes in general bond market movements in the
U.S. and abroad (this is referred to as "market risk") or the change in value of
particular Senior Loans or other debt securities because of an event affecting
the borrower or issuer (this is known as "credit risk"). Changes in interest
rates can also affect prices of debt securities (this is known as "interest rate
risk"). The Fund can invest in foreign loans and other debt securities.
Therefore, it will be subject to the risks that economic, political or other
events can affect the values of loans to borrowers or securities of issuers in
particular foreign countries.
The risks summarized below and elsewhere in this Prospectus
collectively form the risk profile of the Fund and can affect the value of the
Fund's investments, its investment performance and its net asset values per
share. These risks mean that you can lose money by investing in the Fund. When
you sell your shares, they may be worth more or less than what you paid for
them. The following information summarizes the main risks of investing in the
Fund. There is no assurance that the Fund will achieve its investment objective.
Credit Risk. Debt securities are subject to credit risk. Credit risk relates to
the ability of the borrower under a Senior Loan or the issuer of a debt security
to make interest and principal payments on the loan or security as they become
due. If the borrower or issuer fails to pay interest, the Fund's income might be
reduced. If the borrower or issuer fails to repay principal, the value of that
security and the net asset values of the Fund's shares might be reduced. The
Fund's investments in Senior Loans and other debt securities, particularly those
below investment grade, are subject to risks of default.
While the Fund's investments in Senior Loans will be secured by
collateral, lenders may have difficulty liquidating the collateral or enforcing
their rights under the terms of the Senior Loans in the event of the borrower's
default. Also, the Fund can invest part of its assets in loans and other debt
obligations that are not collateralized.
Interest Rate Risk. In general, the value of a debt security changes as
prevailing interest rates change. For fixed-rate debt securities, when
prevailing 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 Senior Loans in which the Fund invests have floating or adjustable
interest rates. For that reason, the Manager expects that when interest rates
change, the values of Senior Loans will fluctuate less than those of fixed-rate
debt securities, and that the net asset values of the Fund's shares will
fluctuate less than the shares of funds that invest mainly in fixed rate debt
obligations. However, the interest rates of some Senior Loans adjust only
periodically. Between the times that interest rates on Senior Loans adjust, the
interest rates on those Senior Loans may not correlate to prevailing interest
rates. That will affect the value of the loans and may cause the net asset
values of the Fund's shares to fluctuate.
Non-Diversification Risk. The Fund is "non-diversified" under the Investment
Company Act. That means that the Fund can invest in the securities of a single
issuer without limit. This policy gives the Fund more flexibility to invest in
the obligations of a single borrower or issuer than if it were a "diversified"
fund. However, the Fund intends to diversify its investments so that it will
qualify as a "regulated investment company" under the Internal Revenue Code
(although it reserves the right not to qualify). Under that requirement, with
respect to 50% of its total assets, the Fund may invest up to 25% of its assets
in the securities of any one borrower or issuer. To the extent the Fund invests
a relatively high percentage of its assets in the obligations of a single issuer
or a limited number of issuers, the Fund is subject to additional risk of loss
if those obligations lose market value or the borrower or issuer of those
obligations defaults.
Borrowing. The Fund can borrow money in an amount up to 33 1/3% of its total
assets (after counting the assets purchased with the amount borrowed). The Fund
will borrow if necessary only to obtain short-term credit to allow it to
repurchase shares during Repurchase Offers, to manage cash flow, and to fund
commitments to purchase Senior Loans. The Fund will not borrow money for
leverage purposes. Borrowing imposes additional costs on the Fund that it would
not otherwise have, reducing the income available to pay shareholders.
Borrowing may impose other risks. Lenders to the Fund will have
preference over the Fund's shareholders as to payments of interest and
repayments of principal on amounts that the Fund borrows and preference to the
Fund's assets in the event of its liquidation. Lending terms may limit the
Fund's activities, including its ability to pay dividends to shareholders.
Lending agreements may also grant the lenders certain voting rights if the Fund
defaults in the payment of interest or principal on the loan.
Limited Secondary Market for Senior Loans. Due to restrictions on transfer in
loan agreements and the nature of the private syndication of Senior Loans,
Senior Loans generally are not as easily purchased or sold as publicly-traded
securities. As a result, many Senior Loans are illiquid, which means that the
Fund may be limited in its ability to sell Senior Loans at an acceptable price
when it wants to, in order to generate cash, avoid losses, or to meet repurchase
requests.
Highly leveraged Senior Loans and Senior Loans in default also may be
less liquid than other Senior Loans. If the Fund voluntarily or involuntarily
sold those types of Senior Loans, it might not receive the full value it
expected. The market for illiquid securities is more volatile than the market
for liquid securities. The Fund could have difficulty selling illiquid portfolio
securities. The inability to dispose of assets may make it difficult for the
Fund to raise the money needed to repurchase shares in a Repurchase Offer. The
Board of Trustees will consider the liquidity of the Fund's portfolio securities
to determine whether to suspend or postpone a Repurchase Offer.
Possible Limited Availability of Senior Loans. Direct investments in Senior
Loans and, to a lesser degree, investments in participation interests in or
assignments of Senior Loans may be limited. There is a risk that the Fund may
not be able to invest at least 80% of its total assets in Senior Loans. The
limited availability may be due to a number of factors. There may be more
willing purchasers of direct loans than there are willing purchasers of
Participation Interests or Assignments. Direct lenders may allocate only a small
number of Senior Loans to new investors, including the Fund. Also, lenders or
Agents may have an incentive to market the less desirable Senior Loans to
investors such as the Fund while retaining attractive loans for themselves. This
would reduce the amount of attractive investments for the Fund. If market demand
for Senior Loans increases, the interest paid by Senior Loans that the Fund
holds may decrease. Also, the Fund may have difficulty finding Senior Loans to
invest in that meet its credit criteria.
Special Risks of Lower-Grade Securities. The Fund can invest up to 100% of its
total assets in Senior Loans and other securities that are rated below BBB by
Standard & Poor's or Baa by Moody's or that have comparable ratings by another
rating organization, or, if unrated, that are considered by the Manager to be of
comparable quality. These obligations are below investment grade. The Fund may
invest in obligations of borrowers in connection with a restructuring under
Chapter 11 of the U.S. Bankruptcy Code if the obligations meet the credit
standards of the Manager. Debt securities below investment grade tend to offer
higher yields than investment grade securities to compensate investors for the
higher risk, and are commonly referred to as "high risk securities" or, in the
case of bonds, "junk bonds."
Lower-grade securities involve much higher risk than investment-grade
securities and may be considered speculative. These securities may expose the
Fund to financial market risks, interest rate risks and credit risks that are
significantly greater than the risks associated with investment-grade
securities. To the extent that the Fund holds lower-grade securities, its net
asset values are likely to fluctuate more, especially in response to economic
downturns. A projection of an economic downturn or a period of rising interest
rates, for example, could cause a decline in the prices of lower-grade
securities. The prices of lower-grade securities structured as zero-coupon or
pay-in-kind securities may be more volatile than securities that pay interest
periodically and in cash. In addition, the secondary market for lower-grade
securities generally is less liquid than the market for investment-grade bonds.
The lack of liquidity could adversely affect the price at which the Fund could
sell a lower-grade security.
Illiquidity of Fund Shares. The Fund is a closed-end investment company designed
primarily for long-term investors and not as a trading vehicle. The Fund does
not intend to list its shares on any national securities exchange or arrange for
their quotation on any over-the-counter market. The Fund's shares are not
readily marketable, and you should consider them to be illiquid. For these
reasons, the Fund has adopted a policy to offer each quarter to repurchase
between 5% and 25% of the shares outstanding. Under certain circumstances, you
may pay an Early Withdrawal Charge if your shares are accepted for repurchase in
a periodic Repurchase Offer. See "Periodic Repurchase Offers" and "How to Buy
Shares." In addition, there is no guarantee that you will be able to sell all
the shares that you want to sell during any one Repurchase Offer. See
"Repurchase Offers."
Year 2000 Risks. Because many computer software systems in use today cannot
distinguish the year 2000 from the year 1900, the markets for securities in
which the Fund invests could be detrimentally affected by computer failures
beginning January 1, 2000. Failure of computer systems used for securities
trading could result in settlement and liquidity problems for the Fund and other
investors. That failure could have a negative impact on the handling of
securities trades, pricing and accounting services. Data processing errors by
government issuers of securities could result in economic uncertainties, and
issuers may incur substantial costs in attempting to prevent or fix such errors,
all of which could have a negative effect on the Fund's investments and returns.
The Manager, the Distributor and the Transfer Agent have been working
on necessary changes to their computer systems to deal with the year 2000 and
expect that their systems will be adapted in time for that event, although there
cannot be assurance of success. Additionally, the services they provide depend
on the interaction of their computer systems with those of brokers, information
services, the Fund's custodian bank and other parties. Therefore, any failure of
the computer systems of those parties to deal with the year 2000 may also have a
negative effect on the services they provide to the Fund. The extent of that
risk cannot be ascertained at this time.
Concentration. Although the Fund cannot invest 25% or more of its total assets
in securities or obligations of borrowers in a single industry, the Fund may
look to the creditworthiness of the agent bank and other intermediate
participants in a Senior Loan, in addition to the borrower. That is because it
may be necessary to assert through the agent bank or intermediate participant
any rights that may exist under the loan against the borrower if the borrower
defaults. Those parties typically are commercial banks, thrift institutions,
insurance companies and finance companies (and their holding companies). Because
the Fund regards the "issuer" of a Senior Loan as including the borrower under
the loan agreement, the agent bank and any participant, the Fund may be deemed
to be concentrated in securities of issuers in the group of industries in the
financial services sector, including banks, bank holding companies, commercial
finance, consumer finance, diversified financial, insurance, savings and loans
and special purpose financial. The Fund will be subject to the risks associated
with financial institutions in those industries.
Companies in the financial services industries may be more susceptible
to particular economic and regulatory events such as fluctuations in interest
rates, changes in the monetary policy of the Board of Governors of the Federal
Reserve System, governmental regulations concerning those industries and
affecting capital raising activities and fluctuations in the financial markets.
Risks of Foreign Investing. The Fund can invest up to 20% of its total assets in
Senior Loans and unsecured loans that are made to, or other debt securities
issued by, foreign borrowers. While the Fund's foreign Senior Loans must be
dollar-denominated, and interest and principal payments must be payable in U.S.
dollars, which may reduce risks of currency fluctuations on the values of those
Senior Loans, foreign obligations have risks not typically involved in domestic
investments.
Foreign investing can result in higher transaction and operating costs
for the Fund. Foreign issuers are not subject to the same accounting and
disclosure requirements that U.S. issuers are subject to. The value of foreign
investments may be affected by exchange control regulations, expropriation or
nationalization of a company's assets, foreign taxes, delays in settlement of
transactions, changes in governmental economic or monetary policies in the U.S.
or abroad, or other political and economic factors. Foreign countries may impose
withholding taxes on income paid on the debt securities of issuers in those
countries. The Fund may experience difficulty in repatriating foreign assets to
the U.S. See "Foreign Securities."
Risks of Using Derivatives and Hedging Strategies. If the Manager uses a
derivative instrument at the wrong time or judges market conditions incorrectly,
these strategies could result in a significant loss to the Fund and might reduce
the Fund's performance. The Fund could also experience losses if the prices of
its hedging instruments, futures and options positions were not properly
correlated with its other investments or if it could not close out a position
because of an illiquid market for the future, option or other derivative
instrument.
There are special risks in particular hedging strategies that the Fund
may use. For example, if a covered call written by the Fund is exercised on an
investment that has increased in value above the call price, the Fund will be
required to sell the investment at the call price and will not be able to
realize any profit on the investment above the call price. In writing a put,
there is a risk that the Fund may be required to buy the underlying security at
a disadvantageous price if the market value is below the put price. See
"Derivative Investments."
How Risky is the Fund Overall? Investing in a closed-end fund like the Fund
presents the risk that you may not be able to dispose of your investment readily
when you want to, even though the Fund will make quarterly Repurchase Offers for
a portion of its shares. The Fund's investment risks mean that the Fund's share
prices can go up or down, despite the expectation that investments in adjustable
rate Senior Loans may reduce short-term price volatility. The Fund's other fixed
income investments are also subject to short-term price volatility. The Fund's
emphasis on investments in loans exposes the Fund to the credit risks of the
borrowers who might not meet their debt service requirement in a timely fashion,
which could reduce the Fund's income, and subject it to losses of principal
value as well, even though most of the Fund's investments are collateralized.
The Fund seeks to maintain a relatively stable net asset value, but has
significantly more risks than a money market fund. The Fund is expected to have
less share price volatility than bond funds emphasizing investments in
fixed-rate debt investments.
Use of Proceeds of the Fund's Offering
The Fund will use the proceeds of the offering of its shares to invest in
accordance with its investment objectives and policies. Because at the date of
this Prospectus the Fund is a new fund, the investment of the proceeds it
receives from the sale of its shares in Senior Loans and other debt securities
will depend upon the amount and timing of proceeds available to the Fund as well
as the availability of Senior Loans and other debt securities. The investment of
80% of the Fund's total assets in Senior Loans may take up to 90 days after the
Fund commences its offering, and in the interim the Fund may invest a
substantial portion of its assets in short-term money market obligations and
other high-quality short-term debt securities. This may result in a lower level
of income for the Fund during that period.
The Fund and Its Investments
The Fund is a closed-end, non-diversified management investment company,
organized as a Massachusetts business trust on June 2, 1999. The Fund offers its
shares in a continuous public offering through the Distributor.
What is the Fund's Investment Objective? The Fund seeks as high a level of
current income and preservation of capital as is consistent with investing
primarily in senior floating rate loans and other debt obligations. There is no
assurance that the Fund will achieve its investment objective.
What Are the Fund's Principal Investment Policies? The allocation of the Fund's
portfolio among the different types of permitted investments will vary over time
based upon the evaluation of economic and market trends by the Manager. Under
normal circumstances: o the Fund will invest at least 80% of its total assets in
Senior Loans, rated B or higher by one or more rating organizations, or, if
unrated, determined to be of comparable quality by the Manager.
o the Fund may invest up to 20% of its total assets in other investments,
including:
o unsecured senior floating rate loans o secured or unsecured short-term
investment-grade debt obligations o debt obligations (other than senior loans)
of foreign issuers and foreign governments (but not in emerging markets)
o secured or unsecured fixed-rate loans o equity securities, including stocks
and warrants o asset-backed securities, such as collateralized loan obligations
o cash and cash equivalents
The Fund can also invest in derivative instruments, such as options,
currency and interest rate swap agreements, futures and structured notes, to
hedge the Fund's portfolio. These investments and strategies are described in
detail below.
How Do the Portfolio Managers Decide What Investments to Buy or Sell? In
selecting investments for the Fund, the Fund's portfolio managers evaluate
overall investment opportunities and risks among the types of investments the
Fund can hold. They analyze the credit standing and risks of borrowers whose
loans or debt securities they are considering for the Fund's portfolio. They
evaluate information about borrowers from their own research or supplied by
agent banks as well as other sources. They select only those Senior Loans made
to borrowers and debt securities issued by borrowers that they believe are
likely to pay the interest and repay the principal on their indebtedness when it
becomes due. The portfolio managers consider many factors, including among
others,
o the borrower's past and expected future financial performance
o the experience and depth of the borrower's management
o the collateral for the loan or other debt security in which the Fund proposes
to invest o the borrower's tangible assets and cash flows
o in the case of participation interests in and assignments of loans, the credit
quality of the debt obligations of the agent bank servicing the loan and other
intermediaries imposed between the borrower and the Fund, to assure the
indebtedness of those agents and intermediaries is investment grade.
Can the Fund's Investment Objective and Policies Change? The Fund's Board of
Trustees can change non-fundamental investment 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 objective is not
fundamental, which means that the Fund's Board of Trustees can change the Fund's
objective without shareholder approval. However, the objective will not be
changed without prior notice to shareholders. Some investment restrictions that
are fundamental policies are listed in the Statement of Additional Information.
An investment policy is not fundamental unless this Prospectus or the Statement
of Additional Information says that it is.
Senior Loans. The Senior Loans the Fund invests in are loans made to U.S. or
foreign corporations, partnerships or other business entities (referred to as
"borrowers"). The Senior Loans are often issued in connection with
recapitalizations, acquisitions, leveraged buyouts, and refinancings of
borrowers. The Fund's Senior Loans, including loans to foreign borrowers, must
be U.S. dollar-denominated and interest and principal must be payable in U.S.
dollars. The Fund's Senior Loans must also be fully secured by collateral, as
discussed below.
What Are Floating or Adjustable Interest Rates? Senior loans are debt
obligations on which interest is payable at rates that adjust periodically,
using a base rate plus a premium or spread above the base rate. The base rate
usually is a benchmark that "floats" or changes to reflect current interest
rates, such as o the prime rate offered by one or more major U.S. banks
(referred to as the "Prime Rate") or o the London Inter-Bank Offered Rate
("LIBOR"), or o the certificate of deposit ("CD") rate or other base rate used
by commercial lenders.
The applicable rate is defined in the loan agreement. Borrowers tend to
select the base lending rate that results in the lowest interest cost, and the
rate selected may change from time to time. If the benchmark interest rate on a
Senior Loan changes, the rate payable to lenders under the Senior Loan will, in
turn, change at the next scheduled adjustment date. If the benchmark rate
increases, the Fund would earn interest at a higher rate on that Senior Loan,
but after the adjustment date. If the benchmark rate decreases, the Fund would
earn interest at a lower rate on that Senior Loan after the adjustment date.
Interest rates may adjust daily, monthly, quarterly, semi-annually or
annually. The Fund does not intend to invest more than 5% of its total assets in
Senior Loans with interest rates that adjust less often than semi-annually. The
Fund may use interest rate swap agreements and other hedging practices to
shorten the effective interest rate adjustment period of a Senior Loan. Because
investments in Senior Loans with longer interest rate adjustment periods may
increase fluctuations in the Fund's net asset values as a result of interest
rate changes, the Fund will attempt to maintain a dollar-weighted average time
until the next interest rate adjustment of 90 days or less for its portfolio of
Senior Loans.
How Are Senior Loans Created? Senior Loans typically are negotiated
between a borrower and one or more commercial banks or other financial
institutions as lenders. The lenders are represented by one or more lenders
acting as agent of all of the lenders. The Senior Loans then are syndicated
among a group of commercial banks and financial institutions.
The agent is responsible for negotiating the terms of the loan
agreement that establishes the terms and conditions of the Senior Loan and the
rights of the borrower and the lenders. The agent typically administers and
enforces the loan on behalf of the other lenders in the syndicate. The agent
normally is responsible to collect principal and interest payments from the
borrower and to apportion those payments among the lenders that are parties to
the agreement. The borrower compensates the agent for its services. That
compensation may include fees for funding and structuring the loan as well as
fees on a continuing basis for other services. A purchaser of a Senior Loan may
receive certain syndication or participation fees in connection with its
purchase. Other fees payable with respect to a Senior Loan, which are separate
from interest payments, may include facility, commitment, amendment and
prepayment fees.
The Fund will generally rely on the agent under a particular Senior
Loan to collect the Fund's portion of the loan payments and to use any
appropriate remedies against the borrower if necessary. In addition, an
institution (which may or may not be the agent) holds any collateral under the
loan on behalf of the lenders. If the agent under a Senior Loan became insolvent
or was declared a bankrupt or had a receiver appointed, the agent's appointment
under the Senior Loan may be terminated and a successor would be appointed.
While in that case the assets held under the loan should remain available to the
lenders, if those assets were determined by a court or regulatory authority to
be subject to the claims of the agent's creditors, the Fund might incur delays
and costs in realizing payment on the loan, or it might suffer a loss of
principal and/or interest.
Senior Loans often have restrictive covenants designed to limit the
activities of the borrower in an effort to protect the right of Lenders to
receive timely payments of interest on and repayment of principal of the Senior
Loans.
How Does the Fund Invest in Senior Loans? The Fund may act as one of
the original lenders originating a Senior Loan, or it may purchase an assignment
of portions of Senior Loans from third parties, or it may invest in
participation interests in Senior Loans. Senior Loans also include debt
obligations of foreign borrowers that are in the form of dollar-denominated
notes rather than loan agreements.
The Fund may be required to pay and may receive various fees and
commissions in connection with buying, selling and holding interests in Senior
Loans. Borrowers typically pay a variety of fees to lenders when a Senior Loan
is originated. The Fund may receive those fees directly if it acts as an
original lender or if it acquires an assignment of a Senior Loan. When the Fund
buys an assignment, it may be required to pay a fee to the assigning lender or
forgo a portion of the interest or fees payable to it. The seller of a
participation interest may deduct a portion of the interest and any fees payable
to the Fund as an administrative fee. Similarly, the Fund might be required to
pass along to a buyer of a Senior Loan from the Fund a portion of the fees that
the Fund is entitled to.
The Fund may have obligations under a Senior Loan, including the
obligation to make additional loans in certain circumstances. In that case, the
Fund will reserve against that contingency by segregating on its books cash or
other liquid securities in an amount equal to the obligation. The Fund will not
purchase a Senior Loan that would require the Fund to make additional loans if
as a result of that purchase all of the Fund's additional loan commitments would
exceed 20% of the Fund's total assets or would cause the Fund to fail to meet
the diversification requirements imposed under the Internal Revenue Code to
qualify as a regulated investment company.
o Acting as an Original Lender. When the Fund acts as an original lender, it
participates in structuring the Senior Loan. As an original lender it will have
a direct contractual relationship with the borrower and may enforce the
borrower's compliance with the terms of the loan agreement. The Fund may also
have rights with respect to any funds acquired by other lenders under the Loan
Agreement as a set-off against the borrower. Lenders have full voting and
consent rights as to the provisions under loan agreements. Action by lender
votes or consent may require approval of a specified percentage of lenders, or,
in some cases, unanimous consent. The Fund will not act as the agent or
collateral holder for a Senior Loan, nor as a guarantor or sole negotiator with
respect to a Senior Loan.
o Buying Assignments of Loans. If the Fund purchases an assignment from a
lender, the Fund typically will succeed to all of the rights and obligations
under the loan agreement of the assigning lender and will generally become a
"lender" for the purposes of the particular loan agreement. In that case the
Fund will have direct contractual rights under the loan agreement and any
related collateral security documents in favor of the lenders under that loan
agreement. In some cases the rights and obligations acquired by a purchaser of
an assignment may differ from, and be more limited than, those held by the
assigning lender.
o Buying Participation Interests. Participation interests may be acquired from a
lender or from other holders of participation interests. If the Fund buys a
participation interest from a lender or other Participant, the Fund will not
have a direct contractual relationship with the borrower and will be required to
rely on the lender or participant that sold the participation interest to
enforce the Fund's rights against the borrower and also to collect payments due
under the Senior Loan and to foreclose on collateral in the event of the
borrower's default. In that case, the Fund is subject to the credit risk of both
the borrower and the selling lender or participant interposed between the
borrower and the Fund under the loan (these are referred to as intermediate
participants).
In the case of participation interests, the Fund might have to assert any
rights it may have against the borrower through an intermediate participant if
the borrower fails to pay interest and principal when due. In that case the Fund
might be subject to greater delays, risks and expenses than if the Fund could
assert its rights directly against the borrower. The Fund may not have any right
to vote on whether to waive enforcement of restrictive covenants breached by a
borrower and might not benefit directly from collateral supporting the Senior
Loan in which it has purchased a participation interest.
Also, under a participation interest the Fund might be deemed to be a
creditor of the intermediate participant rather than the borrower, so that the
Fund will be exposed to the credit risks of the intermediate participant.
Therefore, the Fund will invest in loans through the purchase of participation
interests only if at the time of investment the outstanding debt obligations of
the agent bank and any intermediate participants are investment grade. That
means they must be rated BBB or A-3 or higher by Standard & Poor's, or Baa or
P-3 or higher by Moody's, or have a similar rating by another rating
organization. If they are unrated, they must be deemed comparable to
investment-grade securities by the Manager.
What is the Priority of a Senior Loan? Senior Loans generally hold a
senior position in the capital structure of the borrower. They may include loans
that hold the most senior position, loans that hold an equal ranking with other
senior debt, or loans that are, in the judgment of the Manager, in the category
of senior debt of the borrower. That senior position in the borrower's capital
structure generally gives the holders of Senior Loans a claim on some or all of
the borrower's assets that is senior to that of subordinated debt, preferred
stock and common stock of the borrower in the event that the borrower defaults
or becomes bankrupt.
Does the Fund Have Collateral Requirements for Senior Loans? The Senior
Loans in which the Fund invests must be fully collateralized with one or more of
(1) working capital assets, such as accounts receivable and inventory, (2)
tangible fixed assets, such as real property, buildings and equipment, (3)
intangible assets such as trademarks or patents, or (4) security interests in
shares of stock of subsidiaries or affiliates. A loan agreement may or may not
require the borrower to pledge additional collateral to secure a Senior Loan if
the value of the initial collateral declines.
Collateral may consist of assets that may not be readily liquidated,
and there is no assurance that the liquidation of those assets would satisfy a
borrower's obligations under a Senior Loan. In the case of loans to a non-public
company, the company's shareholders or owners may provide collateral in the form
of secured guarantees and/or security interests in assets that they own.
The Fund will not invest in Senior Loans unless, at the time of
investment, the Manager determines that the value of the collateral equals or
exceeds the aggregate outstanding principal amount of the Senior Loan. The Fund
may invest up to 20% of its total assets in corporate loans that are not secured
by specific collateral, as described below in "Other Investments." Unsecured
loans involve a greater risk of loss.
Does the Fund Have Credit Quality Standards for Senior Loans? Rating
organizations, such as Standard & Poor's or Moody's Investor Services, rate debt
obligations by rating the issuer, after evaluating the issuer's financial
soundness. Generally, the lower the investment rating, the more risky the
investment. Debt securities rated below "BBB-" by Standard & Poor's or "Baa3" by
Moody's are commonly referred to as "high risk" securities or "junk bonds." The
Fund will invest at least 80% of its total assets in Senior Loans that are rated
"B" or higher by one or more rating organizations, or, if unrated, determined by
the Manager to be of comparable quality. Senior Loans rated "B" are below
investment grade and are regarded by rating organizations as predominantly
speculative with respect to the borrower's ability to repay interest and
principal when due over a long period. While securities rated Baa by Moody's or
BBB by Standard & Poor's are considered to be "investment grade," they have some
speculative characteristics.
The Fund may invest in Senior Loans that are rated both investment
grade and below investment grade by different rating organizations. The Fund can
invest up to 100% of its assets in Senior Loans that are below investment grade.
The Fund is not obligated to dispose of its investment in a Senior Loan if its
rating drops below "B," but the Manager will monitor those loans to determine if
any action is warranted or desirable. Many Senior Loans are not rated by rating
organizations. The lack of a rating does not necessarily imply that a loan is of
lesser investment quality. There is no limit on the Fund's investment in unrated
Senior Loans. Appendix A to this Prospectus includes the definitions of the
rating categories of the principal rating organizations.
How Does the Manager Analyze Senior Loans? The Manager performs its own
credit analysis of Senior Loans. The Manager obtains information from the agents
that originate or administer the loans, other lenders and other sources. If a
Senior Loan is rated, the Manager will also evaluate the rating organization's
information about the borrower. The Manager will continue to analyze the credit
of a Senior Loan while the Fund owns that Senior Loan.
In its analysis, the Manager may consider many factors, including the
borrower's past and future projected financial performance; the quality and
depth of management; the quality of the collateral; the borrower's cash flow;
factors affecting the borrower's industry; the borrower's position in the market
and its tangible assets. Typically, the borrowers use the proceeds of Senior
Loans to finance leveraged buyouts, recapitalizations, mergers, acquisitions,
stock repurchases, debt refinancings, and, to a lesser extent, other purposes.
Those may be highly leveraged transactions that pose special risks.
The Manager will consider a Senior Loan for the Fund's portfolio only
if the Manager believes that a borrower under a Senior Loan is likely to repay
its obligations. For example, the Manager may determine that a borrower can meet
debt service requirements from cash flow or other sources, including the sale of
assets, despite the borrower's low credit rating. The Manager may determine that
Senior Loans of borrowers that are experiencing financial distress, but that
appear able to pay their interest, present attractive investment opportunities.
There can be no assurance that the Manager's analysis will disclose factors that
may impair the value of a Senior Loan.
Does the Fund Have Maturity Limits for Senior Loans? The Fund has no
limits as to the maturity of Senior Loans it may purchase. Senior Loans in
general have a stated term of between five and nine years. However, because
Senior Loans typically amortize principal over their stated life and frequently
are prepaid, their average credit exposure is expected to be two to three years.
Senior Loans usually have mandatory and optional prepayment provisions.
If a borrower prepays a Senior Loan, the Fund will have to reinvest the proceeds
in other Senior Loans or securities that may pay lower interest rates. However,
prepayment and facility fees the Fund received may help reduce any adverse
impact on the Fund's yield. Because the interest rates on Senior Loans adjust
periodically, the Manager believes that the Fund should generally be able to
reinvest prepayments in Senior Loans that have yields similar to those that have
been prepaid.
What are the Risks of Default on Senior Loans? Generally, Senior Loans
involve less risk from default than other debt obligations, because in most
instances they take preference over subordinated debt obligations and common
stock with respect to payment of interest and principal. However, the Fund is
subject to the risk that the borrower under a Senior Loan will default on
scheduled interest or principal payments. The risk of default will increase in
the event of an economic downturn or a substantial increase in interest rates
(which will increase the cost of the borrower's debt service as the interest
rate on its Senior Loan is upwardly adjusted). The Fund may own a debt
obligation of a borrower that is about to become insolvent. The Fund can also
purchase debt obligations that are issued in connection with a restructuring of
the borrower under bankruptcy laws.
o Collateralized Senior Loans. Senior Loans that the Fund will purchase must be
backed by collateral. However, the value of the collateral may decline after the
Fund buys the Senior Loan, particularly if the collateral consists of equity
securities of the borrower or its affiliates. If a borrower defaults, insolvency
laws may limit the Fund's access to the collateral, or the lenders may be unable
to liquidate the collateral. If the collateral becomes illiquid or loses some or
all of its value, the collateral may not be sufficient to protect the Fund in
the event of a default of scheduled interest or principal payments. See "Highly
Leveraged Transactions" and "Insolvency Considerations With Respect to Borrowers
of Senior Loans," below.
The Manager will value the collateral for loans by methods that may include
reference to the borrower's financial statements, an independent appraisal, or
obtaining market values from pricing services. The Manager may assign a value to
the collateral that is higher than the value assigned by the borrower. The agent
bank for a loan may rely on independent appraisals, but the agent may be unable
to obtain them in all cases. If a lender accelerates the repayment of a Senior
Loan because of the borrower's violation of a restrictive covenant under the
loan agreement, the borrower might default in payment of the Senior Loan.
If a borrower defaults on a collateralized Senior Loan, the Fund may
receive assets other than cash or securities in full or partial satisfaction of
the borrower's obligation under the Senior Loan. Those assets may be illiquid,
and the Fund might not be able to realize the benefit of the assets for legal,
practical or other reasons. The Fund might hold those assets until the Manager
determined it was appropriate to dispose of them.
o Highly Leveraged Transactions. The Fund can invest a significant portion of
its assets in Senior Loans made in connection with highly leveraged
transactions. These transactions may include operating loans, leveraged buyout
loans, leveraged capitalization loans, and other types of acquisition financing.
The Fund can also invest in Senior Loans of borrowers that are experiencing, or
are likely to experience, financial difficulty. In addition, the Fund can invest
in Senior Loans of borrowers that have filed for bankruptcy protection or that
have had involuntary bankruptcy petitions filed against them by creditors. Those
Senior Loans are subject to greater credit and liquidity risks than other Senior
Loans.
o Insolvency Considerations With Respect to Borrowers. Various laws enacted for
the protection of creditors may apply to Senior Loans. A bankruptcy proceeding
against a borrower could delay or limit the ability of the Fund to collect the
principal and interest payments on that borrower's Senior Loans. In a lawsuit
brought by creditors of a borrower under a Senior Loan, a court or a trustee in
bankruptcy could take certain actions that would be adverse to the Fund. For
example:
o Other creditors might convince the court to set aside a Senior Loan or the
collateralization of the loan as a "fraudulent conveyance" or "preferential
transfer." In that event, the court could recover from the Fund the interest and
principal payments that the borrower made before becoming insolvent. There can
be no assurance that the Fund would be able to prevent that recapture.
o A bankruptcy court may restructure the payment obligations under the Senior
Loan so as to reduce the amount to which the Fund would be entitled.
o The court might discharge the amount of the Senior Loan that exceeds the value
of the collateral.
o The court could subordinate the Fund's rights to the rights of other creditors
of the borrower under applicable law.
Although the Fund's senior and collateralized positions under a Senior Loan
provides some assurance that the Fund would be able to recover most of its
investment in the event of a borrower's default, the collateral might be
insufficient to cover the borrower's debts. A bankruptcy court might find that
the collateral securing the Senior Loan is invalid or require the borrower to
use the collateral to pay other outstanding obligations. If the collateral
consists of stock of the borrower or its subsidiaries, the stock may lose all of
its value in the event of a bankruptcy, which would leave the Fund exposed to
greater potential loss.
o Decline in Market Value. If a borrower defaults on a scheduled interest or
principal payment on a Senior Loan, the Fund may experience a reduction of its
income. In addition, the value of the Senior Loan would decline, which may, in
turn, cause the Fund's net asset values to fall.
Other Investments. Under normal circumstances, the Fund can invest up to 20% of
its total assets (measured at the time of purchase) in investments other than
Senior Loans. Those other investments are described below. More information can
be found about them in the Statement of Additional Information.
Subordinated Debt Obligations. The Fund can purchase fixed-rate and
adjustable-rate subordinated debt obligations rated B or better by a rating
organization or, if unrated, judged by the Manager to be of comparable quality.
Subordinated debt obligations do not have the same level of priority as Senior
Loans and accordingly involve more risk than Senior Loans. If a borrower becomes
insolvent, the borrower's assets may be insufficient to meet its obligations to
the holders of its subordinated debt.
Short-Term, Investment-Grade Debt Obligations. The Fund can hold cash and
invest in cash equivalents such as highly-rated commercial paper, bank
obligations, repurchase agreements, Treasury bills and short-term U.S.
government securities.
Repurchase Agreements. The Fund can acquire securities subject to
repurchase agreements. It might do so for liquidity purposes to meet anticipated
repurchases 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.
Unsecured Loans. The Fund can invest in floating rate senior loans that are
not secured by any specific collateral of the borrower. In particular, if the
borrower is unable to pay interest or defaults in the payment of principal,
there will be no collateral on which the Fund can foreclose. Therefore these
loans present greater risks than collateralized Senior Loans. The Fund applies
the same investment and credit standards to unsecured Senior Loans as to secured
Senior Loans, except for collateral requirements.
U.S. Government Securities. The Fund can invest in securities issued or
guaranteed by the U.S. Treasury or other U.S. government agencies or
federally-chartered corporate entities referred to as "instrumentalities." These
are referred to as "U.S. government securities" in this Prospectus.
o U.S. Treasury Obligations. These include Treasury bills (which have maturities
of one year or less when issued), Treasury notes (which have maturities of from
one to ten years when issued), and Treasury bonds (which have maturities of more
than ten years when issued). 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").
o 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 U.S.
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").
Asset-Backed Securities. The Fund can buy asset-backed securities, which
are fractional interests in pools of receivables or loans that are
collateralized by the loans, other assets or receivables. They are issued by
trusts and special purpose corporations that pass the income from the underlying
pool to the buyer of the interest. These securities are subject to the risk of
default by the issuer as well as by the borrowers of the underlying loans in the
pool.
Neither the Fund nor the Manager selects the borrowers whose loans are
included in the pools or the collateral backing those loans. Collateralized loan
obligations are subject to the credit risk of the borrower and the institution
that creates the pool, as well as prepayment risks.
Equity Securities and Warrants. The Fund can acquire warrants and other
equity securities as part of a unit combining the Senior Loan and equity
securities of a borrower or its affiliates. The acquisition of equity securities
will be incidental to the Fund's purchase of a loan. The Fund may also acquire
equity securities and warrants issued in exchange for a Senior Loan or in
connection with the restructuring of a Senior Loan, subordinated and unsecured
loans, and high-yield securities.
Equity securities include common stocks, preferred stocks, and securities
convertible into common stock. Common stocks and preferred stocks represent
shares of ownership in a corporation or business entity. Preferred stocks
usually pay dividends and rank after the issuer's bonds, but before its common
stock, in claims on the issuer's assets in the event of insolvency. Convertible
securities are debt obligations or preferred stocks that convert into common
stock and usually pay higher dividends than common stocks. The value of
convertible securities is typically affected by the value of the underlying
stock into which they convert. Warrants are options to buy a stated number of
shares of common stock at a specified price for a specific time period. Equity
securities are subject to financial and market risks and fluctuate in value.
Investments in Other Investment Companies. The Fund can purchase shares
of other investment companies to the extent permitted by the Investment Company
Act. Investment companies typically pay management, custodian and other
transaction costs. Therefore, the Fund would be subject to duplicate expenses to
the extent that it purchases shares of other investment companies.
Other Investment Strategies. In seeking its objective, the Fund can also use the
investment techniques and strategies described below. The Manager might not
always use all of the different types of techniques and investments described
below. These techniques involve certain risks, although some are designed to
help reduce investment or market risks.
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. 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. There are no restrictions on the amount that the Fund may
invest in debt securities below investment grade. However, the Fund limits its
investments in debt securities to those rated "B" or higher or, if unrated,
deemed to be of comparable quality by the Manager.
Lower-grade debt securities are those rated below Baa by Moody's or lower
than BBB by Standard & Poor's or that have comparable ratings by other rating
organizations or that are deemed to be of comparable quality by the Manager if
they are unrated. These lower-grade securities are sometimes called "high risk"
securities or, in the case of bonds, "junk bonds" and are considered
speculative. While securities rated Baa by Moody's or BBB by Standard & Poor's
are considered "investment grade," they have some speculative characteristics.
Although investment-grade securities are subject to risks of non-payment of
interest and principal, lower-grade debt securities, 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,
and that the Fund's net asset values per share may be affected by declines in
value of these securities.
Foreign Securities. The Fund can invest in U.S. dollar-denominated Senior
Loans and can buy debt securities of governments and companies in countries that
the Manager deems to be developed countries. Not more than 20% of the Fund's
total assets may be invested in foreign securities, including Senior Loans.
While foreign securities offer special investment opportunities, there are also
special risks that can reduce the Fund's share prices and returns.
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
Fund makes from the income it receives from foreign securities as foreign
currency values change against the U.S. dollar. Foreign investing can result in
higher transaction and operating costs for the Fund. Foreign issuers are not
subject to the same accounting and disclosure requirements that U.S. companies
are subject to. The differences in foreign laws affecting creditors' rights may
pose special risks in the case of Senior Loans and other loans to foreign
borrowers.
The value of foreign investments may be affected by exchange control
regulations, expropriation or nationalization of a company's assets, foreign
taxes, delays in settlement of transactions, changes in governmental economic or
monetary policies in the U.S. or abroad, or other political and economic
factors. The Fund will not invest in securities of issuers in developing or
emerging market countries.
Zero-Coupon and "Stripped" Securities. Some of the government and corporate
debt securities the Fund can buy are zero-coupon obligations that pay no
interest. These securities are issued at a substantial discount from their face
value. "Stripped" securities are the separate income or principal components of
a debt security. Some collateralized loan obligations may be stripped, with each
component having a different proportion of principal or interest payments. One
class might receive all the interest and the other all the principal payments.
Zero-coupon and stripped securities are subject to greater fluctuations in
price from interest rate changes than interest-bearing securities. The Fund may
have to pay out the imputed income on zero-coupon securities without receiving
the actual cash currently. Interest-only and principal-only securities are
particularly sensitive to changes in interest rates.
The values of interest-only securities are also very sensitive to
prepayments of underlying obligations. When prepayments tend to fall, the timing
of the cash flows to principal-only securities increases, making them more
sensitive to changes in interest rates. The market for some of these securities
may be limited, making it difficult for the Fund to dispose of its holdings at
an acceptable price. The Fund can invest up to 20% of its total assets in
zero-coupon securities issued by either the U.S. government or U.S. companies.
"When-Issued" and "Delayed-Delivery" Transactions. The Fund can purchase
securities on a "when-issued" basis and may purchase or sell securities on a
"delayed-delivery" basis. These terms refer to securities that have been created
and for which a market exists, but which are not available for immediate
delivery. There might be a risk of loss to the Fund if the value of the security
declines prior to the settlement date. No income is received by the Fund on a
security purchased on a when-issued basis until the Fund receives the security
on the settlement of the trade.
Derivative Investments. The Fund can invest in a variety of "derivative"
investments, including futures contracts, put and call options, forward
contracts, options on futures and broadly-based securities indices, interest
rate swaps, currency swaps, total return swaps and structured notes. 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.
The Fund may use strategies with derivative instruments to hedge the Fund's
portfolio against price fluctuations. Some strategies, such as buying futures
and call options, would tend to increase the Fund's exposure to the securities
market. The Fund may also use derivative investments because they offer the
potential for a reduction of interest rate risk (by reducing the effective
maturity of an obligation). The Fund will not use derivative instruments for
speculative purposes. The Fund has established limits on its use of derivative
instruments. The Fund is not required to use them in seeking its goal.
o Options, Futures and Options on Futures. The Fund can buy and sell options,
futures contracts and options on futures contracts for a number of purposes. It
might do so to try to manage its exposure to the possibility that the prices of
its portfolio securities may decline, or to establish a position in the
securities market as a temporary substitute for purchasing individual
securities. It might do so to try to manage its exposure to changing interest
rates. The Fund will use them only as a means to hedge or manage the risks
associated with the assets it holds, or in anticipation of buying or selling
assets. Writing covered call options could be used to provide income to the Fund
for liquidity purposes or to raise cash to distribute to shareholders.
o Forward Contracts. Forward contracts can be used to try to manage foreign
currency risks on the Fund's foreign investments. Foreign currency options may
be used to try to protect against declines in the dollar value of foreign
securities the Fund owns, or to protect against an increase in the dollar cost
of buying foreign securities.
o Interest Rate Swaps, Currency Swaps and Total Return Swaps. Interest rate
swaps involve the exchange by the Fund with another party of their respective
commitments or rights to pay or receive interest, such as an exchange of fixed
rate payments for Senior Loans. For example, if the Fund holds a Senior Loan
with an interest rate that is adjusted only twice a year, it might swap the
right to receive interest at that fixed rate for the right to receive interest
at a rate that is adjusted every week. In that case, if interest rates rise, the
increased interest received by the Fund would help offset a decline in the value
of the Senior Loan. On the other hand, if interest rates fall, the Fund's
benefit from falling interest rates would decrease.
Foreign currency swaps involve the exchange by the Fund and a counterparty
of the right to receive foreign currency for the right to receive U.S. dollars.
The relative amounts of the currencies to be received by each party are fixed at
the time the swap is entered into. This locks in the right of the parties to
receive a predetermined amount of a particular currency. The Fund may use these
swaps to try to protect against fluctuations in exchange rates as to the
currencies in which its foreign investments are denominated.
In addition, the Fund can invest in total return swaps with appropriate
counterparties. Total return swaps involve the payment by the Fund of a floating
rate of interest in exchange for the total rate of return on a Senior Loan. For
example, instead of investing in a particular Senior Loan, the Fund could
instead enter into a total return swap and receive the total return of the
Senior Loan, in return for a floating rate payment to the counterparty.
Under a swap, the Fund typically pays a fee determined by multiplying the
face value of the swap agreement by an agreed-upon interest rate. If the value
of the underlying asset declines over the term of the swap, the Fund would be
required to pay the dollar value of that decline to the counterparty in addition
to the swap fees. The Fund intends to invest in swap transactions only if they
are exempt from regulation by the Commodity Futures Trading Commission under the
Commodity Exchange Act.
The risk of loss with respect to interest rate swaps and total return swaps
is limited to the current market value of the hedge at the time of its
expiration or termination. If the other party to a swap defaults, then the
Fund's risk of loss consists of the market value of the cost of replacement. The
Manager will evaluate the creditworthiness of interest rate swap counterparties.
There is no central exchange or market for swap transactions and therefore
they are less liquid investments than exchange-traded instruments. If the Fund
were to sell a swap it owned to a third party, the Fund would still remain
primarily liable for the obligations under the swap contract.
o "Structured" Notes. The Fund can buy "structured" notes, which are
specially-designed derivative debt investments. Their principal repayments or
interest payments are linked to the value of an index (such as a currency or
securities index) or commodity. The terms of the instrument may be "structured"
by the purchaser (the Fund) and the borrower issuing the note.
The principal and/or interest payments depend on the performance of one or
more other securities or indices, and the values of these notes will therefore
fall or rise in response to the changes in the values of the underlying security
or index. These notes are subject to both credit and interest rate risks and
therefore the Fund could receive more or less than it originally invested when
the notes mature, or it might receive less interest than the stated coupon
payment if the underlying investment or index does not perform as anticipated.
Structured notes may have volatile values and they may have a limited trading
market, making it difficult for the Fund to sell its investment at an acceptable
price.
o Risks of Derivative Instruments. Markets underlying securities and indices may
move in a direction not anticipated by the Manager. Interest rate and stock
market changes in the U.S. and abroad may also influence the performance of
derivatives. As a result of these risks the Fund could realize less principal or
income from the investment than expected. The Fund may hold certain derivative
investments that are illiquid.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. 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 Fund's return. The Fund
could also experience losses if the prices of its futures and options positions
were not correlated with its other investments or if it could not close out a
position because of an illiquid market.
Temporary Defensive Investments. In times of unstable market or economic
conditions, the Fund can invest up to 100% of its assets in temporary defensive
investments. These would ordinarily be short-term U.S. government securities,
highly-rated commercial paper, bank obligations or repurchase agreements. To the
extent the Fund invests defensively in these securities, it might not achieve
the primary aspect of its investment objective, high current income.
Borrowing. The Fund can borrow money in amounts up to 33 1/3% of the value
of its total assets at the time of the borrowings. The Fund may borrow money to
finance the repurchase of shares through Repurchase Offers, to fund commitments
to purchase Senior Loans, and for other temporary, extraordinary or emergency
purposes. The Fund can also borrow money in anticipation of cash flows in and
out of the Fund. The Fund may obtain a line of credit from a financial
institution to finance share repurchases through Repurchase Offers. Typically,
that type of line of credit will bear interest at a floating rate.
The Fund will not borrow money for leverage purposes. This policy is not
fundamental, and the Trustees may change this policy without shareholder
approval. The Fund will not purchase additional portfolio securities at any time
that borrowings exceed 5% of the Fund's total assets (excluding the amount
borrowed). Borrowing money involves transaction and interest costs. The Fund may
pay a commitment fee or other fee to maintain a line of credit, and will pay
interest on amounts it borrows. These costs can reduce the income the Fund has
available for distribution to investors.
Under the Investment Company Act, the Fund may not incur indebtedness
unless immediately after it incurs debt it has "asset coverage" of at least 300%
of the aggregate outstanding principal amount of the indebtedness. If the Fund
fails to meet that test, it may be restricted from declaring or paying
dividends. Failure to pay certain dividends could cause the Fund to fail to
qualify as a regulated investment company, which could make the Fund liable for
income and excise taxes. The Fund may be required to dispose of portfolio
investments on unfavorable terms if market fluctuations reduce its asset
coverage to less than 300%.
Lending Portfolio Securities. To raise cash for liquidity purposes or
income, the Fund can lend its portfolio securities to brokers, dealers and other
types of financial institutions under procedures approved by the Fund's Board of
Trustees and administered by the Manager. 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 value of
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 the 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.
Performance Information
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," and "cumulative total return." The
Statement of Additional Information contains an explanation of how yields and
total returns are calculated.
After the first calendar quarter of Fund operations, you can obtain
current performance information for the Fund 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.
How the Fund Is Managed
The Board of Trustees. The Fund is governed by a Board of Trustees, which is
responsible for protecting the interests of shareholders under Massachusetts
law. The Board is elected by shareholders and meets periodically throughout the
year to oversee the Fund's business, review its performance, and review the
actions of the Manager. "Trustees and Officers of the Fund" in the Statement of
Additional Information identifies the Trustees and officers of the Fund (who are
elected by the Trustees) and provides more information about them.
The Manager. The Fund's Manager, OppenheimerFunds, Inc., chooses the Fund's
investments and handles its day-to-day business. The Manager selects the Fund's
portfolio securities and the brokers through which the Fund executes its
portfolio transactions, furnishes offices, facilities, and equipment, and
provides the services of its employees to carry out the Fund's business and
regulatory filings. The Manager performs 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 paid by the Fund to the Manager and describes the expenses that the Fund is
responsible to pay to conduct its business. For example, the Fund pays for its
own brokerage costs, and custodian, transfer agent, accounting and legal fees.
The Agreement permits the Manager to employ broker-dealers that are affiliates
of the Fund or the Manager in executing the Fund's portfolio transactions.
However, it is expected that most of the Fund's portfolio transactions will be
principal trades at net prices, for which no broker-dealer is used.
The Manager has operated as an investment adviser since January 1960.
The Manager (including subsidiaries) currently manages private accounts and
investment companies, including other Oppenheimer funds, with assets of more
than $110 billion as of June 30, 1999, and with more than 4 million shareholder
accounts. The Manager is located at Two World Trade Center, 34th Floor, New
York, New York 10048-0203.
Portfolio Managers. The portfolio managers of the Fund are Arthur Zimmer and
Joseph Welsh. Mr. Zimmer is also a Vice President of the Fund and a Senior Vice
President of the Manager and has been a portfolio manager with OppenheimerFunds
since 1990. He also serves as an officer and portfolio manager for other
Oppenheimer funds.
Mr. Welsh is an Assistant Vice President of the Manager and of the Fund. He
joined the Manager in January 1995 as a high yield bond analyst. Prior to
joining the Manager, Mr. Welsh was a high yield bond analyst for W.R. Huff Asset
Management (from November 1991 to December 1994).
Advisory Fees. Under the Investment Advisory Agreement, the Fund pays the
Manager an advisory fee at an annual rate that declines as the Fund's assets
grow: 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, and 0.60% of average annual net assets in excess of $800
million. The Manager has voluntarily agreed to waive 0.20% of its management
fee. It can amend or terminate that voluntary waiver at any time.
A b o u t Y o u r A c c o u n t
How to Buy Shares
How Do I Buy Shares? On the commencement of the Fund's public offering of its
shares on the date of this Prospectus, Class B and Class C shares of the Fund
will be offered to the public at the net asset value of $10.00 per share. After
that date, the Fund will sell its Class B and Class C shares continuously at the
respective offering price for each class of shares. The offering price will be
the net asset value per share of the particular class of shares next determined
after the Distributor, OppenheimerFunds Distributor, Inc., receives the purchase
order. Class A shares are available only upon automatic conversion of Class B
shares (please refer to "Automatic Conversion of Class B Shares", below). You
can buy Class B and Class C shares several ways: o through any dealer, broker or
financial institution that has a sales agreement with the Fund's Distributor, or
o directly through the Distributor, or
o automatically through an Asset Builder Plan under the
OppenheimerFundsAccountLink service.
The Distributor may appoint certain servicing agents to accept purchase
orders. The Distributor, in its sole discretion, may reject any purchase order
for the Fund's shares.
o Buying Shares Through Your Dealer. Your dealer will place your order with the
Distributor on your behalf.
o Buying Shares Through the Distributor. Complete an OppenheimerFunds
New Account Application and return it with a check payable to
"OppenheimerFunds Distributor, Inc." Mail it to P.O. Box 5270, Denver,
Colorado 80217. If you do not list a dealer on the application, the
Distributor will act as your 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
you.
You can also pay for shares you purchase through the Distributor 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, shares are purchased for your account by a transfer of
money from your bank account 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.
o Buying Shares Through Asset Builder Plans. You may purchase shares
of the Fund (and up to four other Oppenheimer funds) automatically
each month from your account at a bank or other financial
institution under an Asset Builder Plan with AccountLink. Details
are in the Asset Builder Application and the Statement of
Additional Information.
How Much Must I Invest? You can buy Fund shares with a minimum initial
investment of $1,000 and make additional investments at any time with as
little as $25. There are reduced minimum investments under special
investment plans. o With Asset Builder Plans, 403(b) plans, Automatic
Exchange Plans and military allotment plans, you can make initial and
subsequent investmentsfor as little as $25. Subsequent purchases of at least
$25 can be made by telephone through AccountLink.
o Under retirement plans, such as IRAs, pension and profit-sharing
plans and 401(k) plans, you can start your account with as little
as $250. If your IRA is started under an Asset Builder Plan, the
$25 minimum applies. 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
appears in the Statement of Additional Information, or you can ask
your 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? The Fund sells its shares at their offering
price, which is equal to the "net asset value" per share. The offering price
that applies to a purchase order is the net asset value per share next
calculated after the Distributor receives the purchase order at its offices in
Denver, Colorado, or after any agent appointed by the Distributor receives the
order and sends it to the Distributor.
The Fund calculates the net asset value of each class of shares 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").
o To buy shares at 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.
o 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 the Fund determines.
How the Fund Calculates its Net Asset Values. The Fund determines the
net asset value per share 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. For debt securities
traded in a recognized market, the valuations are, 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 Manager values Senior Loans (and other loans) held by the Fund for
which an active secondary market exists (in the opinion of the Manager) on the
basis of market value, which may include valuations provided by a pricing
service approved by the Board of Trustees. The pricing service may use "matrix"
comparisons to the prices of comparable loans on the basis of quality, yield and
maturity. Loans for which no reliable market valuations are available will be
valued by the Manager at fair value, following procedures established by the
Fund's Board of Trustees. In making such valuations, the Manager considers such
factors and data as:
(1) fundamental analytical data relating to the Senior Loan,
including the cost, size, current interest rate and base lending
rate of the Senior Loan, the terms and conditions of the loan
agreement and any related agreements, and the position of the
loan in the borrower's capital structure,
(2) the creditworthiness of the borrower based upon an evaluation of
its financial condition, financial statements and information
about its business, cash flows, capital structure and future
prospects;
(3) the nature, adequacy and value of the loan collateral,
(4) information relating to the market for the loan, including any
price quotations from reliable dealers for trading in interests in
similar loans,
(5) the market environment and investor attitude toward the loan
and similar loans,
(6) the reputation and financial condition of the agent and any intermediate
participants, and
(7) general economic and market conditions that the Manager believes affect
the fair value of the loan.
Because some foreign securities trade in markets and on exchanges that
operate on U.S. holidays and weekends, the value of some of the Fund's foreign
investments might change significantly on days when investors cannot buy shares.
What Classes of Shares Does the Fund Offer? The Fund has three 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
whether you wish to buy Class B or Class C shares. If you do not choose a class,
the Fund will issue Class B shares to you.
o Class A Shares. Class A shares are not available for direct
purchase. Class A shares will be available only upon automatic
conversion of Class B shares. (See "Automatic Conversion of Class
B Shares," below.)
o Class B Shares. If you buy Class B shares, you pay no sales charge
at the time of purchase, but your shares will be subject to an
annual asset-based distribution fee. If you tender your shares for
repurchase and they are repurchased by the Fund within five years
after you originally bought them, normally you will pay an Early
Withdrawal Charge. That Early Withdrawal Charge varies depending
on how long you own your shares, as described in "How Can I Buy
Class B Shares?" below.
o Class C Shares. If you buy Class C shares, you pay no sales charge
at the time of purchase, but your shares will be subject to an
annual asset-based distribution fee. If you sell your shares within
12 months after your originally bought them, normally you will pay
an Early Withdrawal Charge of 1%, as described in "How Can I Buy
Class C Shares?" below.
Which Class of Shares Should You Choose? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is best
suited to your needs depends on a number of factors that you should discuss with
your financial adviser. Some factors to consider are how much you plan to invest
and how long you plan to hold your investment. If your goals and objectives
change over time and you plan to purchase additional shares, you should
re-evaluate those factors to see if you should consider another class of shares.
The Fund's operating costs that apply to a class of shares and the effect of the
different types of sales and Early Withdrawal 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.
You should review these factors with your financial adviser. The discussion
below assumes that you will purchase only one class of shares and not a
combination of shares of different classes.
How Long Do You Expect to Hold Your Investment? While future financial
needs cannot be predicted with certainty, knowing how long you expect to hold
your investment will assist you in selecting the appropriate class of shares.
Because of the effect of class-based expenses, your choice will also depend on
how much you plan to invest. For example, after 72 months, Class B shares
convert to Class A shares, which have lower expenses than Class C shares.
o Investing for the Shorter Term. While the Fund is intended as a
long-term investment, if you have a relatively short-term
investment horizon (that is, you plan to hold your shares for
less than six years), you should probably consider purchasing
Class C shares rather than Class B shares. That is because of the
effect of the Class B Early Withdrawal Charge if you tender your
shares for repurchase within five years of buying them, 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 the Early Withdrawal
Charge does not apply to amounts you tender for repurchase after
holding them one year.
o Investing for the Longer Term. If you are investing less
than $100,000 for the longer-term, for example for
retirement, and do not expect to need access to your money
for five years or more, Class B shares may be appropriate.
Of course, these examples are based on approximations of the effect of
current asset-based sales charges and Early Withdrawal 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
adviser before making that choice.
How Does It Affect Payments to My Broker? A salesperson, such as a broker, may
receive different compensation for selling one class of shares than for selling
another class. It is important to remember that Class B and Class C Early
Withdrawal Charges compensate the Distributor for commissions and expense
reimbursements 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.
Are There Any Early Withdrawal Charge Waivers? Appendix C to the Statement of
Additional Information details the conditions for the waiver of Early Withdrawal
Charges that apply in certain cases, or that apply to purchases of shares of the
Fund by certain groups, or under specified retirement plan arrangements or in
other special types of transactions.
How Can I Buy Class B Shares? The Fund sells Class B shares at their current net
asset value per share without an initial sales charge. However, if you tender
your Class B shares for repurchase in a Tender Offer and they are accepted for
repurchase within five years of the day you originally purchased them, the Fund
will deduct an Early Withdrawal Charge from the repurchase proceeds. The Class B
Early Withdrawal Charge is used to compensate the Distributor for its expenses
in providing distribution-related services to the Fund in connection with the
sale of Class B shares.
The Early Withdrawal Charge will be based on the lesser of the net
asset value of the repurchased shares at the time of repurchase or the original
net asset value. The Early Withdrawal Charge is not imposed on: o the amount of
your share 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 repurchased in the special circumstances described in
Appendix C to the Statement of Additional Information.
To determine whether the Early Withdrawal Charge applies to a repurchase,
the Fund repurchases shares in the following order:
1. shares acquired by reinvestment of dividends and capital gains
distributions,
2. shares held for more than five years, and
3. shares held the longest during the five-year period.
The amount of the Early Withdrawal Charge will depend on the number of
years since you bought the shares and the dollar amount the Fund has
repurchased, according to the following schedule:
<TABLE>
<CAPTION>
Years Since the Date on Which the Purchase Order was Early Withdrawal Charge on Shares Accepted for
Accepted Repurchase in That Year (As % of Amount Subject to
Charge)
<S> <C>
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------ ---------------------------------------------------------
0 - 1 3.0%
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
1 - 2 2.0%
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
2 - 3 1.5%
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
3 - 4 1.5%
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
4 - 5 1.0%
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
5 and following None
- ------------------------------------------------------------ ---------------------------------------------------------
</TABLE>
In the table, a "year" is a 12-month period. In applying the Early Withdrawal
Charge, holding period is measured from the day you purchase the shares. If your
Class B shares that are repurchased were acquired by exchange of Class B shares
of another Oppenheimer fund, they will be subject to the Class B contingent
deferred sales charge rate of the original fund, which may be higher than the
Early Withdrawal Charge rate of this Fund for a comparable holding period.
Automatic Conversion of Class B Shares. Class B shares automatically convert to
Class A shares 72 months after end of the month in which you purchase 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 Early Withdrawal Charge or other charge is imposed. When
Class B shares convert, a pro-rata amount of your Class B shares that were
acquired by reinvesting dividends and distributions on the converted shares will
also convert to Class A shares. The conversion feature is subject to the
continued availability of a tax ruling described in the Statement of Additional
Information.
How Can I Buy Class C Shares? The Fund sells Class C shares at net asset value
per share without an initial sales charge. However, if you tender your Class C
shares for purchase in a Tender Offer within 12 months after you purchased them,
the Fund will deduct an Early Withdrawal Charge of 1.0% from the repurchase
proceeds. The Class C Early Withdrawal Charge is used to compensate the
Distributor for its expenses in providing distribution-related services to the
Fund in connection with the sale of Class C shares.
The Early Withdrawal Charge will be based on the lesser of the net
asset value of the repurchased shares at the time of repurchase or the original
net asset value. The Early Withdrawal Charge is not imposed on: o the amount of
your share 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 repurchased in the special circumstances described in
Appendix C to the Statement of Additional Information.
To determine whether the Early Withdrawal Charge applies to a repurchase,
the Fund repurchases shares in the following order:
1. shares acquired by reinvestment of dividends and capital gains
distributions,
2. shares held for more than 12 months, and 3. shares held the longest during
the 12-month period.
Distribution and Service 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. The Fund
will pay this fee 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 will use 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 and Class C Shares. The Fund
has adopted Distribution and Service Plans for Class B and Class C shares to pay
the Distributor for its services and costs in distributing Class B and Class C
shares and servicing accounts. Under the plans, the Fund pays the Distributor a
distribution fee (which is deemed to be an "asset-based sales charge") of up to
0.75% of average annual net assets on Class B shares and on Class C shares. The
Board of Trustees has currently set that fee rate at 0.50% per year under each
plan but may increase it up to 0.75% in the future. The Fund also pays the
Distributor a service fee of 0.25% of average annual net assets under each plan.
The distribution fee and service fees increase Class B and Class C
expenses by 0.75% of the average annual net assets of the respective class.
Because these fees are paid out of the Fund's assets on an ongoing basis, over
time these fees will increase the cost of your investment.
The Distributor uses the service fees to compensate dealers for
providing personal services for accounts that hold Class B or Class C shares.
The Distributor pays the 0.25% service fees to dealers in advance for the first
year after the dealer has sold the shares. After the shares have been held for
one year, the Distributor pays the service fees to dealers on a quarterly basis.
The Distributor currently pays a sales commission of 2.75% 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 that the
Distributor pays to the dealer at the time of sale of Class B shares is
therefore 3.00% of the purchase price. The Distributor retains the Class B
distribution fee.
The Distributor currently pays a sales commission 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 that the
Distributor pays to the dealer at the time of sale of Class C shares is
therefore 1.00% of the purchase price. The Distributor pays the distribution fee
as an ongoing commission to the dealer on Class C shares that have been
outstanding for a year or more.
Special Investor Services
AccountLink. You can use the OppenheimerFunds AccountLink feature to link
your 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 repurchase proceeds or transmit dividends
and distributions directly to your bank account. Please call the Transfer Agent
for more information.
You may purchase shares by telephone only after the Fund has
established your account. You can then purchase shares in amounts up to $250,000
through a telephone representative. To do so, call the Distributor at
1-800-852-8457. The Fund will debit the purchase payment from your bank account.
You should request AccountLink privileges on your purchase Application
or your dealer's settlement instructions if you buy your shares through a
dealer. You can also establish AccountLink privileges after you open your Fund
account by sending signature-guaranteed instructions to the Transfer Agent.
AccountLink privileges will apply to each shareholder listed in the registration
on your account as well as to your dealer representative of record unless and
until the Transfer Agent receives written instructions terminating or changing
those privileges. After you establish AccountLink for your account, you can
change any bank account information by providing signature-guaranteed
instructions to the Transfer Agent signed by all shareholders 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. You may use PhoneLink on already established Fund
accounts after you obtain a Personal Identification Number (PIN), by calling the
special PhoneLink number, 1-800-533-3310.
Purchasing Shares. You may purchase shares in amounts up to $100,000 by
phone, by calling 1-800-533-3310. You must have established AccountLink
privileges to link your bank account with the Fund to pay for these purchases.
Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can request exchanges of your Fund shares by phone to
another OppenheimerFunds account you have already established by calling the
special PhoneLink number. You can exchange shares only in connection with a
repurchase through a Repurchase Offer, described below.
OppenheimerFunds Internet Web Site. You can obtain information about the Fund,
as well as your account balance, on the OppenheimerFunds Internet web site, at
http://www.oppenheimerfunds.com. Additionally, shareholders 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 your account, please call the
Transfer Agent at 1-800-525-7048.
Retirement Plans. You may buy shares of the Fund for your retirement
plan account. If you participate in a plan sponsored by your employer, the
plan trustee or administrator must buy the shares for your plan account.
The Distributor also offers a number of different retirement plans that can
be used by individuals and employers: o Individual Retirement Accounts
IRAs), including regular IRAs, Roth IRAs, SIMPLE IRAs, rollover IRAs and
Education IRAs.
o SEP-IRAs, which are Simplified Employee Pensions Plan IRAs for small
business owners or self-employed individuals.
o 403(b)(7) Custodial Plans, that are tax-deferred plans for employees
of eligible tax-exempt organizations, such as schools, hospitals and
charitable organizations.
o 401(k) Plans, which are special retirement plans for businesses.
o Pension and Profit-Sharing Plans, designed for businesses and self-employed
individuals.
Please call the Distributor for OppenheimerFunds retirement plan
documents, which include applications and important plan information.
Special Considerations for Retirement Plan Investors. Unlike shares of
an open-end fund, the Fund's shares are not redeemable daily, and unlike
traditional closed-end funds, the Fund has not registered its shares on an
exchange. Therefore the Fund's shares cannot be readily sold. Although the Fund
has adopted a policy of making quarterly Repurchase Offers, they may not provide
retirement plan investors with the degree of liquidity they may need to make
mandatory retirement plan distributions. Even during a Repurchase Offer, a
retirement plan investor might not be able to have all of the shares repurchased
that are necessary to meet minimum distribution requirements. Accordingly,
retirement plan investors may wish to consider limiting the amount of their plan
assets that are invested in the Fund.
Periodic Repurchase Offers
The Fund has adopted repurchase policies, described below. Each
quarter, the Fund intends to make a "Repurchase Offer," to repurchase a portion
of the Fund's outstanding shares from shareholders. The Repurchase Offers are
designed to provide some liquidity for Fund investors who wish to sell some or
all of their shares, because the Fund is not aware of any currently existing
secondary market for its shares. It does not anticipate that a secondary market
will develop. A secondary market is a market, exchange facility or system for
quoting bid and asked prices where investors can readily buy and sell securities
after their initial distribution. Without a secondary market, Fund shares are
not liquid, which means that you may not be able to readily sell them.
For purposes of Repurchase Offers, all of the Fund's classes of shares
are considered to be a single class, so that Offers are not pro-rated among the
classes of shares. The Fund normally will repurchase shares that are tendered by
the Repurchase Request Deadlines and accepted for repurchase at the Net Asset
Values per share determined as of the Fund's close of business (which is the
close of business of The New York Stock Exchange, normally 4:00 p.m. New York
time) on the Repurchase Pricing Date. The Repurchase Pricing Date is normally
expected to be the regular business day that is the Repurchase Request Deadline,
which is the day the Repurchase Offer ends, but may be a day not more than 14
days after the Repurchase Request Deadline (or the next business day if the l4th
day is not a business day), as described below.
Repurchase Offer Notices. The Fund will send shareholders a written notification
of each Repurchase Offer. The Fund will send the notification to shareholders at
least 21 days but not more than 42 days before the Repurchase Request Deadline
for a Repurchase Offer. The notification will include information about the
Repurchase Offer, including: o the percentage of the Fund's shares to be
repurchased (the "Repurchase Amount") o how you may request the Fund to
repurchase your shares o the Repurchase Request Deadline, which is the date that
the Repurchase Offer ends and the date by which the Transfer Agent must receive
your repurchase request.
o the Repurchase Pricing Date, which is the day the Fund uses to
calculate the Net Asset Values per share that apply to shares
repurchased in a Repurchase Offer
o the Repurchase Payment Deadline, which is the date by which the
Fund will send the payment to shareholders for Fund shares
accepted for repurchase. That date will be not more than 7 days
after the Repurchase Pricing Date.
A shareholder may tender all or some of his or her shares for
Repurchase. There is no minimum number of shares that must be tendered. You may
withdraw or change a Repurchase Request at any time up until the Repurchase
Request Deadline for a particular Repurchase Offer, but not after that date. The
Repurchase Request Deadline will be strictly observed.
Repurchase Request Deadline. The Fund's Board of Trustees will
establish the Repurchase Request Deadline for each Repurchase Offer based on
factors such as market conditions, the level of the Fund's assets and
shareholder servicing considerations. It is anticipated that the Repurchase
Request Deadline for each quarterly Repurchase Offer will be the close of
business on the last regular business day of January, April, July and October.
The first quarterly Repurchase Offer will be in January 2000.
Repurchase Pricing Date. The repurchase price of the Fund's shares for
a particular Repurchase Offer will be the net asset value determined as of the
close of The New York Stock Exchange on the Repurchase Pricing Date for that
Offer. The Fund anticipates that the Repurchase Pricing Date for an Offer
normally will be the same date as the Repurchase Request Deadline for that
offer. In that case, the Fund will set the Repurchase Request Deadline for a
time no later than the close of The New York Stock Exchange on that date. The
Fund, however, may choose to make the Repurchase Pricing Date for a Repurchase
Offer as many as 14 days after the Repurchase Request Deadline for that Offer.
If that day is not a regular business day, then the Repurchase Pricing Date for
that Offer will be the following regular business day.
The Fund does not presently plan to deduct any repurchase fees from the
repurchase proceeds (other than any applicable Early Withdrawal Charges.)
However, in the future the Board of Trustees may determine to impose a
repurchase fee payable to the Fund to help it defray its expenses of making
Repurchase Offers. If that fee is imposed, it may not exceed 2% of the
repurchase proceeds.
Repurchase Payment Deadline. The Fund will pay repurchase proceeds in
cash, usually within seven days after each Repurchase Pricing Date. The payment
date is referred to as the "Repurchase Payment Deadline." During the period from
notification to shareholders of a Repurchase Offer until the Repurchase Pricing
Date, the Fund will maintain liquid assets equal to 100% of the Repurchase Offer
Amount.
Repurchase Offer Amounts. Each quarter, the Fund's Board, in its sole
discretion, will determine the number of shares that the Fund will offer to
repurchase (the "Repurchase Offer Amount") for a particular Repurchase Offer.
The Repurchase Offer Amount will be at least 5% but not more than 25% of the
total number of shares of all classes of the Fund (in the aggregate) outstanding
on the Repurchase Request Deadline. If shareholders tender more than the
Repurchase Offer Amount for a particular Repurchase Offer, the Fund may
repurchase up to an additional 2% of the shares outstanding on the Repurchase
Request Deadline.
The Fund may not be able to repurchase the entire amount of shares a
shareholder has tendered in a Repurchase Request for a particular Repurchase
Offer if the aggregate tenders exceed the Repurchase Offer Amount. If
shareholders tender more shares than the Fund has decided to repurchase, the
Fund will repurchase the tendered shares on a pro-rata basis, rounded down to
the nearest full share. If a Repurchase Offer is oversubscribed, shareholders
may be unable to liquidate some or all of their investment during that
Repurchase Offer. In that case, the shareholder may have to wait until a later
Repurchase Offer to tender shares for repurchase and would be subject to the
risk of share price fluctuations during that period. If you tender fewer than
100 shares, however, the Fund may decide to accept all of those shares before
repurchasing shares tendered by other shareholders on a pro-rata basis. There is
a risk that because of the potential for pro-ration, some investors might tender
more shares than they wish to have repurchased to try to ensure the repurchase
of some number of shares.
"Fundamental" Policies on Repurchases. The following policies of the Fund
concerning Repurchase Offers are fundamental, which means that the Board of
Trustees cannot change these policies without the vote of the holders of a
"majority of the fund's outstanding voting securities," as that term is defined
in the Investment Company Act: o Periodic Repurchase Offers. The Fund will make
periodic Repurchase Offers, pursuant to Rule 23c-3 under the Investment Company
Act (as that Rule may be amended from time to time).
o Repurchase Request Deadline. Repurchase Offers shall be made at
periodic intervals of three months between Repurchase Request Deadlines.
The Repurchase Request Deadlines will be at the time on a regular business
day (normally the last regular business day) in the months of January,
April, July and October to be determined by the Fund's Board of Trustees.
o Repurchase Pricing Date. The Repurchase Pricing Date for a particular
Repurchase Offer shall be not more than 14 days after the Repurchase
Request Deadline for that Repurchase Offer. If that day is not a regular
business day, then the Repurchase Pricing Date will be the following
regular business day.
Other Repurchase Policies. Other policies in this Prospectus describing
Repurchase Offers and related procedures are not fundamental, which means that
the Board can change them without approval of shareholders. The Fund's Board of
Trustees may establish other policies for repurchases of shares that are
consistent with the Investment Company Act and other relevant laws and
regulations. For example, once every two years, the Board may, if it chooses,
make an additional Repurchase Offer to repurchase shares in addition to regular
quarterly Repurchase Offers.
Special Considerations and Risks of Repurchases. In addition to the limitations
and risks discussed elsewhere in this Prospectus, there are a number of other
factors affecting Repurchase Orders that investors should consider, as
summarized below:
o Early Withdrawal Charges. You may be subject to Early Withdrawal
Charges if the Fund repurchases your Class B shares within 5 years
after you purchased them or repurchases your Class C shares within
1 year after you purchased them.
o Borrowing. The Fund may borrow money to finance the repurchase of
shares in Repurchase Offers, subject to its investment
restrictions on borrowing. Interest on the borrowings may increase
the Fund's expenses and reduce the Fund's net investment income.
See "Investment Restrictions" in the Statement of Additional
Information.
o Differences Between Market Value and Net Asset Value. If a
secondary market were to develop for the Fund's shares, the shares
could, at times, trade in that market at a discount from the net
asset value per share. A number of factors could cause those
differences, including the relative demand for and supply of
shares and the performance of the Fund. The Fund's policy of
making quarterly Repurchase Offers for shares at net asset value
might not alleviate the discount of the market price from net
asset value per share.
o Decrease in Fund Assets. Although the Board believes that the
Fund's policy of making quarterly Repurchase Offers will generally
benefit shareholders by providing liquidity, the repurchase of
shares could cause the Fund's total assets to decrease unless
offset by ongoing new sales of shares. The Fund's expense ratio
might therefore increase as a result of repurchases. Repurchase
Offers may also decrease the Fund's investment flexibility, in
part because of the Fund's need to hold liquid assets to satisfy
repurchase requests. The impact may depend on the number of shares
that the Fund repurchases and the ability of the Fund to sell
additional shares.
o Asset Coverage for Borrowings. Repurchases of Fund shares may
significantly reduce the asset coverage for any Fund borrowings.
The Fund may not repurchase shares if the repurchase results in
its asset coverage levels falling below the requirements of the
Investment Company Act. As a result, in order to be able to
repurchase shares tendered, the Fund may be forced to repay all or
a part of its outstanding borrowings to maintain the required
asset coverage.
o Forced Sale of Portfolio Securities. The Fund intends to finance
Repurchase Offers with cash on hand, cash raised through
borrowings, or the sale of portfolio securities. To complete a
Repurchase Offer, the Fund might be required to sell portfolio
securities to raise cash. This might cause the Fund to realize
gains or losses at a time when the Manager would otherwise not
want the Fund to do so. It might increase portfolio turnover and
the Fund's portfolio transaction expenses, reducing the Fund's net
income to distribute to shareholders.
o Alternative Means to Provide Liquidity to Shareholders. The Board
may consider other means to provide liquidity for shareholders if
Repurchase Offers do not enable the Fund to repurchase the amount
of shares tendered by shareholders. Those actions might include
evaluating any secondary market that may exist for shares and
determining whether that market provides liquidity for
shareholders. The Board might consider all available options to
provide liquidity. One possibility that the Board may consider is
listing the shares on a major domestic stock exchange or arranging
for the quotation of shares on an over-the-counter market.
o Taxes. The Fund's repurchase of shares is a taxable event to the
tendering shareholder. See "Dividends, Capital Gains and Taxes."
Suspension or Postponement of Repurchase Offers. The Fund may postpone or
suspend Repurchase Offers, but only if it meets certain regulatory requirements.
A postponement or suspension may occur only if approved by a vote of a majority
of the Board of Trustees, including a majority of the Independent Trustees. The
Fund will send you a notice if there is a suspension or postponement of a
Repurchase Offer and if an Offer is renewed after a suspension or postponement.
A suspension or postponement may be done only in limited circumstances. These
circumstances include the following: o If the repurchase of shares would cause
the Fund to lose its status as a regulated investment company under Subchapter
M of the Internal Revenue Code,
o During an emergency that makes it impractical for the Fund to
dispose of securities it owns or to determine the Net Asset Values
of the Fund's shares,
o During other periods that the SEC permits the suspension or
postponement of offers by the Fund for the
protection of its shareholders,
o If the Fund's shares were to be listed on a stock exchange or are
quoted on an inter-dealer quotation system of a national
securities association (such as Nasdaq) and the repurchase would
cause the shares to lose that listing or quotation, or
o During any period in which The New York Stock Exchange or any
other market on which the Fund's portfolio securities are traded
is closed (other than customary weekend or holiday closings) or
trading in those markets is restricted.
Repurchase Procedures. You can tender some or all of your Fund shares for
repurchase after you receive Notification of a Repurchase Offer. You can tender
shares by written instructions or by telephone. Your Repurchase Request must be
received by the Fund's Transfer Agent by its close of business on the Repurchase
Request Deadline. That deadline will be enforced strictly and if your request is
not received by that time, you will have to wait until the next Repurchase Offer
is made to tender your shares for repurchase.
Your Repurchase Request must be in proper form (which means that it
must comply with the procedures described below) and must first be accepted by
the Fund, as described above. If you have questions about any of these
procedures, and especially if you are tendering shares in a special situation,
such as due to the death of the owner or from a retirement plan account, please
call the Transfer Agent first, at 1-800-525-7048, for assistance.
Certain Requests Require a Signature Guarantee. To protect you and the
Fund from fraud, the following repurchase requests must be in writing and must
include a signature guarantee (although there may be other situations that also
require a signature guarantee): o You wish to have the Fund repurchase shares
worth $100,000 or more and send you a check o The check for the repurchase is
not payable to all shareholders listed on the account statement o The repurchase
check is not sent to the address of record on your account statement o Your
shares are being transferred to the name of a different owner o Shares are being
repurchased by someone (such as an Executor) other than the owners listed in the
account registration
Where Can I Have My 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, or
o a foreign bank that has a U.S. correspondent bank, or
o a U.S. registered dealer or broker in securities, municipal
securities or government securities, or 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.
Retirement Plan Accounts. There are special procedures to tender shares
held in an OppenheimerFunds retirement plan account. Call the Transfer Agent for
a distribution request form. Special income tax withholding requirements apply
to distributions from retirement plans. You must submit a withholding form with
your repurchase request to avoid delay in getting your money and if you do not
want tax withheld. If your employer holds your retirement plan account for you
in the name of the plan, you must ask the plan trustee or administrator to
request the repurchase of the Fund shares in your plan account.
Sending Repurchase Proceeds by Wire. While the Fund normally sends your
money by check, you can arrange to have the proceeds of repurchased shares sent
by Federal Funds wire to a bank account you designate. The account must be at
a commercial bank that is a member of the Federal Reserve wire system.
The minimum amount you can have sent by wire is $2,500. There is a $10 fee for
each wire. To find out how to set up this feature on your account or to arrange
a wire, call the Transfer Agent at 1-800-852-8457.
How Do I Tender Shares for Repurchase by Mail? You can use the Fund's
Repurchase Request Form or you can write a letter to the Transfer Agent
that includes:
o Your name
o The Fund's name
o Your Fund account number (from your account statement)
o The dollar amount or number of shares you request to be
repurchased
o Any special payment instructions
o The signatures of all registered owners exactly as listed in the
account statement, and
o Any special documents requested by the Transfer Agent to assure
proper authorization of the person asking the Fund to repurchase
the shares (such as Letters Testamentary of an Executor).
Use the following address for requests by mail:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
Send courier or exprss mail requests to:
OppenheimerFunds Services
10200 E. Girard Avenue
Denver, Colorado 80231
Can I Submit Repurchase Requests by Telephone? You and your dealer
representative of record may also submit Repurchase Requests by telephone. You
may not submit Repurchase Requests by telephone for Fund shares held in an
OppenheimerFunds retirement plan account. o To request repurchase through a
service representative, call 1-800-852-8457 o To request repurchase on
PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address on
the account statement, or, if you have linked your Fund account to your bank
account on AccountLink, you may have the proceeds sent to that bank account.
Are There Limits on Repurchase Requests Submitted by Telephone? If you
request payment by check, you may request repurchase of up to $100,000 by
telephone in a single Repurchase Offer. The check must be payable to all owners
of record of the shares and must be sent to the address on the account
statement. This service is not available within 30 days of changing the address
on an account.
There are no dollar limits on repurchase requests submitted by
telephone if you have the proceeds sent to a bank account you designate when you
establish AccountLink. Normally the ACH transfer to your bank is initiated on
the business day after the Repurchase Payment Deadline. You do not receive
dividends on the proceeds of the shares while they are waiting to be
transferred.
Reinvestment Privilege. If the Fund repurchases some or all of your Class A or
Class B shares of the Fund, you have up to six months to reinvest all or part of
the repurchase proceeds in Class A shares of one of the other Oppenheimer mutual
funds without paying sales charge. This privilege applies only to Class A shares
you acquired by conversion of Class B shares and Class B shares on which you
paid an Early Withdrawal Charge when you tendered them for repurchase. You may
not reinvest repurchase proceeds in Class A shares of this Fund. This privilege
does not apply to Class C shares. You must be sure to ask the Distributor for
this privilege when you send your payment.
How to Exchange Shares
You may exchange shares of the Fund for shares of certain Oppenheimer funds at
net asset value per share at the time of exchange, without a sales charge. You
may exchange your shares only in connection with a quarterly Repurchase Offer.
To exchange shares, you must meet several conditions: o Your request must comply
with the terms of the Repurchase Offer. o Shares of the fund selected for
exchange must be available for sale in your state of residence. o The
Prospectuses of this Fund and the fund whose shares you want to buy must offer
the exchange privilege.
o You must hold the Fund shares for at least seven days before
the Repurchase Request Deadline before you can exchange them in
a Repurchase Offer.
o You must meet the minimum and not exceed the maximum purchase
requirements for the fund you purchase by exchange.
o Before exchanging into a fund, you must obtain and read its
Prospectus.
You may exchange shares of a particular class of the Fund only for
shares of the same class in the other Oppenheimer funds. For example, you can
exchange Class B shares of this Fund only for Class B shares of another
Oppenheimer fund. You may acquire only Class B or Class C shares of this Fund by
exchange of the same class of another Oppenheimer fund. Class A shares of this
Fund are not available by exchange of Class A shares of other Oppenheimer funds.
In some cases, sales charges may be imposed on exchange transactions. For tax
purposes, exchanges of shares involve a sale of the shares of the fund you own
and a purchase of the shares of the other fund, which may result in a capital
gain or loss. 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 I Submit Exchange Requests? When you receive notice of a Repurchase
Offer, you may submit your exchange request in writing or by telephone.
Written Exchange Requests. The Transfer Agent must receive your
OppenheimerFunds Exchange Request form (or a letter of instructions) requesting
an exchange, signed by all owners of the account, before the Repurchase Request
Deadline for a Repurchase Offer. Send it to the Transfer Agent at the address on
the back cover of this Prospectus.
Telephone Exchange Requests. You can submit exchange requests by
telephone. Either call a service representative at 1-800-852-8457 or use
PhoneLink by calling 1-800-533-3310. You can make telephone exchanges only
between accounts that are registered in the same name(s) and address.
Are There Limitations on Exchanges? There are certain exchange policies
you should be aware of:
o The Transfer Agent must receive your exchange request no later than
the close of business (normally 4:00 p.m.) on the Repurchase Request
Deadline.
o The Fund is not an appropriate investment for investors who are
(or use) market timers. 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 you 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 you request
because of a restriction cited above, only the shares eligible for
exchange will be exchanged, and if a Repurchase Offer is
oversubscribed, it is possible that only a pro-rata amount of your
shares may be exchanged.
Shareholder Account Rules and Policies
More information about the Fund's policies and procedures for buying, tendering
shares for repurchase, and exchanging shares is contained in the Statement of
Additional Information.
Offering of Shares. The Fund may suspend the offering of shares during any
period in which the determination of net asset values is suspended, and the Fund
may suspend the offering at any time the Board believes it is in the Fund's best
interest to do so.
Share Certificates. Share certificates are not available.
Telephone Transaction Privileges. The Fund may modify, suspend or terminate
Telephone Transaction Privileges at any time. If an account has more than one
owner, the Fund and the Transfer Agent may rely on the instructions of any one
owner. Telephone privileges apply to each owner of the account and the dealer
representative of record for the account unless the Transfer Agent receives
cancellation instructions from an owner of the account.
Recording of Calls. The Transfer Agent will record telephone calls to verify
data concerning transactions. It 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 they
reasonably believe to be genuine.
Requests Must Be In Proper Form. The Transfer Agent will not honor any requests
to repurchase or exchange shares in a Repurchase Offer unless it receives all
required documents in proper form by the Repurchase Request Deadline.
Networking Arrangements. Dealers that can perform account transactions for their
clients by participating in Networking through the National Securities Clearing
Corporation must obtain their clients' permission to perform those transactions.
Those dealers are responsible to their clients who are shareholders of the Fund
if the dealer performs any transaction erroneously or improperly.
The Fund's Net Asset Values Will Vary. The Net Asset Values for the Fund's
different classes of shares will vary from day to day because the values of the
securities in the Fund's portfolio fluctuate. The repurchase price, which is the
applicable net asset value per share, will normally differ for each class of
shares. The repurchase value of your shares may be more or less than their
original cost.
Payment for Repurchased Shares. The Fund ordinarily makes payment for
repurchased shares in cash. The Fund will send the money by check or through
AccountLink or by Federal Funds wire (as elected by the shareholder) within
seven days after the Repurchase Pricing Date for the relevant Repurchase Order
(if the Transfer Agent has received repurchase documentation in proper form by
the Regular Request Deadline). However, under unusual circumstances determined
by the SEC, payment may be delayed or suspended.
Involuntary Repurchases of Small Accounts. The Fund may involuntarily repurchase
the shares in your account if the account value has fallen below $200 for
reasons other than the fact that the market value of the shares has dropped. In
some cases, the Fund may make involuntary repurchases to repay the Distributor
for losses from the cancellation of share purchase orders. The Fund will provide
notice to shareholders prior to making an involuntary repurchase of shares,
including information about how to avoid that repurchase by increasing the size
of the account.
"Backup Withholding." The Fund may apply "backup withholding" of federal income
tax against taxable dividends, distributions and repurchase proceeds (including
exchanges) if you fail to furnish the Fund your correct, certified Social
Security or Employer Identification Number when you sign your application, or if
you under-report your income to the Internal Revenue Service.
Multiple Copies. To avoid sending duplicate copies of materials to households,
the Fund will mail only one copy of each annual and semi-annual report to
shareholders having the same last name and address on the Fund's records.
However, each shareholder may call the Transfer Agent at 1-800-525-7048 to ask
that copies of those materials be sent personally to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund intends to declare dividends separately for each class of
shares from net investment income on each regular business day and to pay those
dividends to shareholders monthly on a date selected by the Board of Trustees.
The Fund will not pay or declare daily dividends on newly-purchased shares until
Federal Funds are available to the Fund from the purchase payment for the
shares.
The amount of any dividends the Fund pays may vary over time, depending
on market conditions, the composition of the Fund's investment portfolio and the
expenses borne by the particular class of shares. Dividends and other
distributions paid on Class A shares will generally be higher than dividends for
Class B and Class C shares, which normally have higher expenses than Class A
shares. The Fund has no fixed dividend rate and cannot guarantee that it will
pay any dividends or other distributions.
Capital Gains Distributions. 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.
What Choices Do I Have for Receiving Distributions? When you open your account,
specify on your application how you want to receive your dividends and
distributions. If you do not select an option, all dividends and distributions
will be reinvested in Fund shares for your account. You have four options:
Reinvest All Distributions in the Fund. You can elect to reinvest all
dividends and capital gains distributions in additional shares of the Fund.
Reinvest Certain Types of Distributions. You can elect to reinvest one
or more types of distributions dividends, short-term capital gains or long-term
capital gains -- in the Fund while receiving your other distributions by check
or having them sent to your bank account through AccountLink.
Receive All Distributions in Cash. You can elect to receive a check for
all dividends and capital gains distributions or have them sent to your bank
through AccountLink.
Reinvest Your Distributions in Another OppenheimerFunds Account. You
can reinvest all distributions in the same class of shares of another
Oppenheimer fund in which you have established an account.
Taxes. The Fund intends to qualify as a regulated investment company under the
Internal Revenue Code. That means that in each year it qualifies, it will pay no
federal income tax on the earnings or capital gains it distributes to its
shareholders. If your Fund shares are not held in a tax-deferred retirement
account, you should be aware of the following tax implications of investing in
the Fund. o Whether you receive them in cash or reinvest them, dividends and
capital gains distributions are subject to federal income tax and may be subject
to state and local taxes.
o Dividends paid from net investment income and short-term capital
gains are taxable as ordinary income. Distributions of the Fund's
long-term capital gains are taxable as long-term capital gains. It
does not matter how long you have held your shares.
o Dividends that are attributable to interest the Fund receives on
certain U.S. government obligations may be exempt from certain
state and local income taxes. The extent to which dividends are
attributable to interest on U.S. government obligations will be
provided on the tax statements you receive from the Fund.
o Every year the Fund will send you and the IRS a statement showing
the amount of any taxable dividends and other distributions the
Fund paid to you in the previous year. The tax information the
Fund sends you will separately identify any long-term capital
gains distribution the Fund paid to you.
o Because the Fund's share prices fluctuate, you may have a capital
gain or loss when all your shares are repurchased or you exchange
them. A capital gain or loss is the difference between the price
you paid for the shares and the price you received when they were
accepted for repurchase or exchange. Generally, when shares of the
Fund you have tendered are repurchased, you must recognize any
capital gain or loss on those shares.
o It is possible (although the Fund believes it is unlikely) that if
a shareholder tenders less than all of his or her shares in a
Repurchase Offer, the offer might not be treated as a sale or
exchange for federal income tax purposes. In that case the
payment of the repurchase proceeds may be subject to income tax
as ordinary income, a return of capital or capital gain,
depending on the Fund's earnings and profits and the
shareholder's basis in the shares. If that occurs, there is a
risk that non-tendering shareholders could be considered to have
received a "deemed" distribution subject to tax in whole or in
part as ordinary income. The income tax consequences of the
repurchase of shares pursuant to Repurchase Offers will be
disclosed in the related Repurchase Offer documents.
o It is not expected that any portion of the Fund's distributions
will be eligible for the corporate dividends received deduction.
o If you buy shares on the date or just before the Fund declares a
distribution, a portion of the purchase price for the shares will
be returned to you as a taxable distribution.
o You should review the more detailed discussion of federal income
tax considerations in the Statement of Additional Information.
Returns of Capital Can Occur. In certain cases, distributions made by the Fund
may be considered a non-taxable return of capital to shareholders. The Fund will
identify returns of capital in shareholder notices.
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.
Additional Information About the Fund
The Fund's Voting Shares. Shares of the Fund are freely transferable, and each
share of the Fund represents an interest in the Fund proportionately equal to
the interests of each other share of the same class. Each class of shares of the
Fund pays its own dividends and other distributions, and pays certain expenses
which may be different from those of other classes.
Each share of each class has one vote at shareholder meetings, with
fractional shares voting proportionally, on matters submitted to the vote of
shareholders. There are no cumulative voting rights. Shares of all classes are
voted in the aggregate and not by class, except when voting by class is required
by law or when matters affect a particular class or classes. Each class may have
separate voting rights on matters in which the interests of that class are
different from the interests of another class.
The Fund's Classes of shares do not have pre-emptive or conversion
rights (other than the automatic conversion of Class B shares for Class A shares
described above) or redemption provisions. In the event of a liquidation of the
Fund, shareholders are entitled to share pro rata in the net assets of the Fund
available for distribution to shareholders of a class after all expenses and
debts have been paid.
Anti-Takeover Provisions. The Fund has certain anti-takeover provisions in its
Declaration of Trust. They are intended to limit the ability of entities or
persons to acquire control of the Fund, to cause it to engage in certain
transactions or to modify its structure. The affirmative vote or consent of the
holders of two-thirds of the outstanding shares of the Fund is required for the
following transactions involving a "Principal Shareholder" (a person,
corporation or other entity that owns 5% or more of the outstanding shares of
the Fund):
o Merger or consolidation of the Fund into any Principal Shareholder,
o Conversion of the Fund from a closed-end to an open-end investment
company (except that if the Board of Trustees recommends such conversion,
the approval of a majority of the Fund's outstanding voting shares will be
sufficient),
o Issuance of any securities of the Fund to any Principal Shareholder
(other than the Manager or Distributor) for cash,
o Sale, lease, or exchange of all or any substantial part of the
assets of the Fund to any Principal Shareholder (except assets having an
aggregate market value of less than $1 million),
o Sale, lease or exchange to the Fund, in exchange for securities of
the Fund, of any assets of any Principal Shareholder (except assets having
an aggregate market value of less than $1 million).
However, the affirmative vote or consent of two-thirds of the
outstanding shares of the Fund will not be required for those transactions if
the Board of Trustees under certain conditions approves the transaction.
Additionally, the provisions of the Fund's Declaration of Trust containing the
above anti-takeover provisions cannot be amended without the affirmative vote of
two-thirds of the outstanding voting shares of the Fund.
These provisions may make it more difficult to convert the Fund to an
open-end investment company or to consummate any of the other transactions
without the approval of the Board of Trustees or approval by the owners of
two-thirds of the Fund's outstanding voting shares. The anti-takeover provisions
could also deprive shareholders of the Fund of the opportunity to sell their
Fund shares at a premium over Net Asset Value in the event that a secondary
market for the Fund's shares develops, by discouraging third parties from
seeking to obtain control of the Fund by a tender offer or similar transaction.
The Board has considered these provisions and has concluded that they are in the
best interests of the Fund and its shareholders because they will likely require
persons seeking control of the Fund to negotiate with its management regarding
the price to be paid.
<PAGE>
Appendix A
RATINGS DEFINITIONS
Below are summaries of the rating definitions used by the nationally-recognized
rating agencies listed below. Those ratings represent the opinion of the agency
as to the credit quality of issues that they rate. The summaries below are based
upon publicly-available information provided by the rating organizations.
Moody's Investors Service, Inc.
Long-Term (Taxable) Bond Ratings
Aaa: Bonds rated Aaa are judged to be the best quality. They carry the smallest
degree of investment risk. Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, the changes that can be expected are
most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group, they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as with Aaa securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than those of Aaa securities.
A: Bonds rated A possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa: Bonds rated Baa are considered medium grade obligations; that is, they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and have speculative
characteristics as well.
Ba: Bonds rated Ba are judged to have speculative elements. Their future cannot
be considered well-assured. Often the protection of interest and principal
payments may be very moderate and not well safeguarded during both good and bad
times over the future. Uncertainty of position characterizes bonds in this
class.
B: Bonds rated B generally lack characteristics of desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa: Bonds rated Caa are of poor standing and may be in
default or there may be present elements of danger with
respect to principal or interest.
Ca: Bonds rated Ca represent obligations which are speculative in a high
degree and are often in default or have other marked shortcomings.
C: Bonds rated C are the lowest class of rated bonds and can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa through Caa. The modifier "1" indicates that the
obligation ranks in the higher end of its category; the modifier "2" indicates a
mid-range ranking and the modifier "3" indicates a ranking in the lower end of
the category.
Short-Term Ratings - Taxable Debt
These ratings apply to the ability of issuers to repay punctually senior debt
obligations having an original maturity not exceeding one year:
Prime-1: Issuer has a superior ability for repayment of senior short-term debt
obligations.
Prime-2: Issuer has a strong ability for repayment of senior short-term debt
obligations. Earnings trends and coverage, while sound, may be subject to
variation. Capitalization characteristics, while appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Prime-3: Issuer has an acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market compositions may
be more pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and may require relatively
high financial leverage. Adequate alternate liquidity is maintained.
Not Prime: Issuer does not fall within any Prime rating category.
Standard & Poor's Rating Services
Long-Term Credit Ratings
AAA: Bonds rated "AAA" have the highest rating assigned by Standard &
Poor's. The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA: Bonds rated "AA" differ from the highest rated obligations only in
small degree. The obligor's capacity to meet its financial commitment on
the obligation is very strong.
A: Bonds rated "A" are somewhat more susceptible to adverse effects of changes
in circumstances and economic conditions than obligations in higher-rated
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is still strong.
BBB: Bonds rated BBB exhibit adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on the
obligation.
Bonds rated BB, B, CCC, CC and C are regarded as having significant speculative
characteristics. BB indicates the least degree of speculation and C the highest.
While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.
BB: Bonds rated BB are less vulnerable to nonpayment than other speculative
issues. However, these face major uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B: A bond rated B is more vulnerable to nonpayment than an obligation rated BB,
but the obligor currently has the capacity to meet its financial commitment on
the obligation.
CCC: A bond rated CCC is currently vulnerable to nonpayment, and is dependent
upon favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation. CC: An
obligation rated CC is currently highly vulnerable to nonpayment.
C: The C rating may be used where a bankruptcy petition has been filed or
similar action has been taken, but payments on this obligation are being
continued.
D: Bonds rated D are in default. Payments on the obligation are not being made
on the date due.
The ratings from AA to CCC may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories. The
"r" symbol is attached to the ratings of instruments with significant noncredit
risks.
Short-Term Issue Credit Ratings
A-1: Rated in the highest category. The obligor's capacity to meet its financial
commitment on the obligation is strong. Within this category, a plus (+) sign
designation indicates the issuer's capacity to meet its financial obligation is
very strong.
A-2: Obligation is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than obligations in higher rating
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is satisfactory.
A-3: Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity of the obligor to meet its financial commitment on the obligation.
B: Regarded as having significant speculative characteristics. The obligor
currently has the capacity to meet its financial commitment on the obligation.
However, it faces major ongoing uncertainties which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.
C: Currently vulnerable to nonpayment and is dependent upon favorable
business, financial, and economic conditions for the obligor to meet its
financial commitment on the obligation.
D: In payment default. Payments on the obligation have not been made
on the due date. The rating may also be used if a bankruptcy petition has
been filed or similar actions jeopardize payments on the obligation.
<PAGE>
Oppenheimer Senior Floating Rate Fund
6803 South Tucson Way
Englewood, Colorado 80112
1-800-525-7048
Manager
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
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche, LLP
555 Seventeenth Street, Suite 3600
Denver, Colorado 80202-3942
Legal Counsel
Meyer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
Psp291.9/99
For More Information About Oppenheimer Senior Floating Rate 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 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 1-800-SEC-0330) or the SEC's Internet web site at
http://www.sec.gov. Copies may be obtained upon payment of a duplicating fee by
writing to the SEC's Public Reference Section, Washington, D.C. 20549-6009.
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.
SEC File No. 811-09373
Printed on recycled paper.
<PAGE>
Oppenheimer Senior Floating Rate Fund
6803 South Tucson Way, Englewood, Colorado 80112
1-800-525-7048
Statement of Additional Information dated September __, 1999
This Statement of Additional Information is not a Prospectus. This document
contains additional information about the Fund and supplements information in
the Prospectus dated September __, 1999. 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..... 2
More Information About Senior Loans.................................. 2
Other Investment Techniques and Strategies.......................... 13
Investment Restrictions............................................. 37
How the Fund is Managed.................................................. 39
Organization and History................................................. 39
Trustees and Officers............................................... 41
The Manager......................................................... 46
Brokerage Policies of the Fund........................................... 47
Distribution and Service Plans........................................... 49
Performance of the Fund................................................. 52
About Your Account
How To Buy Shares........................................................ 57
Periodic Offers to Repurchase Shares..................................... 63
How To Exchange Shares................................................... 65
Dividends, Capital Gains and Taxes....................................... 66
Additional Information About the Fund.................................... 73
Financial Information About the Fund
Independent Auditors' Report.. .......................................... 74
Financial Statements..................................................... 75
Appendix A: Industry Classifications................................... A-1
Appendix B: Special Sales Charge Arrangements and Waivers.............. B-1
<PAGE>
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 composition of the Fund's portfolio and the techniques and
strategies that the 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 in seeking its goal. It may use some of the special
investment techniques and strategies at some times or not at all.
In general, the Fund engages in portfolio transactions when the Manager
believes that the sale of a portfolio security, or the purchase of another
security, can enhance the Fund's principal or increase its income. The Manager
may sell a security to avoid a potential decline in market value, or the Manager
may buy a security in anticipation of a market rise. The Manager may buy and
sell similar securities at the same time to take advantage of disparities in the
normal yield and price relationship between the two securities.
In selecting securities for the Fund's portfolio, the Manager evaluates
the merits of particular securities primarily through the exercise of its own
investment analysis. That process may include, among other things, evaluation of
the issuer's historical operations, prospects for the industry of which the
issuer is part, the issuer's financial condition, its pending product
developments and business (and those of competitors), the effect of general
market and economic conditions on the issuer's business, and legislative
proposals that might affect the issuer.
Additionally, in analyzing a particular issuer, the Manager may
consider the trading activity in the issuer's securities, present and
anticipated cash flow, estimated current value of its assets in relation to
their historical cost, the issuer's experience and managerial expertise,
responsiveness to changes in interest rates and business conditions, debt
maturity schedules, current and future borrowing requirements, and any change in
the financial condition of an issuer and the issuer's continuing ability to meet
its future obligations. The Manager also may consider anticipated changes in
general business conditions, levels of interest rates on bonds compared to
levels of cash dividends, industry and regional prospects, the availability of
new investment opportunities and the general economic, legislative and monetary
outlook for specific industries, the nation and the world.
More Information About Senior Loans. Senior Loans typically are arranged through
private negotiations between a borrower and one or more financial institutions
("Lenders"). Usually the Lenders are represented by an agent ("Agent"), which
usually is one of the Lenders.
Senior Loans generally hold the most senior position in a borrower's
capital structure. Borrowers generally pay the holders of Senior Loans before
they pay the holders of unsecured bank loans, corporate bonds or subordinated
debt, trade creditors, and preferred or common stockholders. Lenders obtain
priority liens that typically provide the first right to cash flows or proceeds
from the sale of a borrower's collateral, if any, if the borrower becomes
insolvent. That right is subject to the limitations of bankruptcy law, which may
provide higher priority to certain other claims such as, for example, employee
salaries, employee pensions and taxes.
Senior Loans have contractual terms designed to protect lenders. Loan
agreements often include restrictive covenants that limit the activities of the
borrower. A restrictive covenant is a promise by the borrower to not take
certain actions that might impair the rights of lenders. Those covenants
typically require the scheduled payment of interest and principal and may
include restrictions on dividend payments and other distributions to the
borrower's shareholders, provisions requiring the borrower to maintain specific
financial ratios or relationships and limits on the borrower's total debt. In
addition, a covenant may require the borrower to prepay the Senior Loan or debt
obligation with any excess cash flow. Excess cash flow generally includes net
cash flow after scheduled debt service payments and permitted capital
expenditures, among other things, as well as the proceeds from asset
dispositions or sales of securities.
A breach of a covenant (after giving effect to any cure period) in a
loan agreement that is not waived by the Agent and the lending syndicate
normally is an event of acceleration. This means that the Agent has the right to
demand immediate repayment in full of the outstanding loan. Acceleration may
cause the non-payment of the principal or interest on the loan, in whole or in
part, which may result in a reduction in value of the loan (and possibly the
Fund's net asset values) if the loan is not paid. Acceleration may also occur in
the case of the breach of a covenant in a debt obligation agreement.
Lenders typically also have certain voting and consent rights under a
Senior Loan agreement. Action subject to a Lender vote or consent generally
requires the vote or consent of the holders of some specified percentage of the
outstanding principal amount of a Senior Loan, and the Fund might not agree with
the actions of the holders of that specified percentage of a particular Senior
Loan. Certain decisions, such as reducing the amount or increasing the time for
payment of interest on or repayment of principal of a Senior Loan, or releasing
collateral for the Senior Loan, frequently require the unanimous vote or consent
of all Lenders affected.
|X| Collateral. Senior Loans in which the Fund invests are typically
secured by the borrower's collateral. Collateral may include tangible assets,
such as cash, accounts receivable, inventory, real estate, buildings and
equipment, common and/or preferred stock of subsidiaries, and intangible assets
including trademarks, copyrights, patent rights and franchise value. The Fund
may also receive guarantees or other credit support as a form of collateral. In
some instances, the Fund may invest in Senior Loans that are secured only by
stock of the borrower or its subsidiaries or affiliates.
Generally, as discussed below, the Agent for a particular Senior Loan
is responsible for monitoring collateral and for exercising remedies available
to the lenders such as foreclosure upon collateral in the event of the
borrower's default. In certain circumstances, the loan agreement may authorize
the Agent to liquidate the collateral and to distribute the liquidation proceeds
pro rata among the lenders. The Fund may invest up to 20% of its total assets in
senior loans that are not secured by specific collateral. Unsecured senior loans
involve additional risk.
|X| Interest Rate Benchmarks. Interest rates on Senior Loans adjust
periodically. The interest rates adjust based on a base rate plus a premium or
spread over the base rate. The base rate usually is the London Inter-Bank
Offered Rate ("LIBOR"), the Federal Reserve federal funds rate, the Prime Rate
or the certificate of deposit ("CD") rate or other base lending rates used by
commercial lenders (each as defined in the applicable loan agreement). The
interest rate on Prime Rate-based corporate loans and corporate debt securities
floats daily as the Prime Rate changes, while the interest rate on LIBOR-based
and CD-based Corporate Loans and Corporate Debt Securities is reset
periodically, typically between 30 days and one year.
o LIBOR usually is an average of the interest rates quoted by
several designated banks as the rates at which they pay interest
to major depositors in the London interbank market on U.S. dollar
denominated deposits. The market views changes in short-term LIBOR
rates as closely related to changes in the Federal Reserve federal
funds rate, although the two are not officially related.
o The Federal Reserve federal funds rate is the rate that the
Federal Reserve Bank charges member banks for borrowing money.
o The Prime Rate quoted by a major U.S. bank is generally the
interest rate at which that bank is willing to lend U.S. dollars
to its most creditworthy borrowers, although it may not be the
bank's lowest available rate.
o The CD rate, as provided for in loan agreements, usually is the
average rate paid on large certificates of deposit traded in the
secondary market.
Certain floating or variable rate Senior Loans may permit the borrower
to select an interest rate reset period of up to one year. A portion of the
Fund's investments may consist of Senior Loans with interest rates that are
fixed for the term of the loan. Investing in Senior Loans with longer interest
rate reset periods or fixed interest rates may increase fluctuations in the
Fund's net asset value as a result of changes in interest rates. However, the
Fund may attempt to hedge all of its fixed rate Senior Loans against interest
rate fluctuations by entering into interest rate swaps or total return swap
transactions. The Fund also will attempt to maintain a dollar-weighted average
time period to the next interest rate adjustment of 90 days or less for its
portfolio of Senior Loans.
Senior Loans are generally structured so that borrowers pay higher
margins when they elect LIBOR and CD-based borrower options. This permits
lenders to obtain generally consistent yields on Senior Loans, regardless of
whether borrowers select the LIBOR or CD-based options, or the Prime-based
option. In recent years, however, the differential between the lower LIBOR and
CD base rates and the higher Prime Rate base rates prevailing in the commercial
bank markets has widened to the point that the higher margins paid by borrowers
for LIBOR and CD-based pricing options do not currently compensate for the
differential between the Prime Rate and the LIBOR and CD base rates.
Consequently, borrowers have increasingly selected the LIBOR-based pricing
option, resulting in a yield on Senior Loans that is consistently lower than the
yield available from the Prime Rate-based pricing option. If this trend
continues, it will significantly limit the ability of the Fund to achieve a net
return to shareholders that consistently approximates the average published
Prime Rate of leading U.S. banks. The Manager cannot predict whether this trend
will continue.
|X| The Manager's Credit Analysis of Senior Loans. The Manager performs
its own credit analysis of Senior Loans. The Manager obtains information from
the agents that originate or administer the loans, other lenders and other
sources. The Manager will continue to analyze the credit of Senior Loans while
the Fund owns the Senior Loans.
In its analysis, the Manager may consider many factors, including the
borrower's past and future projected financial performance; the quality of
management; collateral; cash flow; industry; position in the market; and
tangible assets. When evaluating Senior Loans, the Manager may consider, and may
rely in part, on analysis performed by Agents and other Lenders. This analysis
may include an evaluation of the value and sufficiency of any collateral
securing Senior Loans.
A borrower's capital structure may include Senior Loans, senior and
junior unsubordinated debt, preferred stock and common stock. Senior Loans
typically have the most senior claim on the borrower's assets, while common
stock has the lowest priority. Typically, the borrowers use the proceeds of
Senior Loans to finance leveraged buyouts, recapitalizations, mergers,
acquisitions, stock repurchases, debt refinancings, and, to a lesser extent,
other purposes.
When the Manager determines that a borrower of a Senior Loan is likely
to repay its obligations, it will consider that Senior Loan for investment in
the Fund. For example, the Manager may determine that a borrower can meet debt
service requirements from cash flow or other sources, including the sale of
assets, despite the borrower's low credit rating. The Manager may determine that
Senior Loans of borrowers that are experiencing financial distress, but that
appear able to pay their interest, may present investment opportunities.
|X| How Senior Loans Are Arranged. The Fund generally will acquire
Senior Loans from and sell Senior Loans to the following types of Lenders: money
center banks, selected regional banks and selected non-banks, investment banks,
insurance companies, finance companies, other investment companies, private
investment funds, and lending companies. The Fund may also acquire Senior Loans
from and sell Senior Loans to U.S. branches of foreign banks that are regulated
by the Federal Reserve System or appropriate state regulatory authorities.
The Fund may have obligations under a loan agreement, including the
obligation to make additional loans in certain circumstances. The Fund intends
to reserve against such contingent obligations by segregating cash, liquid
securities and liquid Senior Loans as a reserve. The Fund will not purchase a
Senior Loan that would require the Fund to make additional loans if as a result
of that purchase all of the Fund's additional loan commitments in the aggregate
would exceed 20% of the Fund's total assets or would cause the Fund to fail to
meet the asset composition requirements set forth in "Investment Restrictions,"
below in this Statement of Additional Information.
|_| The Agent. Agents that arrange Senior Loans typically are
commercial or investment banks or other entities that originate Senior Loans and
invite other parties to join the lending syndicate. In larger transactions, it
is common to have several Agents. However, usually only one Agent has primary
responsibility for documentation and administration of the Senior Loan. Agents
are normally paid fees by the borrower for their services. While the Fund can
serve as the Agent or co-agent for a Senior Loan, the Fund currently does not
intend to act as an Agent or co-Agent.
Agents, acting on behalf of the Lenders, generally are primarily
responsible for negotiating the loan agreement, which establishes the terms and
conditions of the Senior Loan and the rights of the borrower and the Lenders.
Agents usually monitor the adequacy of assets that collateralize Senior Loans.
Agents may rely on independent appraisals of specific collateral. In reliance
upon the opinions of their legal counsel, Agents generally are also responsible
for determining that the Lenders have obtained a perfected security interest in
the collateral securing Senior Loans.
The Fund will rely on Agents to collect payments of principal and
interest on a Senior Loan. The Fund also will rely in part on Agents to monitor
compliance by the borrower with the restrictive covenants in the loan agreement
and to notify the Fund (or the Lender from whom the Fund has purchased a
participation) of any adverse change in the borrower's financial condition.
Financial difficulties of Agents can pose a risk to the Fund. If an
Agent for a particular Senior Loan becomes insolvent, the Fund could incur
losses in connection with its investment in that Senior Loan. An Agent could
declare bankruptcy, and a regulatory authority could appoint a receiver or
conservator. Should this occur, the assets that the Agent holds under the Senior
Loan should continue to be available to the holders of the Senior Loans,
including the Fund. A regulator or a court, however, might determine that the
assets that the Agent holds for the benefit of the Fund are subject to the
claims of the Agent's general or secured creditors. If that occurs, the Fund
might incur costs and delays in realizing final payment on a Senior Loan, or the
Fund might suffer a loss of principal or interest. The Fund may be subject to
similar risks when it buys a Participation Interest or an Assignment from an
intermediary.
|X| How the Fund Invests in Senior Loans. The Fund may invest in
Senior Loans in one or more of three ways:
o The Fund may invest directly in a Senior Loans by acting as
an original Lender.
o The Fund may purchase a Senior Loan by an assignment of the loan
(an "Assignment") from the Agent or other Lender.
o The Fund may purchase a participation interest in a Senior Loan
("Participation Interest") from an Agent or other Lender.
|_| Direct Investments. The Fund can invest directly in Senior Loans,
generally "at par" (a price for the Senior Loan equal approximately to 100%
of the funded principal amount of the loan). When the Fund directly invests
in a Senior Loan, it may receive a return at the full interest rate for the
Senior Loan.
When the Fund is an original lender, it will have a direct contractual
relationship with the borrower and will have direct recourse against the
borrower in the event the borrower fails to pay scheduled principal or interest.
In all other cases, the Fund looks to the Agent to enforce appropriate remedies
against the borrower.
|_| Assignments. When the Fund purchases a Senior Loan by Assignment,
the Fund typically succeeds to the rights of the assigning lender under the
Senior Loan agreement and becomes a "Lender" under the Senior Loan
agreement. Subject to the terms of the loan agreement, the Fund may enforce
compliance by the borrower with the terms of the loan agreement and may
have rights with respect to any funds acquired by other lenders through
set-off.
However, Assignments are arranged through private negotiations between
potential assignees and potential assignors, and the rights and obligations
acquired by the purchaser of an Assignment may be more limited than those held
by the assigning lender. The Fund will purchase an Assignment or act as lender
with respect to a syndicated Senior Loan only when the Manager determines that
the Agent is creditworthy.
|_| Participation Interests. A participation interest is an undivided
interest in a loan made by the issuing financial institution in the
proportion that the buyer's participation interest bears to the total
principal amount of the loan. 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. Holders of
Participation Interests are referred to as "Participants."
Participation Interests involve special risks for the Fund.
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. 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.
The Fund's rights under a Participation Interest with respect to a
particular Senior Loan may be more limited than the rights of original Lenders
or of investors who acquire an Assignment of that Loan. The Fund has the right
to receive payments of principal, interest and any fees to which it is entitled
only from the Lender selling the Participation Interest and only when the Lender
receives the payments from the borrower. In purchasing Participation Interests,
the Fund will usually have a contractual relationship only with the selling
institution and not the underlying borrower. The Fund generally will have no
right directly to enforce compliance by the borrower with the terms of the
related loan agreement, nor will the Fund generally have the right to object to
certain changes to the loan agreement agreed to by the selling institution. The
Fund generally will have no right to compel the lender from whom it purchased
the Participation Interest to enforce compliance by the borrower with the terms
of the Senior Loan agreement.
In buying a Participation Interest, the Fund might not directly benefit
from the collateral supporting the related Senior Loan and may be subject to any
rights of set off the borrower has against the selling institution. As a result,
the Fund may be subject to delays, expenses and risks that are greater than
those that exist when the Fund is an original Lender.
Due to restrictions and conditions on transfer in loan agreements and
in the participation agreement negotiated by the Fund and the selling
institution, Participation Interests are not as easily purchased or sold as a
publicly traded security. Accordingly, investments in participation interests
may be illiquid.
In buying a Participation Interest, the Fund assumes the credit risk of
both the borrower and the Lender selling the Participation Interest. If a Lender
that sells the Fund a Participation Interest becomes insolvent, the Fund may be
treated as a general creditor of the Lender. As a general creditor, the Fund may
not benefit from a right of set off that the Lender has against the borrower. In
the event of bankruptcy or insolvency of the borrower, the obligation of the
borrower to repay the Senior Loan may be subject to certain defenses that can be
asserted by the borrower as a result of any improper conduct of the Lender
selling the participation. The Fund will acquire a Participation Interest only
if the Manager determines that the Lender (or other intermediary Participant)
selling the Participation Interest is creditworthy.
|X| Fees. The Fund may be required to pay and may receive various fees
and commissions in connection with purchasing, selling and holding interests in
Senior Loans. Borrowers typically pay three kinds of fees to Lenders:
o facility fees when a Senior Loan is originated;
o commitment fees on an ongoing basis based on the unused portion of a Senior
Loan commitment; and o prepayment penalties when a borrower prepays a Senior
Loan.
The Fund receives these fees directly from the borrower if the Fund is
an original Lender or, in the case of commitment fees and prepayment penalties,
if the Fund acquires an Assignment. Whether the Fund receives a facility fee in
the case of an assignment, or any fees in the case of a Participation Interest,
depends on negotiations between the Fund and the Lender selling the interests.
When the Fund buys an Assignment, it may be required to pay a fee, or
forgo a portion of interest and fees payable to it, to the Lender selling the
assignment. Occasionally, the assignor pays a fee to the assignee. In addition,
the Fund may be required to pay a transfer fee to the Agent. The seller of a
Participation Interest to the Fund may deduct a portion of the interest and any
fees payable to the Fund, as an administrative fee. The Fund may be required to
pass along to a buyer of a Senior Loan from the Fund a portion of any fees that
the Fund is entitled to.
If the Fund sells a Participation Interest, the Fund may be required to
pay a transfer fee to the Lender that holds the nominal interest in the Senior
Loan.
Main Risks of Debt Securities. In addition to Senior Loans, the Fund can invest
up to 20% of its total assets in a variety of debt securities to seek its
objective. Foreign debt securities are subject to the risks of foreign
securities described below, and in general, all debt securities (including
Senior Loans) are subject to credit risk and interest rate risk.
|X| Interest Rate Risk. Interest rate risk refers to the fluctuations
in value of debt securities resulting from the inverse relationship between
price and yield. For example, an increase in prevailing interest rates will tend
to reduce the market value of already-issued debt securities, and a decline in
general interest rates will tend to increase their value. In addition, debt
securities having longer maturities tend to have higher yields, but are subject
to potentially greater fluctuations in value from changes in interest rates than
obligations having shorter maturities.
The Fund does not have investment policies establishing specific
maturity ranges for its 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 Manager expects
that the Senior Loans the Fund will invest in will have maturities ranging from
1 to ten years. However, Senior Loans typically have mandatory and optional
prepayment provisions. Because of prepayments, the actual remaining maturity of
a Senior Loan may be considerably less than its stated maturity. The
reinvestment by the Fund of the proceeds of prepaid Senior Loans could result in
a reduction of income to the Fund in falling interest rate environments.
Prepayment penalty fees that may be assessed in some cases may help offset the
loss of income to the Fund in those cases.
Because the interest rates on Senior Loans adjust periodically to
reflect current market rates, falling short-term interest rates should tend to
decrease the income payable to the Fund on its Senior Loan investments and
rising rates should tend to increase that income. The Fund may also use interest
rate swaps and other derivative investments to try to shorten the average
maturity of its portfolio of debt securities.
However, investments in floating rate obligations should also mitigate
the fluctuations in the Fund's net asset values during periods of changing
interest rates, compared to changes in values of longer-term fixed-rate debt
securities. However, changes in interest rates can affect the value of the
Fund's Senior Loans, especially if rates change sharply in a short period,
because the resets of the interest rates on the underlying portfolio of Senior
Loans occur periodically and will not all happen simultaneously with changes in
prevailing rates. Having a shorter average reset period for its portfolio of
Senior Loans may help mitigate that risk.
The Fund's other investments in debt securities that have fixed interest rates
will be subject to the general effects of changes in interest rates, described
above. For those investments, the Fund may shift its focus to securities having
longer maturities as interest rates decline and to securities having shorter
maturities as interest rates rise.
|X| Credit Risk. Credit risk relates to the ability of an issuer of a
debt security to meet interest or principal payments (or both) as they become
due. In general, lower-grade, higher-yield debt securities are subject to credit
risk to a greater extent than higher-quality bonds.
The Fund's investments in Senior Loans and other debt securities can
include high yield, non-investment-grade securities (commonly referred to as
"junk bonds"). It is expected that most of the Fund's Senior Loans will be below
investment grade. Investment-grade securities are securities rated at least
"Baa" by Moody's Investors Service, Inc., at least "BBB" by Standard & Poor's
Ratings Group or Duff & Phelps, Inc., or that have comparable ratings by another
nationally-recognized rating organization ("NRSRO"). If the debt securities the
Fund buys are unrated, they are assigned a rating by the Manager of comparable
quality to securities having similar yield and risk characteristics within a
rating category of a 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.
|_| Special Credit Risks of Lower-Grade Securities. The Fund can
invest without limit in lower-grade debt securities, if the Manager believes it
is consistent with the Fund's objective of seeking high income and preservation
of capital. Because lower-quality securities tend to offer higher yields than
investment-grade securities, the Fund may invest in lower-grade securities to
try to achieve higher income.
Senior Loans, like other debt obligations, are subject to the risk of
the borrower's non-payment of scheduled interest and/or principal. While the
Fund's investments in Senior Loans will be secured by collateral that the
Manager believes to equal or exceed the principal amount of the Senior Loan at
the time of investment, there can be no assurance that the liquidation of such
collateral would satisfy the borrower's obligations in the event of non-payment
of scheduled interest or principal payments, or that the collateral could be
readily liquidated. In the event of a borrower's bankruptcy, the Fund could
experience delays or limitations in its ability to realize the benefits of
collateral securing a loan. To the extent that a Senior Loan is collateralized
by the stock of the borrower or its subsidiaries, that stock may lose all of its
value in the event of the borrower's bankruptcy. Additionally, some Senior Loans
are subject to the risk that a court could subordinate the Senior Loan to
presently existing or future indebtedness of the borrower under fraudulent
conveyance or similar laws, or take other actions detrimental to the interests
of holders of Senior Loans, including invalidating the loan. Nevertheless, in
general, the Manager believes that below-investment-grade Senior Loans have more
favorable loss recovery rates than other below-investment-grade debt securities.
"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 Standard & Poor's or Duff & Phelps, or similar ratings by other rating
organizations. If debt securities 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.
Although at least 80% of the Fund's total assets will normally be invested in
Senior Loans rated "B" or better (or that have, in the Manager's judgment, a
comparable quality, if unrated), a "B" rating is below investment grade. The
Fund is not required to sell a security if its rating falls below "B" after the
Fund buys it.
While Senior Loans are increasingly being rated by national rating
organizations, many Senior Loans in which the Fund will invest will not be rated
by an independent rating agency. While the Fund expects to have access to
financial and other information of the borrower made available to the Lenders
under a Senior Loan, it may not have such information in connection with
Participation Interests and certain Assignments. Additionally, the amount of
public information available with respect to Senior Loans will generally be less
extensive than what is available for exchange-listed or otherwise registered
securities.
Unlike collateralized Senior Loans, other debt securities the Fund can
buy may have no collateral supporting the borrower's obligation to pay interest
and repay principal. The Fund can invest up to 20% of its total assets in that
type of debt securities that are below invest-grade (but which must be rated at
least "B" or have a comparable rating assigned by the Manager if unrated)..
There is a greater risk that the issuer of a below-investment-grade
debt security 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 debt securities, 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 debt
securities, 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 Standard & Poor's
or Duff & Phelps are investment grade and are not regarded as junk bonds, those
securities may be subject to special risks, and have some speculative
characteristics.
Other Debt Securities the Fund Can Buy. Under normal market circumstances and
as part of its regular investment program, the Fund can invest up to 20% of
its total assets in debt securities other than Senior Loans. Those
types of securities are described below.
|X| U.S. Government Securities. These are securities issued or
guaranteed by the U.S. Treasury, other government agencies or federally-charted
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.
|_| U.S. Treasury Obligations. These include Treasury bills (which
have maturities of one year or less when issued), Treasury notes (which have
maturities of one to ten years when issued), and Treasury bonds (which have
maturities of more than ten years when issued). 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 by U. S. Treasury
securities whose interest coupons have been "stripped" by a Federal Reserve
Bank, zero-coupon U.S. Treasury securities described below, and Treasury
Inflation-Protection Securities ("TIPS").
The U.S. Treasury securities called "TIPS" 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").
|_| Zero-Coupon U.S. Government Securities. The Fund can 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.
Other Investment Techniques and Strategies. In seeking its objective, from time
to time the Fund can 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 the Fund may not use them.
|X| Foreign Securities. The Fund can invest up to 20% of its total
assets in foreign securities. "Foreign securities" include equity and debt
securities (including Senior Loans) of companies organized under the laws of
countries other than the United States and debt securities issued or guaranteed
by governments other than the U.S. government or by foreign supra-national
entities. They also include securities of companies (including those that are
located in the U.S. or organized under U.S. law) that derive a significant
portion of their revenue or profits from foreign businesses, investments or
sales, or that have a significant portion of their assets abroad. They may be
traded on foreign securities exchanges or in the foreign over-the-counter
markets.
Securities of foreign issuers that are represented by American
Depository Receipts or that are listed on a U.S. securities exchange or traded
in the U.S. over-the-counter markets are not considered "foreign securities" for
the purpose of the Fund's investment allocations, because they are not subject
to many of the special considerations and risks, discussed below, that apply to
foreign securities traded and held abroad. Generally, the Fund will purchase
Senior Loans of foreign issuers or borrowers only if they are denominated and
payable in U.S. dollars, to reduce the risks of currency fluctuations on the
values of the loans.
The Fund limits its investments in "foreign securities" to securities
of companies and governments in "developed" markets, which the Manager currently
defines to include the United Kingdom, Germany, France, Italy, Belgium, The
Netherlands, Luxembourg, Ireland, Sweden, Finland, Switzerland, Austria,
Denmark, Norway, Spain, Canada, Australia, New Zealand and Japan as well as
securities issued by "supra-national" entities. 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 percentage of the Fund's assets that will be allocated to foreign
securities will vary over time depending on a number of factors. Those factors
may include the relative yields of foreign and U.S. securities, the economies of
foreign countries, the condition of a country's financial markets, the interest
rate climate of particular foreign countries and the relationship of particular
foreign currencies to the U.S. dollar. The Manager analyzes fundamental economic
criteria (for example, relative inflation levels and trends, growth rate
forecasts, balance of payments status, and economic policies) as well as
technical and political data.
Investing in foreign securities offers potential benefits not available
from investing solely in securities of domestic issuers. They include the
opportunity to invest in securities of foreign issuers that appear to offer high
income potential, or in foreign countries with economic policies or business
cycles different from those of the U.S., or to reduce fluctuations in portfolio
value by taking advantage of foreign securities markets that do not move in a
manner parallel to U.S. markets. The Fund will hold foreign currency only in
connection with the purchase or sale of foreign securities.
|_| Foreign Government Debt Obligations. 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. 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.
|_| 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.
Because the Fund can purchase securities denominated in foreign
currencies, a change in the value of a foreign currency against the U.S. dollar
could result in a change in the amount of income the Fund has available for
distribution. Because a portion of the Fund's investment income may be received
in foreign currencies, the Fund will be required to compute its income in U.S.
dollars for distribution to shareholders, and therefore the Fund will absorb the
cost of currency fluctuations. After the Fund has distributed income, subsequent
foreign currency losses may result in the Fund's having distributed more income
in a particular fiscal period than was available from investment income, which
could result in a return of capital to shareholders.
|_| 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 lira)
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), 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 has upgraded (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 managers 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| Other Zero-Coupon Securities. The Fund may buy zero-coupon and
delayed interest securities, and "stripped" securities of U.S. and foreign
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| Other "Stripped" Securities. In addition to buying stripped
Treasury 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 collateralized mortgage obligations (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. Preferred stock may be "participating" stock, which means
that it may be entitled to a dividend exceeding the stated dividend in certain
cases.
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 provisions allowing
calls or redemption prior to maturity, which also can have a negative impact on
prices when interest rates decline. 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. Preferred stock generally has a preference over common stock on the
distribution of a corporation's assets in the event of liquidation of the
corporation.
|X| Other Floating Rate and Variable Rate Obligations. The Fund can
invest in debt securities other than Senior Loans that have floating or variable
interest rates. Those variable rate obligations may 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 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. 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 year and upon no more than 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. The Fund can also buy step-coupon bonds that have a coupon rate
that changes periodically during the life of the security on pre-determined
dates that are set when the security is issued.
|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. 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, the
Fund makes no payment to the issuer and no interest accrues to the Fund from the
investment until it receives the security at settlement.
The Fund may engage in when-issued transactions to secure what the
Manager considers to be an advantageous price and yield at the time the
obligation is entered into. 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's purpose in entering into delayed-delivery or when-issued
purchase transactions is 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| Repurchase Agreements. The Fund can acquire securities subject to
repurchase agreements. It might do so
o for liquidity purposes to meet anticipated repurchases of Fund shares,
or
o pending the investment of the proceeds from sales of Fund shares, or
o pending the settlement of portfolio securities transactions, or
o 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 to five days of the purchase.
Repurchase agreements having a maturity beyond seven days may be deemed to be
illiquid investments. The Fund will not enter into a repurchase agreement that
causes more than 15% of its net assets to be subject to repurchase agreements
having a maturity beyond seven days. There is no limit on the amount of the
Fund's net assets that may be subject to repurchase agreements having maturities
of seven 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| Reverse Repurchase Agreements. The Fund can use reverse repurchase
agreements on debt obligations it owns, as a cash management tool, but not as a
means of leveraging investments. Under a reverse repurchase agreement, the Fund
sells an underlying debt obligation and simultaneously obtains the commitment of
the purchaser to sell the security back to the Fund at an agreed-upon price at
an agreed-upon date. The Fund will identify on its books liquid assets in an
amount sufficient to cover its obligations under reverse repurchase agreements,
including interest, until payment is made to the seller. Before the Fund enters
into a reverse repurchase agreement, the Manager must be satisfied that the
seller, typically a bank or broker-dealer, is creditworthy.
These transactions involve the risk of default or insolvency by the
seller, including possible delays in the Fund's ability to dispose of the
underlying collateral. An additional risk is that the market value of the
securities sold by the Fund under a reverse repurchase agreement could decline
below the price at which the Fund is obligated to repurchase them. These
agreements will be considered borrowings by the Fund and will be subject to the
asset coverage requirement under the Fund's policy on borrowing discussed
elsewhere in this Statement of Additional Information. The Fund will not hold
more than 5% of the value of its total assets in reverse repurchase agreements.
|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. Because
most Senior Loans are not actively traded in securities markets and
are not listed on exchanges, most of the Fund's holdings may be deemed
to be "illiquid." Since the Fund has fundamental policies requiring it
to make periodic offers to repurchase a portion of its shares, the
Investment Company Act imposes certain liquidity requirements on the
Fund in connection with repurchases. That liquidity requirement
extends from the time the Fund sends out a notice to shareholders of
the offer of repurchase until the repurchase pricing date. During that
period, a percentage of the Fund's assets equal to 100% of the
repurchase offer amount must consist of o assets that can be sold or
disposed of in the ordinary course of business at approximately the
price at which the Fund has valued the assets and which can be sold at
that price within the period between the repurchase request deadline
and the repurchase payment deadline, or
o assets that mature by the next repurchase payment deadline.
If at any time the Fund does not meet those liquidity requirements in
connection with repurchases, the Board of Trustees is required to cause the Fund
to take appropriate action to assure compliance. That might include the
requirement to sell securities or to terminate borrowings, which could cause
losses or additional to the Fund on its investment or loan.
If the Fund buys a restricted security, one that is not registered
under the Securities Act of 1933, the Fund may have to cause those securities to
be registered before it can dispose of its holdings. 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.
Illiquid securities include repurchase agreements maturing in more than seven
days and participation interests that do not have puts exercisable within seven
days, as well as Rule 144A securities the Fund holds for which there is a lack
of a trading market among institutional purchasers.
|X| Investments in Equity Securities. The Fund can invest in securities
other than debt securities, including certain types of equity securities of both
foreign and U.S. companies, if such investments are consistent with the Fund's
investment objective. The Fund does not anticipate investing significant amounts
of its assets in these securities as part of its normal investment strategy. The
Fund's equity securities principally will be securities acquired in connection
with purchasing, restructuring or disposing of Senior Loans. Those equity
securities include preferred stocks (described above), rights and warrants, and
securities convertible into common stock. Certain equity securities may be
purchased because they may provide dividend income.
|_| Risks of Investing in Stocks. Stocks fluctuate in price, and
their short-term volatility at times may be great. To the extent that the Fund
invests in equity securities, the value of the Fund's portfolio will be affected
by changes in the stock markets. Market risk can affect the Fund's net asset
value per share, which will fluctuate as the values of the Fund's portfolio
securities change. The prices of individual stocks do not all move in the same
direction uniformly or at the same time. Different stock markets may behave
differently from each other.
Other factors can affect a particular stock's price, such as poor
earnings reports by the issuer, loss of major customers, major litigation
against the issuer, or changes in government regulations affecting the issuer or
its industry. The Fund can invest in securities of large companies and mid-size
companies, but may also hold stocks of small companies, which may have more
volatile stock prices than stocks of larger companies.
|_| Convertible Securities. While some convertible securities are
a form of debt security, in certain cases their conversion feature (allowing
conversion into equity securities) causes them to be regarded more as "equity
equivalents." As a result, the rating assigned to the security has less impact
on the Manager's investment decision with respect to convertible securities than
in the case of non-convertible fixed income securities. Convertible securities
are subject to the credit risks and interest rate risks of debt securities
described above.
The value of a convertible security is a function of its "investment
value" and its "conversion value." If the investment value exceeds the
conversion value, the security will behave more like a debt security and the
security's price will likely increase when interest rates fall and decrease when
interest rates rise. If the conversion value exceeds the investment value, the
security will behave more like an equity security. In that case, it will likely
sell at a premium over its conversion value and its price will tend to fluctuate
directly with the price of the underlying security.
To determine whether convertible securities should be regarded as
"equity equivalents," the Manager examines the following factors:
(1) whether, at the option of the investor, the convertible
security can be exchanged for a fixed number of shares of
common stock of the issuer,
(2) whether the issuer of the convertible securities has restated
its earnings per share of common stock on a fully diluted
basis (considering the effect of conversion of the convertible
securities), and
(3) the extent to which the convertible security may be a
defensive "equity substitute," providing the ability to
participate in any appreciation in the price of the issuer's
common stock.
|_| Rights and Warrants. The Fund can hold warrants or rights,
however, the Fund does not expect that it will have significant
investments in warrants and rights. Warrants basically are options to
purchase equity securities at specific prices valid for a specific
period of time. Their prices do not necessarily move parallel to the
prices of the underlying securities. Rights are similar to warrants,
but normally have a short duration and are distributed directly by the
issuer to its shareholders. Rights and warrants have no voting rights,
receive no dividends and have no rights with respect to the assets of
the issuer.
|X| Money Market Instruments. The Fund can invest in money market
instruments, which are short-term debt obligations, to provide
liquidity. Following is a brief description of the types of the U.S.
dollar-denominated money market securities the Fund can invest in.
Money market securities are high-quality, short-term debt instruments
that may be issued by the U.S. government, corporations, banks or
other entities. They may have fixed, variable or floating interest
rates.
|_| U.S. Government Securities. These include obligations issued
or guaranteed by the U.S. government or any of its agencies or
instrumentalities, described above.
|_| Bank Obligations. The Fund can buy time deposits,
certificates of deposit and bankers' acceptances. They must be: o
obligations issued or guaranteed by a domestic bank (including a
foreign branch of a domestic bank) having total assets of at least
U.S. $1 billion, or o obligations of a foreign bank with total assets
of at least U.S. $1 billion.
"Banks" include commercial banks, savings banks and savings and loan
associations, which may or may not be members of the Federal Deposit Insurance
Corporation.
|_| Commercial Paper. The Fund can invest in commercial paper if
it is rated within the top three rating categories of Standard &
Poor's and Moody's or other rating organizations. If the paper is not
rated, it may be purchased if the Manager determines that it is
comparable to rated commercial paper in the top three rating
categories of national rating organizations.
The Fund can buy commercial paper, including U.S. dollar-denominated
securities of foreign branches of U.S. banks, issued by other entities if the
commercial paper is guaranteed as to principal and interest by a bank,
government or corporation whose certificates of deposit or commercial paper may
otherwise be purchased by the Fund.
|_| Variable Amount Master Demand Notes. Master demand notes are
corporate obligations that permit the investment of fluctuating amounts by the
Fund at varying rates of interest under direct arrangements between the Fund, as
lender, and the borrower. They permit daily changes in the amounts borrowed. The
Fund has the right to increase the amount under the note at any time up to the
full amount provided by the note agreement, or to decrease the amount. The
borrower may prepay up to the full amount of the note without penalty. These
notes may or may not be backed by bank letters of credit.
Because these notes are direct lending arrangements between the lender
and borrower, it is not expected that there will be a trading market for them.
There is no secondary market for these notes, although they are redeemable (and
thus are immediately repayable by the borrower) at principal amount, plus
accrued interest, at any time. Accordingly, the Fund's right to redeem such
notes is dependent upon the ability of the borrower to pay principal and
interest on demand.
The Fund has no limitations on the type of issuer from whom these notes
will be purchased. However, in connection with such purchases and on an ongoing
basis, the Manager will consider the earning power, cash flow and other
liquidity ratios of the issuer, and its ability to pay principal and interest on
demand, including a situation in which all holders of such notes made demand
simultaneously. Investments in master demand notes are subject to the limitation
on investments by the Fund in illiquid securities, described in the Prospectus.
Currently, the Fund does not intend that its investments in variable amount
master demand notes will exceed 5% of its total assets.
|X| Loans of Portfolio Securities. To raise cash for income or
liquidity 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.
Each 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. The Fund has the ability to borrow from banks on an
unsecured basis to raise cash in order to repurchase its shares in a Repurchase
offer, to fund commitments to purchase Senior Loans and for temporary, emergency
purposes. The Fund will not borrow money on a long-term basis to invest in
portfolio securities, which is a speculative technique is known as "leverage."
The Fund may borrow only from banks, although the Fund may enter into reverse
repurchase agreements, which are considered to be borrowings.
Under current regulatory requirements, the Fund can borrow 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.
To enable the Fund to meet its commitments to repurchase shares in the
amount set by the Board of Trustees, and to the extent needed to enable the Fund
to meet the asset coverage requirements for those repurchases under the
Investment Company Act, any borrowing by the Fund will either o mature by the
next repurchase request deadline or o provide for its redemption, call, or
repayment by the Fund by the next repurchase request deadline
without penalty or premium.
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 loans. Asset
backed securities that are collateralized loan obligations may include domestic
and foreign senior secured loans, unsecured senior loans and subordinate
corporate loans, all of which may be investment grade or below investment grade
in quality. The Fund currently intends to limit its investments in these
securities to not more than 10% of its total assets.
These securities 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 interest
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.
In general, asset backed securities are subject to prepayment risks,
interest rate risks and the credit risks of both the borrowers and of the entity
that issues the security. 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 main risks of
investing in asset-backed securities are ultimately related to payment of the
underlying loans by the individual borrowers.
The Fund does not select either the borrowers or the collateral under
these arrangements. 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. Some asset-backed securities do not have the benefit
of a security interest in the underlying collateral. Even if the obligations are
collateralized, there may be significant delays in collecting on the collateral
in the case of a default on an underlying loan, and as an investor in the
asset-backed security the Fund may have limited rights or no rights to enforce
the terms of underlying loan agreements, to object to amendments to the lending
agreement or to any set-off against the borrower.
|X| Derivatives. The Fund can invest in a variety of derivative
investments to seek income or for hedging purposes. Derivative investments the
Fund can use include the mortgage-backed and asset-backed securities described
above, and the swaps, structured notes and other hedging instruments described
below in this Statement of Additional Information.
|X| Hedging. The Fund can use hedging instruments, although it is not
obligated to use them in seeking its objective. The Fund may uses these
techniques to try to preserve returns on a particular investment in its
portfolio, or to try to protect against anticipated decreases in the interest
rates on floating rate investments or for other risk-management purposes, such
as managing the effective dollar-weighted average maturity of the Fund's
portfolio. To attempt to protect against declines in the market value of the
Fund's portfolio holdings from changes in interest rates or other market
factors, 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: o sell futures contracts, o buy puts on such
futures or on securities, or o 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: o buy
futures, or o 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. Because these
hedging transactions are entered into for risk management purposes, the Manager
does not believe that these obligations are "senior securities" subject to the
Fund's asset-coverage requirements for senior securities. 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 stock index is used as the basis for trading stock
index futures. They may in some cases be based on stocks of issuers in a
particular industry or group of industries. A stock 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 stock index
cannot be purchased or sold directly. Bond index futures are similar contracts
based on the future value of the basket of securities that comprise the index.
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 main
commodity groups: (1) energy, which includes crude oil, natural gas, gasoline
and heating oil; (2) livestock, which includes cattle and hogs; (3) agriculture,
which includes wheat, corn, soybeans, cotton, coffee, sugar and cocoa; (4)
industrial metals, which includes aluminum, copper, lead, nickel, tin and zinc;
and (5) precious metals, which includes gold, platinum and silver. The Fund may
purchase and sell commodity futures contracts, options on futures contracts and
options and futures on commodity indices with respect to these five main
commodity groups and the individual commodities within each group, as well as
other types of commodities.
The Fund does not pay or receive money 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. Alternatively, the Fund may maintain accounts with futures brokers,
provided that the Fund and the futures brokers comply with the requirements of
the rules under the Investment Company Act.
At any time prior to the expiration of a futures contract, 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 can 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, although the Fund does not
expect to engage in this practice extensively.
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 bank, 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 identifying on its
books an equivalent dollar amount of liquid assets. The Fund will identify
additional liquid assets if the value of the segregated assets drops below 100%
of the current value of the future. Because of this asset coverage 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 liquid assets
identified on the Fund's books. 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 identify on its books 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 identified 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 other portfolio management decisions. 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 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 can use 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 contract 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 Swaps and Total Return Swaps. 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 fixed rate payments for floating rate payments. If the Fund held a
Senior Loan with an interest rate that is reset only once a year, it might swap
the right to receive interest at that rate for the right to receive interest at
a rate that is reset every week. In that case, if interest rates were to rise,
the increased interest received by the Fund would offset a decline in the value
of the Senior Loan. On the other hand, if interest rates were to fall, the
Fund's benefit from the effect of falling interest rates on the value of the
Senior Loan would decrease.
In addition, the Fund may invest in total return swaps with appropriate
counterparties. In a total return swap, one party pays a rate of interest in
exchange for the total rate of return on another investment. For example, if the
Fund wished to invest in a Senior Loan, it could instead enter into a total
return swap and receive the total return of the Senior Loan, less the "funding
cost," which would be a floating interest rate payment to the counterparty.
Under a swap agreement, the Fund typically will pay a fee determined by
multiplying the face value of the swap agreement by an agreed-upon interest
rate. If the underlying asset value declines over the term of the swap, the Fund
would be required to pay the dollar value of that decline to the counterparty in
addition to its fee payments.
The Fund intends to invest only in swap transactions that are exempt
from regulation by the Commodity Futures Trading Commission under the Commodity
Exchange Act.
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
receives. 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
mark-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.
Temporary Defensive Investments. When market conditions are unstable, or the
Manager believes it is otherwise appropriate to reduce holdings in stocks, 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:
o obligations issued or guaranteed by the U. S. government or its
instrumentalities or agencies,
o commercial paper (short-term, unsecured promissory notes) of domestic or
foreign companies,
o debt obligations of domestic or foreign corporate issuers,
o certificates of deposit and bankers' acceptances of domestic and foreign
banks having total assets in excess of $1 billion, and
o 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.
Portfolio Turnover. "Portfolio turnover" describes the rate at which the Fund
traded its portfolio securities during its last fiscal year. For example, if a
fund sold all of its securities during the year, its portfolio turnover rate
would have been 100%. The Manager is not limited in the amount of portfolio
trading it may conduct on behalf of the Fund and will buy and sell securities as
it deems appropriate. The Fund's portfolio turnover rate will fluctuate from
year to year, and the Fund could have a portfolio turnover rate of more than
100% annually. The portfolio turnover rate may vary greatly from year to year.
The Fund can engage in short-term trading to try to achieve its objective.
However, the Manager does not expect the Fund's annual portfolio turnover rate
to exceed 100%.
Increased portfolio turnover creates higher brokerage and transaction
costs for the Fund, which may reduce its overall performance. Additionally, the
realization of capital gains from selling portfolio securities may result in
distributions of taxable 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. If the Fund repurchases large
amounts of shares during Repurchase Offers, it may have to sell portions of its
securities holdings to raise cash to pay for those repurchases. That might may
result in a higher than usual portfolio turnover rate.
Investment Restrictions. In addition to having a number of investment policies
and restrictions identified in the Prospectus or elsewhere as "fundamental
policies," the Fund has other investment restrictions that are fundamental
policies, described below.
|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: o 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
o more than 50% of the outstanding shares.
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| What Are the Fund's Additional Fundamental Policies? The following
investment restrictions are fundamental policies of the Fund:
o The Fund cannot invest 25% or more of its total assets in
securities of issuers having their principal business activities in
the same industry. The Fund can invest 25% or more of its total assets
and can invest up to 100% of its total assets in securities of issuers
in the group of financial services industries, which under the Fund's
currently-used industry classifications include the following
industries (this group of industries and the Fund's industry
classifications can be changed by the Fund without shareholder
approval): banks, bank holding companies, commercial finance, consumer
finance, diversified financial, insurance, savings and loans, and
special purpose financial. For the purpose of this investment
restriction, the term "issuer" includes the borrower under a loan, the
agent bank for a loan, and any intermediate participant in the loan
interposed between the borrower and the Fund. The percentage
limitation in this investment restriction does not apply to securities
issued or guaranteed by the U.S. government or its agencies and
instrumentalities. For the purposes of interpreting this investment
restriction, each foreign national government is treated as an
"industry" and utilities are divided according to the services they
provide.
o The Fund cannot borrow money in excess of 33 1/3% of the value
of its total assets at the time of the borrowings. The Fund's
borrowings must comply with the 300% asset coverage requirement under
the Investment Company Act, as such requirement may be amended from
time to time.
o The Fund cannot make loans to other persons. However, the Fund
can invest in loans (including by direct investments or purchasing
assignments or participation interests) and other debt obligations in
accordance with its investment objective and policies. The Fund may
also lend its portfolio securities and may purchase securities subject
to repurchase agreements.
o The Fund cannot buy or sell real estate. However, the Fund can
purchase securities secured by real estate or interests in real
estate, or issued by issuers (including real estate investment trusts)
that invest in real estate or interests in real estate. The Fund may
hold and sell real estate as acquired as a result of the Fund's
ownership of securities.
o The Fund cannot buy or sell commodities or commodity contracts.
However, the Fund can buy and sell derivative instruments and other
hedging instruments, such as futures contracts, options and swaps.
o The Fund cannot underwrite securities of other companies. A
permitted exception is in case the Fund is deemed to be an underwriter
under the Securities Act of 1933 when reselling any securities held in
its own portfolio.
o The Fund cannot buy securities on margin. However, the Fund can
make margin deposits in connection with its use of derivative
instruments and hedging instruments.
o The Fund cannot issue "senior securities," except as permitted
under the Investment Company Act. This limitation 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.
Notwithstanding the Fund's investment policies and restrictions, the
Fund may invest all or part of its investable assets in a management investment
company with substantially the same investment objective policies and
restrictions as the Fund. This could allow creation of a "master/feeder"
structure in the future, although the Fund has no current intention to
restructure in this manner.
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 B to
this Statement of Additional Information. This is not a fundamental policy.
|X| Additional Fundamental Policies Concerning Repurchase Offers. The
following policies concerning the Repurchase Offers are fundamental, which means
that the Board of Trustees cannot change the policies without the vote of the
holders of a "majority of the fund's outstanding voting securities," as that
term is defined in the 1940 Act:
o The Fund will make periodic Repurchase Offers, pursuant to Rule
23c-3 under the Investment Company Act (as that Rule may be
amended from time to time).
o Repurchase Offers shall be made at periodic intervals of three
months between Repurchase Request Deadlines. The Repurchase
Request Deadlines will be at the time on the regular business day
(normally the last regular business day) in the months of January,
April, July and October to be determined by the Fund's Board of
Trustees.
o The Repurchase Pricing Date for a particular Repurchase Offer
shall be not more than 14 days after the Repurchase Request
Deadline for that Repurchase Offer. If that day is not a regular
business day, then the Repurchase Pricing Date will be the
following regular business day.
How the Fund is Managed
Organization and History. The Fund is a closed-end, non-diversified management
investment company with an unlimited number of authorized shares of beneficial
interest. The Fund was organized as a Massachusetts business trust in June 1999.
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 three classes of
shares: Class A, Class B and Class C. All classes invest in the same investment
portfolio. 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 and 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. The
Declaration of Trust further states that 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 during the past five 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 also trustees, directors or managing general partners of the
following Denver-based Oppenheimer funds1:
Oppenheimer Cash Reserves Oppenheimer Total Return Fund, Inc.
Oppenheimer Champion Income Fund Oppenheimer Variable Account Funds
Oppenheimer Capital Income Fund Panorama Series Fund, Inc.
Oppenheimer High Yield Fund Centennial America Fund, L. P.
Oppenheimer International Bond Fund Centennial California Tax Exempt
Trust
Oppenheimer Integrity Funds Centennial Government Trust
Oppenheimer Limited-Term Government
Fund Centennial Money Market Trust
Oppenheimer Main Street Funds, Inc. Centennial New York Tax Exempt Trust
Oppenheimer Municipal Fund Centennial Tax Exempt Trust
Oppenheimer Real Asset Fund Oppenheimer Main Street Small Cap
Fund
Oppenheimer Strategic Income Fund Oppenheimer Senior Floating Rate Fund
Ms. Macaskill and Messrs. Swain, Bishop, Donohue, Farrar, Wixted and Zack,
who are officers of the Fund, respectively hold the same offices with the
other Denver-based Oppenheimer funds. As of September 1, 1999, none of the
Trustees and officers of the Fund owned shares of the Fund.
William L. Armstrong, Trustee; Age 62
11 Carriage Lane, Littleton, Colorado 80121
Chairman of the following private mortgage banking companies: Cherry Creek
Mortgage Company (since 1991), Centennial State Mortgage Company (since 1994),
The El Paso Mortgage Company (since 1993), Transland Financial Services, Inc.
(since 1997) and Ambassador Media Corporation (since 1994); Chairman of the
following private companies: Frontier Real Estate, Inc. (residential real estate
brokerage)(since 1995), Frontier Title (title insurance agency) (since 1995) and
Great Frontier Insurance (insurance agency)(since 1994); a Director of the
following public companies: Storage Technology Corporation (computer equipment
company) (since 1991), Helmerich & Payne, Inc. (oil and gas drilling/production
company) (since 1992), and UNUMProvident (insurance company); formerly United
States Senator (1/79 - 1/91) and a director of Natec Resources, Inc. (air
pollution control equipment and services company) (1991-1995) and International
Family Entertainment (television channel) (1991-1997.
Robert G. Avis,* Trustee; Age: 67
One North Jefferson Ave., St. Louis, Missouri 63103
Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer)
and A.G. Edwards, Inc. (its parent holding company);
Chairman of A.G.E. Asset Management and A.G. Edwards Trust
Company (its affiliated investment adviser and trust
company, respectively).
William A. Baker, Trustee; Age: 84
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
George C. Bowen, Trustee; Age 62
6803 South Tucson Way, Englewood, Colorado 80112
Formerly (until June 1999) Mr. Bowen held the following positions: Senior Vice
President (from September 1987) and Treasurer (from March 1985) of the Manager;
Vice President (from June 1983) and Treasurer (from March 1985) of the
Distributor; Vice President (from October 1989) and Treasurer (from April 1986)
of HarbourView Asset Management, an investment adviser subsidiary of the
Manager; Senior Vice President (from February 1992), Treasurer (from July 1991)
and a director (from December 1991) of Centennial Asset Management, an
investment advisory subsidiary of the Manager; President, Treasurer and a
director of Centennial Capital Corporation, a subsidiary of the Manager (from
June 1989); Vice President and Treasurer (from August 1978) and Secretary (from
April 1981) of Shareholder Services, Inc., a transfer agent subsidiary of the
Manager; Vice President, Treasurer and Secretary of Shareholder Financial
Services, Inc., a transfer agent subsidiary of the Manager (from November 1989);
Assistant Treasurer of Oppenheimer Acquisition Corp., the Manager's parent
holding company (from March 1998); Treasurer of Oppenheimer Partnership
Holdings, Inc., a subsidiary of the Manager (from November 1989); Vice President
and Treasurer of Oppenheimer Real Asset Management, Inc., an investment advisory
subsidiary of the Manager (from July 1996); Chief Executive Officer, Treasurer;
Treasurer of OppenheimerFunds International Ltd., an offshore investment
advisory subsidiary of the Manager, and Oppenheimer Millennium Funds plc,
off-shore investment companies managed by the Manager (from October 1997).
Jon S. Fossel, Trustee; Age: 56
P.O. Box 44, Mead Street, Waccabuc, New York 10597
Formerly Chairman and a director of the Manager, President and a director of
Oppenheimer Acquisition Corp., Shareholder Services, Inc. and Shareholder
Financial Services, Inc.
<PAGE>
Sam Freedman, Trustee; Age: 58
4975 Lakeshore Drive, Littleton, Colorado 80123
Formerly Chairman and Chief Executive Officer of OppenheimerFunds Services, a
transfer agent division of the Manager; Chairman, Chief Executive Officer and a
director of Shareholder Services, Inc.; Chairman, Chief Executive Officer and a
director of Shareholder Financial Services, Inc.; Vice President and director of
Oppenheimer Acquisition Corp. and a director of the Manager.
Raymond J. Kalinowski, Trustee; Age: 69
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc. (a computer products training
company), self-employed consultant (securities matters).
C. Howard Kast, Trustee; Age: 77
2552 East Alameda, Denver, Colorado 80209
Formerly Managing Partner of Deloitte, Haskins & Sells (an accounting firm).
Robert M. Kirchner, Trustee; Age: 77
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Bridget A. Macaskill, Trustee and President; Age: 51
Two World Trade Center, 34th Floor, New York, New York 10048
President (since June 1991), Chief Executive Officer (since September 1995) and
a Director (since December 1994) of the Manager; President and director (since
June 1991) of HarbourView Asset Management Corp; Chairman and a director of
Shareholder Services, Inc. (since August 1994), and Shareholder Financial
Services, Inc. (since September 1995); President (since September 1995) and a
director (since October 1990) of Oppenheimer Acquisition Corp.; President (since
September 1995) and a director (since November 1989) of Oppenheimer Partnership
Holdings, Inc.; a director of Oppenheimer Real Asset Management, Inc. (since
July 1996); President and a director (since October 1997) of OppenheimerFunds
International Ltd.; Chairman, President and a director of Oppenheimer Millennium
Funds plc (since October 1997); President and a director of other Oppenheimer
funds; a director of Hillsdown Holdings plc (a U.K. food company).
Ned M. Steel, Trustee; Age: 83
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; a director of Visiting Nurse
Corporation of Colorado.
James C. Swain, Chairman, Chief Executive Officer and Trustee*; Age: 65
6803 South Tucson Way, Englewood, Colorado 80112
Vice Chairman of the Manager (since September 1988); formerly President and a
director of Centennial Asset Management Corporation and Chairman of the Board of
Shareholder Services, Inc.
<PAGE>
Arthur Zimmer, Vice President and Portfolio Manager, Age: 53.
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President of the Manager (since June 1997); Vice President of
Centennial Asset Management Corporation (since September 1991); an officer of
other Oppenheimer funds; formerly Vice President of the Manager (October 1990 -
June 1997).
Joseph Welsh, Assistant Vice President and Portfolio Manager; Age: 35.
Assistant Vice President of the Manager (since 1999); previously a high yield
bond analyst for the Manager (January 1995 to 1999), prior to which he was a
high yield bond analyst for W.R. Huff Asset Management (from November 1991 to
December 1994).
Andrew J. Donohue, Vice President and Secretary; Age: 49
Two World Trade Center, 34th Floor, New York, New York 10048
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 the Distributor; Executive Vice President, General Counsel and
a director of HarbourView Asset Management Corp., Shareholder Services, Inc.,
Shareholder Financial Services, Inc. and Oppenheimer Partnership Holdings, Inc.
(since September 1995) and a director of Centennial Asset Management Corp.
(since September 1995); President, General Counsel and a director of Oppenheimer
Real Asset Management, Inc. (since July 1996); General Counsel (since May 1996)
and Secretary (since April 1997) of Oppenheimer Acquisition Corp.; Vice
President and a director of OppenheimerFunds International Ltd. and Oppenheimer
Millennium Funds plc (since October 1997); an officer of other Oppenheimer
funds.
Brian 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 Corporation, 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 Corporation
(since April 1999); formerly Principal 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 J. Bishop, Assistant Treasurer; Age: 40
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 Farrar, Assistant Treasurer; Age: 33
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.
Robert G. Zack, Assistant Secretary; Age: 51
Two World Trade Center, 34th Floor, New York, New York 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 (since October 1997) of OppenheimerFunds International Ltd.
and Oppenheimer Millennium Funds plc; an officer of other Oppenheimer funds.
Remuneration of Trustees. The officers of the Fund and three of the Trustees of
the Fund (Ms. Macaskill and Messrs. Bowen and Swain) are affiliated with the
Manager and receive no salary or fee from the Fund. The remaining Trustees of
the Fund received the compensation shown below. As of the date of this Statement
of Additional Information, the Fund has paid no compensation to the Trustees
because the Fund is a new fund that has previously had no operations. The
compensation from all of the Denver-based Oppenheimer funds includes represents
compensation received as a director, trustee, managing general partner or member
of a committee of the Board during the calendar year 1998.
<TABLE>
<CAPTION>
Estimated Total Compensation
Aggregate Compensation From all Denver-Based
Trustee's Name and Position from Fund Oppenheimer Funds 1
<S> <C> <C>
- ----------------------------------------- -------------------------------- ---------------------------------
- ----------------------------------------- -------------------------------- ---------------------------------
William H. Armstrong $276 None2
- ----------------------------------------- -------------------------------- ---------------------------------
- ----------------------------------------- -------------------------------- ---------------------------------
Robert G. Avis $276 $67,998
- ----------------------------------------- -------------------------------- ---------------------------------
- ----------------------------------------- -------------------------------- ---------------------------------
William A. Baker $276 $69,998
- ----------------------------------------- -------------------------------- ---------------------------------
- ----------------------------------------- -------------------------------- ---------------------------------
George C. Bowen $207 None3
- ----------------------------------------- -------------------------------- ---------------------------------
- ----------------------------------------- -------------------------------- ---------------------------------
Jon. S. Fossel
Review Committee Member $276 $67,496
- ----------------------------------------- -------------------------------- ---------------------------------
- ----------------------------------------- -------------------------------- ---------------------------------
Sam Freedman
Review Committee Member $300 $67,998
- ----------------------------------------- -------------------------------- ---------------------------------
- ----------------------------------------- -------------------------------- ---------------------------------
Raymond J. Kalinowski $300 $73,998
- ----------------------------------------- -------------------------------- ---------------------------------
- ----------------------------------------- -------------------------------- ---------------------------------
C. Howard Kast
Audit Committee and Review
Committee Chairman $313 $76,998
- ----------------------------------------- -------------------------------- ---------------------------------
- ----------------------------------------- -------------------------------- ---------------------------------
Robert M. Kirchner
Audit Committee Member $276 $67,998
- ----------------------------------------- -------------------------------- ---------------------------------
- ----------------------------------------- -------------------------------- ---------------------------------
Ned M. Steel $276 $67,998
- ----------------------------------------- -------------------------------- ---------------------------------
</TABLE>
1. For the 1998 calendar year. Compensation is only from those of the 22
Denver-based Oppenheimer funds on whose Board a Trustee served during that
year.
2. Mr. Armstrong was not a Trustee or Director of the Denver-based Oppenheimer
funds during 1998.
3. Mr. Bowen did not receive compensation during the 1998 calendar year
as he was affiliated with the Manager during that period.
|X| Deferred Compensation Plan. 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 Trustee's fees under the plan will not materially affect
the Fund's assets, liabilities and 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 the date of this Statement of
Additional Information, OppenheimerFunds, Inc. was the only
shareholder of record for each class of shares of the Fund.
The Manager. The Manager is wholly-owned by Oppenheimer Acquisition Corp., a
holding company controlled by Massachusetts Mutual Life Insurance Company. The
Manager and the Fund have a Code of Ethics. It is designed to detect and prevent
improper personal trading by certain employees, including portfolio managers,
that would compete with or take advantage of the Fund's portfolio transactions.
Compliance with the Code of Ethics is carefully monitored and enforced by the
Manager.
|X| 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 investments for
the Fund's portfolio and handles its day-to-day business. The portfolio managers
of the Fund are employed by the Manager and are the persons who are 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 managers with
counsel and support in managing the Fund's portfolio.
The investment advisory 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.
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 resulting from a good faith
error or omission on its part with respect to any of its duties under the
agreement.
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 loans and
other 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 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, including Senior Loans, 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.
The investment advisory agreement permits the Manager to allocate
brokerage for research services. The investment 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.
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 different classes of shares of the Fund. The Distributor is not
obligated to sell a specific number of shares. Expenses normally attributable to
sales are borne by the Distributor.
Distribution and Service Plans. The Fund has adopted a Service Plan for Class A
shares and Distribution and Service Plans for Class B and Class C shares. 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.
Because the Fund is a closed-end fund and is not able to rely on the
provisions of Rule 12b-1 that apply to open-end funds, the Fund has requested
and obtained from the Securities and Exchange Commission exemptive relief from
certain provisions of the Investment Company Act, to permit the Fund to adopt
Distribution and Service Plans and to make payments under those plans to the
Distributor. The operation of those plans is contingent upon the continued
availability of that exemptive relief from the SEC. That exemptive order also
permits the Fund to impose early withdrawal charges on its Class B and Class C
shares, under the circumstances described in the Prospectus and elsewhere in
this Statement of Additional Information.
Each plan has been approved by a vote of the Board of Trustees,
including a majority of the Independent Trustees2, cast in person at a meeting
called for the purpose of voting on that plan. Each plan has also been approved
by the holders of a "majority" (as defined in the Investment Company Act) of the
shares of the applicable class. The shareholder votes were cast by the Manager
as the sole initial shareholder of each class of shares of the Fund.
Under the plans, the Manager and the Distributor, 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 five 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, 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 plans 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.
|X| Class A Service Plan. 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. The Class A
service plan permits reimbursements to the Distributor of up to 0.25% of the
average annual net assets of Class A shares. 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.
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.
|X| Class B and Class C Service and Distribution Plans. Under each
plan, service fees and 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 and Class C plans
allows the Distributor to be compensated at a flat rate for its services,
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.
The Class B and the Class C Plans permit 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 will make 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 repurchased by the Fund 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 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 commission 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 commissions and
service fee in advance at the time of purchase.
The asset-based sales charges on Class B and Class C 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 and Class C shares. The payments are made to the
Distributor in recognition that the Distributor: o pays sales commissions to
authorized brokers and dealers at the time of sale and pays service fees as
described above,
o may finance payment of sales commissions 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 and Class C
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.
The Distributor's actual expenses in selling Class B and Class C shares
may be more than the payments it receives from the early withdrawal charges
collected on repurchased shares and from the Fund under the plans. If either the
Class B or the Class C 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.
Under the exemptive order granted to the Fund by the Securities and
Exchange Commission that allows the Fund to establish the Distribution and
Service Plans and to pay fees to the Distributor under those plans, 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," and "cumulative total return." An
explanation of how yields and total returns are calculated is set forth below.
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
www.oppenheimerfunds.com.
The Fund's illustrations of its performance data in advertisements must
comply with rules of the Securities and Exchange Commission. In general,
advertisement by the Fund of its performance data may include the average annual
total returns for the advertised class of shares of the Fund. Those returns may
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, including a dividend yield.
Use of performance calculations enables an investor to compare the
Fund's performance to the performance of other funds for the same periods.
However, you should consider a number of factors before using the Fund's
performance information as a basis for comparison with other investments:
o 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.
o The Fund's performance returns do not reflect the effect of taxes
on dividends and capital gains distributions.
o An investment in the Fund is not insured by the FDIC or any other
government agency.
o 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.
o When you sell your shares, they may be worth more or less than
their original cost.
o 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.
o The performance of each class of shares is shown separately. The
performance of each class of shares will usually be different,
because each class bears different expenses. 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.
o Unlike open-end mutual funds, closed-end funds are not required to
calculate or depict performance in a standardized manner. However,
the Fund may choose to follow the performance calculation
methodology used by open-end funds.
|X| Yields. The Fund can use 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") may be shown for a class of shares for a
stated 30-day period. It is not based on actual distributions paid by
the Fund to shareholders in the 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.
Although the Fund is not an open-end fund, it may show its standardized
yield, calculated using the following formula set forth in rules adopted by the
Securities and Exchange Commission for open-end funds, designed to assure
uniformity in the way that all funds calculate their yields:
a-b 6
Standardized Yield = 2 [(--- + 1)) - 1]
cd
The symbols above represent the following factors:
a = dividends and interest earned during the 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 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 30-day period may differ from
the yield for other periods. The SEC formula assumes that the standardized yield
for a 30-day period occurs at a constant rate for a six-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 30-day period.
|_| Dividend Yield. The Fund may quote a "dividend yield" for each
class of its shares. Dividend yield is a distribution return 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 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, Class B and Class C shares is
the net asset value per share, without considering the effect of early
withdrawal charges for Class B and Class C.
|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 repurchased 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 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 for open-end funds. The methodology is discussed below.
In calculating total returns for Class B shares, the applicable early
withdrawal charge is applied, depending on the period for which the return is
shown: 3.0% in the first year, 2.0% in the second year, 1.5% in the third and
fourth years, 1.0% in the fifth year, and none thereafter. For Class C shares,
the 1% early withdrawal charge is deducted for returns for the 1-year period.
There is no sales charge for Class A shares.
|_| 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 B or Class C 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 early withdrawal charges) and takes into consideration
the reinvestment of dividends and capital gains distributions.
Other Performance Comparisons. The Fund may compares its performance to that of
an appropriate broadly-based market index. The Fund may also compare its
performance to that of other investments, including other mutual funds, or use
ratings or 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 is a widely-recognized independent mutual fund monitoring service. Lipper
monitors the performance of regulated investment companies, and ranks their
performance for various periods based on categories relating to investment
objectives. 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. The Fund expects to be
ranked in the "Loan Participation Funds" category. Lipper also publishes
"peer-group" indices of the performance of all funds in a category that it
monitors and averages of the performance of the funds in particular categories.
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., an independent fund monitoring service. Morningstar
rates and ranks open and closed-end funds in broad investment categories. The
Fund expects to be included in the "ultrashort 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 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 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 ranking (weighted 60%/40% respectively), or
its combined 3-, 5-, and 10-year rating (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 rating. 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.
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.
ABOUT YOUR ACCOUNT
How to Buy Shares
Additional information is presented below about the methods that can be
used to buy shares of the Fund. Appendix C contains more information about the
special early withdrawal arrangements and waivers offered by the Fund, and the
circumstances in which early withdrawal 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 days after the regular business
day the Distributor is instructed to initiate the Automated Clearing House
("ACH") transfer to buy the shares. Dividends will begin to accrue on shares
purchased with the proceeds of ACH transfers on the business day the Fund
receives Federal Funds for the purchase through the ACH system before the close
of The New York Stock Exchange. The Exchange normally closes at 4:00 P.M., but
may close earlier on certain days. If Federal Funds are received on a business
day after the close of the Exchange, the shares will be purchased and dividends
will begin to accrue on the next regular business day. The proceeds of ACH
transfers are normally received by the Fund 3 days after the transfers are
initiated. The Distributor and the Fund are not responsible for any delays in
purchasing shares resulting from delays in ACH transmissions.
<PAGE>
|X| The Oppenheimer Funds. The Oppenheimer funds include the Fund as
well as those open-end mutual funds for which the Distributor acts as the
distributor or the sub-distributor and currently include the following:
Oppenheimer Bond Fund Oppenheimer Limited-Term Government Fund
Oppenheimer Capital Appreciation
Fund Oppenheimer Main Street California
Municipal Fund
Oppenheimer California Municipal
Fund Oppenheimer Main Street Growth & Income
Fund
Oppenheimer Champion Income Fund Oppenheimer MidCap Fund
Oppenheimer Convertible Securities
Fund Oppenheimer Multiple Strategies Fund
Oppenheimer Developing Markets Fund Oppenheimer Municipal Bond Fund
Oppenheimer Disciplined Allocation
Fund Oppenheimer New York Municipal Fund
Oppenheimer Disciplined Value Fund Oppenheimer New Jersey Municipal Fund
Oppenheimer Discovery Fund Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Enterprise Fund Oppenheimer Quest Balanced Value Fund
Oppenheimer Capital Income Fund Oppenheimer Quest Capital Value Fund,
Inc.
Oppenheimer Florida Municipal Fund Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Global Fund Oppenheimer Quest Opportunity Value Fund
Oppenheimer Global Growth & Income
Fund Oppenheimer Quest Small Cap Value Fund
Oppenheimer Gold & Special Minerals
Fund Oppenheimer Quest Value Fund, Inc.
Oppenheimer Growth Fund Oppenheimer Real Asset Fund
Oppenheimer High Yield Fund Oppenheimer Senior Floating Rate Fund
Oppenheimer Insured Municipal Fund Oppenheimer Strategic Income Fund
Oppenheimer Intermediate Municipal
Fund Oppenheimer Total Return Fund, Inc.
Oppenheimer International Bond Fund Oppenheimer Trinity Core Fund
Oppenheimer International Growth Fund Oppenheimer Trinity Growth Fund
Oppenheimer International Small Company
Fund Oppenheimer Trinity Value Fund
Oppenheimer Main Street Small Cap Fund Oppenheimer U. S. Government Trust
Rochester Fund Municipals Oppenheimer World Bond Fund
Limited-Term New York Municipal Fund
And the following "money market funds":
Centennial America Fund, L. P. Centennial New York Tax Exempt Trust
Centennial California Tax Exempt
Trust Centennial Tax Exempt Trust
Centennial Government Trust Oppenheimer Cash Reserves
Centennial Money Market Trust Oppenheimer Money Market Fund, Inc.
There is an initial sales charge on the purchase of Class A shares of
each of the Oppenheimer funds described above except the Fund and 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.
Asset Builder Plans. To establish an Asset Builder Plan to buy shares directly
from a bank account, you must enclose a check (minimum $25) for the initial
purchase with your application. Asset Builder Plans also enable shareholders of
Oppenheimer Cash Reserves to use their fund account to make monthly automatic
purchases of shares of up to four other Oppenheimer funds.
If you make payments from your bank account to purchase shares of the
Fund, your bank account will be automatically debited, normally two business
days prior to the investment dates selected in the Application. Neither the
Distributor, the Transfer Agent nor the Fund shall be responsible for any delays
in purchasing shares resulting from delays in ACH transmissions.
Before initiating Asset Builder payments, obtain a prospectus of the
selected fund(s) from the Distributor or your financial advisor and request an
application from the Distributor, complete it and return it. The amount of the
Asset Builder investment may be changed or the automatic investments may be
terminated at any time by writing to the Transfer Agent. The Transfer Agent
requires a reasonable period (approximately 10 days) after receipt of such
instructions to implement them. The Fund reserves the right to amend, suspend,
or discontinue offering Asset Builder plans at any time without prior notice.
Retirement Plans. As stated in the Prospectus, the Fund does not offer to redeem
its shares daily, and the quarterly repurchase offers cannot guarantee that the
entire number of shares tendered by a shareholder will be repurchased by the
Fund in a particular repurchase offer. Therefore, the Fund may not be an
appropriate investment for retirement plans, especially if the investor must
take regular periodic distributions of a specific amount from the plan to
satisfy the minimum distribution requirements of the Internal Revenue Code that
apply to plans after the investor reaches age 70 1/2. The same limitations apply
to plans that would otherwise wish to offer the Fund as part of a
"multi-manager" product, because investments in the Fund could not be readily
liquidated to fund investments in other plan investment choices. Additionally,
because exchanges of Fund shares for shares of other Oppenheimer funds are
limited to quarterly repurchase offers, the Fund may not be appropriate for
plans that need to offer their participants the ability to make more frequent
exchanges.
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
repurchasing shares from any account registered in that investor's name, or the
Fund or the Distributor may seek other redress.
Classes of Shares. The Fund's multiple class structure is available because the
Fund has obtained from the Securities and Exchange Commission an exemptive order
(discussed in "Distribution Plans") permitting it to offer more than one class
of shares. The available of the Fund's share classes is contingent upon the
continued availability of the relief under that order.
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 or
Class C shares and the dividends payable on Class B or Class C shares will be
reduced by incremental expenses borne solely by that class. Those expenses
include the asset-based sales charges to which Class B and Class C 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. While Class B
and Class C shares have no initial sales charge, the purpose of the early
withdrawal charge and asset-based sales charge on Class B and Class C shares is
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 than another.
|X| Class B Conversion. The conversion of Class B shares to Class A
shares after six years is subject to the continuing availability of a private
letter ruling from the Internal Revenue Service, or an opinion of counsel or a
tax adviser, to the effect that the conversion of Class B shares does not
constitute a taxable event for the shareholder under Federal income tax law. If
such a revenue ruling or opinion is no longer available, the automatic
conversion feature may be suspended, in which event no further conversions of
Class B shares would occur while 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 an exchange, Class B shares might continue to be subject
to the asset-based sales charge for longer than six 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, 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 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. on a regular business day. The Fund's net asset
values will not be calculated on those days and the values 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 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, to the extent such prices are
available for the debt security.
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 397 days when issued,
2. debt instruments that had a maturity of 397 days or less when issued
and have a remaining maturity of more than 60 days, and
3. non-money market debt instruments that had a maturity of 397 days
or less when issued and which have a remaining maturity of 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 397 days when issued that have a
remaining maturity of 60 days or less, and
2. debt instruments held by a money market fund that have a remaining
maturity of 397 days or less.
In the case of Senior Loans and other loan obligations, 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 services
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.
Securities (including Senior Loans and other loans for which reliable
bids are not available from dealers or pricing services, and other 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). The special factors used by the Manager to derive a fir value for
Senior Loans for which reliable market prices are not available are discussed in
the Prospectus.
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.
Periodic Offers to Repurchase Shares
Information on how the Fund's periodic offers to repurchase shares ("Repurchase
Offers") is stated in the Prospectus. The information below provides additional
information about the procedures and conditions for selling shares in a
Repurchase Offer.
Reinvestment Privilege. Within six months after the Fund repurchases shares
Class B shares as part of a Repurchase offer, a shareholder may reinvest all or
part of the proceeds of the Class B shares that were subject to an early
withdrawal charge at the time of repurchase.
The reinvestment may be made without a sales charge only in Class A
shares of any of the other Oppenheimer funds into which shares of the Fund are
exchangeable as described in "How to Exchange Shares" below. Reinvestment is not
allowed into Class A shares of the Fund. 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 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.
Any capital gain that was realized when the shares were redeemed is
taxable, and reinvestment will not alter any capital gains tax payable on that
gain. If there has been a capital loss on the repurchase, some or all of the
loss may not be tax deductible, depending on the timing and amount of the
reinvestment. Under the Internal Revenue Code, if the repurchase proceeds of
Fund shares on which a sales charge was paid are reinvested in shares of the
Fund or another of the Oppenheimer funds within 90 days of payment of the sales
charge, the shareholder's basis in the shares of the Fund that were repurchased
may not include the amount of the sales charge paid. That would reduce the loss
or increase the gain recognized from the repurchase. However, in that case the
sales charge would be added to the basis of the shares acquired by the
reinvestment of the repurchase proceeds.
Involuntary Repurchases. The Fund's Board of Trustees has the right to cause the
involuntary repurchase of the shares held in any account if the aggregate net
asset value of those shares is less than $200 or such lesser amount as the Board
may fix. The Board will not cause the involuntary repurchase 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 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 repurchased.
Transfers of Shares. A transfer of shares to a different registration is not an
event that triggers the payment of early withdrawal charges. Therefore, shares
are not subject to the payment of an early withdrawal 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 an early withdrawal charge are transferred, the transferred
shares will remain subject to the early withdrawal 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 an early withdrawal charge
if sold in a Repurchase Offer at the time of transfer, the priorities described
in the Prospectus under "How to Buy Shares" for the imposition of the Class B or
Class C early withdrawal charge will be followed in determining the order in
which shares are transferred.
Distributions From Retirement Plans. Distributions from Retirement plans holding
shares of the Fund may be made only in conjunction with quarterly Repurchase
offers by the Fund. Requests for distributions from OppenheimerFunds-sponsored
IRAs, 403(b)(7) custodial plans, 401(k) plans or pension or profit-sharing plans
should accompany Repurchase Requests, and sent to the Transfer Agent in the
manner described in the Notice to Shareholders of the Repurchase Offer. The
request for distributions 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
Repurchase Offer 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 the
Fund to repurchase shares for 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.
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.
o You may exchange your shares of the Fund only in connection with a
Repurchase Offer. You may not be able to exchange all of the
shares you wish to exchange if a Repurchase is oversubscribed.
o Class A shares of the Fund are not available by exchange of Class
A shares of other Oppenheimer funds. Class A shares of the Fund
that are exchanged for shares of the other Oppenheimer funds may
not be exchanged back for Class A shares of the Fund.
o 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.
o Oppenheimer Main Street California Municipal Fund currently
offers only Class A and Class B shares.
o 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.
o 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.
o 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 class 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.
o 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.
Class A shares of Oppenheimer funds 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
an early withdrawal charge or 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 30 days prior to that
purchase may subsequently be exchanged for shares of other Oppenheimer funds
(except the Fund) without being subject to an initial sales charge 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.
How Exchanges Affect Early Withdrawal Charges. No contingent deferred sales
charge or early withdrawal charge is imposed on exchanges of shares of any class
purchased subject to a contingent deferred sales charge or an early withdrawal
charge. However, if Class B or Class C shares of the Fund acquired by exchange
are subsequently redeemed, this Fund's applicable early withdrawal charge will
be applied based on the age of the shares measured from their initial purchase
in the original Oppenheimer fund. The Fund's Class B early withdrawal charge is
imposed on Class B shares of the Fund acquired by exchange if they are redeemed
within 5 years of the initial purchase of the exchanged Class B shares. The
Fund's Class C early withdrawal sales charge is imposed on Class C shares of the
Fund acquired by exchange if they are redeemed within 12 months of the initial
purchase of the exchanged Class C shares.
When Class B or Class C shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the imposition
of the Class B or the Class C Early Withdrawal 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
early withdrawal charge that might be imposed in the subsequent repurchase of
remaining shares. Shareholders owning shares of more than one class must specify
which class of shares they wish to exchange.
If Class B shares of an Oppenheimer fund are exchanged for shares of
the Fund or Oppenheimer Limited Term Government Fund or Limited Term New York
Municipal Fund, and those shares acquired by exchanged are subsequently
repurchased (in the case of the Fund) or redeemed, 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 or Limited Term New
York Municipal Fund or the Early Withdrawal Charge for Class B shares of the
Fund.
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. For full or partial exchanges of an account
made by telephone, any special account features such as Asset Builder Plans will
be switched to the new account unless the Transfer Agent is instructed
otherwise. If all telephone lines are busy (which might occur, for example,
during periods of substantial market fluctuations), shareholders might not be
able to request exchanges by telephone and would have to submit written exchange
requests.
Processing Exchange Requests. You may exchange your shares only in connection
with a Repurchase Offer. Shares to be exchanged are sold under the terms of the
Repurchase Offers described in the Prospectus. The Transfer Agent must receive
your exchange request no later than the close of business (normally 4:00 p.m.
New York time) on the Repurchase Request Deadline. Normally, shares of the fund
to be acquired are purchased on the Repurchase Pricing Date, but such purchases
may be delayed by either fund up to five business days if it determines that it
would be disadvantaged by an immediate transfer of the exchange proceeds.
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. Additionally, shares of the
Fund tendered for exchange in a Repurchase Offer are subject to possible
pro-ration of the exchange request if the Repurchase Offer is oversubscribed. 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 repurchase proceeds in such cases.
However, a different tax treatment may apply to exchanges of less than all of a
shareholder's shares of the Fund, to the extent that the repurchase of Fund
shares to effect the exchange is not treated as a "sale" for tax purposes
(please refer to "Taxes" in the Prospectus). 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. If the Fund pays dividends, they 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 that the Fund repurchases in a Repurchase Offer procedure will
be paid dividends through and including the Repurchase Pricing Date. If the Fund
repurchases all shares in an account, all dividends accrued on shares of the
same class in the account will be paid together with the repurchase proceeds.
The Fund has no fixed dividend rate for Class A, Class B and Class C
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 and Class C 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 and
Class C 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 purchases of shares by the
Fund represented by checks returned to the Transfer Agent by the Postal Service
as undeliverable will be invested in shares of Oppenheimer Money Market Fund,
Inc. 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, Distributions and Repurchases. The Federal
tax treatment of the Fund's dividends and capital gains distributions is briefly
highlighted in the Prospectus. The following is only a summary of certain
additional tax considerations generally affecting the Fund and its shareholders
that are not described in the Prospectus.
The tax discussion in the Prospectus and this Statement of Additional
Information is based on tax law in effect on the date of the Prospectus and this
Statement of Additional Information. Those laws and regulations may be changed
by legislative, judicial, or administrative action, sometimes with retroactive
effect. State and local tax treatment of ordinary income dividends and capital
gain dividends from regulated investment companies may differ from the treatment
under the Internal Revenue Code described below. Potential purchasers of shares
of the Fund are urged to consult their tax advisers with specific reference to
their own tax circumstances as well as the consequences of federal, state and
local tax rules affecting an investment in the Fund.
|X| Qualification as a Regulated Investment Company. The Fund has
elected to be taxed as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended. As a regulated investment company,
the Fund is not subject to federal income tax on the portion of its net
investment income (that is, taxable interest, dividends, and other taxable
ordinary income, net of expenses) and capital gain net income (that is, the
excess of capital gains over capital losses) that it distributes to
shareholders. That qualification enables the Fund to "pass through" its income
and realized capital gains to shareholders without having to pay tax on them.
This avoids a "double tax" on that income and capital gains, since shareholders
normally will be taxed on the dividends and capital gains they receive from the
Fund (unless their Fund shares are held in a retirement account or the
shareholder is other exempt from tax). The Internal Revenue Code contains a
number of complex tests relating to qualification that the Fund might not meet
in a particular year. If it did not qualify as a regulated investment company,
the Fund would be treated for tax purposes as an ordinary corporation and would
receive no tax deduction for payments made to shareholders.
To qualify as a regulated investment company, the Fund must distribute
at least 90% of its investment company taxable income (in brief, net investment
income and the excess of net short-term capital gain over net long-term capital
loss) for the taxable year. The Fund must also satisfy certain other
requirements of the Internal Revenue Code, some of which are described below.
Distributions by the Fund made during the taxable year or, under specified
circumstances, within twelve months after the close of the taxable year, will be
considered distributions of income and gains for the taxable year and will
therefore count toward satisfaction of the above-mentioned requirement.
To qualify as a regulated investment company, the Fund must derive at
least 90% of its gross income from dividends, interest, certain payments with
respect to securities loans, gains from the sale or other disposition of stock
or securities or foreign currencies (to the extent such currency gains are
directly related to the regulated investment company's principal business of
investing in stock or securities) and certain other income.
In addition to satisfying the requirements described above, the Fund
must satisfy an asset diversification test in order to qualify as a regulated
investment company. Under that test, at the close of each quarter of the Fund's
taxable year, at least 50% of the value of the Fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers. As to each of those
issuers, the Fund must not have invested more than 5% of the value of the Fund's
total assets in securities of each such issuer and the Fund must not hold more
than 10% of the outstanding voting securities of each such issuer. No more than
25% of the value of its total assets may be invested in the securities of any
one issuer (other than U.S. Government securities and securities of other
regulated investment companies), or in two or more issuers which the Fund
controls and which are engaged in the same or similar trades or businesses. For
purposes of this test, obligations issued or guaranteed by certain agencies or
instrumentalities of the U.S. Government are treated as U.S. Government
securities.
|X| Excise Tax on Regulated Investment Companies. 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. To meet this requirement, in certain
circumstances the Fund might be required to liquidate portfolio investments to
make sufficient distributions to avoid excise tax liability. 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.
|X| Taxation of Fund Distributions. The Fund anticipates distributing
substantially all of its investment company taxable income for each taxable
year. Those distributions will be taxable to shareholders as ordinary income and
treated as dividends for federal income tax purposes. Special provisions of the
Internal Revenue Code govern the eligibility of the Fund's dividends for the
dividends-received deduction for corporate shareholders. Long-term capital gains
distributions are not eligible for the deduction. The amount of dividends paid
by the Fund that may qualify for the deduction is limited to the aggregate
amount of qualifying dividends that the Fund derives from portfolio investments
that the Fund has held for a minimum period, usually 46 days. A corporate
shareholder will not be eligible for the deduction on dividends paid on Fund
shares held for 45 days or less. To the extent the Fund's dividends are derived
from gross income from option premiums, interest income or short-term gains from
the sale of securities or dividends from foreign corporations, those dividends
will not qualify for the deduction. Since it is anticipated that most of the
Fund's income will be derived from interest it receives on its investments, the
Fund does not anticipate that its distributions will qualify for this deduction.
The Fund may either retain or distribute to shareholders its net
capital gain for each taxable year. The Fund currently intends to distribute any
such amounts. If net capital gain is distributed and designated as a capital
gain distribution, it will be taxable to shareholders as long-term capital gain.
It does not matter how long the shareholder has held his or her shares or
whether that gain was recognized by the Fund before the shareholder acquired his
or her shares.
If the Fund elects to retain its net capital gain, the Fund will be
subject to tax on it at the 35% corporate tax rate. If the Fund elects to retain
its net capital gain, it is expected that the Fund also will elect to have
shareholders of record on the last day of its taxable year treated as if each
received a distribution of their pro rata share of such gain. As a result, each
shareholder will be required to report his or her pro rata share of such gain on
their tax return as long-term capital gain, will receive a refundable tax credit
for his/her pro rata share of tax paid by the Fund on the gain, and will
increase the tax basis for his/her shares by an amount equal to the deemed
distribution less the tax credit.
Investment income that may be received by the Fund from sources within
foreign countries may be subject to foreign taxes withheld at the source. The
United States has entered into tax treaties with many foreign countries which
entitle the Fund to a reduced rate of, or exemption from, taxes on such income.
Distributions by the Fund that do not constitute ordinary income
dividends or capital gain distributions will be treated as a return of capital
to the extent of the shareholder's tax basis in their shares. Any excess will be
treated as gain from the sale of those shares, as discussed below. Shareholders
will be advised annually as to the U.S. federal income tax consequences of
distributions made (or deemed made) during the year. 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.
Distributions by the Fund will be treated in the manner described above
regardless of whether the distributions are paid in cash or reinvested in
additional shares of the Fund (or of another fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date.
The Fund will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of ordinary income dividends and capital gain distributions
and the proceeds of repurchase of shares, paid to any shareholder (1) who has
failed to provide a correct, certified taxpayer identification number, (2) who
is subject to backup withholding for failure to report the receipt of interest
or dividend income properly, or (3) who has failed to certify to the Fund that
the shareholder is not subject to backup withholding or is an "exempt recipient"
(such as a corporation).
|X| Tax Effects of Repurchases of Shares. If a shareholder tenders all
of his or her shares during a Repurchase Offer and they are repurchased by the
Fund, and as a result the shareholder is not considered to own any shares of the
Fund under the attribution rules under the Internal Revenue Code, the
shareholder will recognize gain or loss on the repurchased shares in an amount
equal to the difference between the proceeds of the repurchased shares and the
shareholder's adjusted tax basis in the shares. All or a portion of any loss
recognized in that manner may be disallowed if the shareholder purchases other
shares of the Fund within 30 days before or after the repurchase.
In general, any gain or loss arising from the repurchase of shares of
the Fund will be considered capital gain or loss, if the shares were held as a
capital asset. It will be long-term capital gain or loss if the shares were held
for one year or more. However, any capital loss arising from the repurchase of
shares held for six months or less will be will be treated as a long-term
capital loss to the extent of the amount of capital gain dividends received on
those shares. Special holding period rules under the Internal Revenue Code apply
in this case to determine the holding period of shares and there are limits on
the deductibility of capital losses in any year.
Different tax effects may apply to tendering and non-tendering
shareholders in connection with a Repurchase Offer by the Fund, and these
consequences will be disclosed in the related offering documents. For example,
if a tendering shareholder tenders less than all shares owned by or attributed
to that shareholder, and if the payment to that shareholder does not otherwise
qualify under the Internal Revenue Code as a sale or exchange, the proceeds
received would be treated as a taxable dividend, a return of capital or capital
gain, depending on the Fund's earnings and profits and the shareholder's basis
in the repurchased shares. Additionally, there is a risk that non-tendering
shareholders might be deemed to have received a distribution that may be a
taxable dividend in whole or in part.
|X| Foreign Shareholders. Taxation of a shareholder who under United
States law is a nonresident alien individual, foreign trust or estate, foreign
corporation, or foreign partnership depends on whether the shareholder's income
from the Fund is effectively connected with a U.S. trade or business carried on
by such shareholder.
If the income from the Fund is not effectively connected with a U.S.
trade or business carried on by a foreign shareholder, ordinary income dividends
paid to such foreign shareholder will be subject to U.S. withholding tax. The
rate of the tax depends on a number of factors. If the income from the Fund is
effectively connected with a U.S. trade or business carried on by a foreign
shareholder, then ordinary income dividends, capital gain dividends, and any
gains realized upon the sale of shares of the Fund will be subject to U.S.
federal income tax at the rates applicable to U.S. citizens or domestic
corporations.
In the case of a foreign non-corporate shareholder, the Fund may be
required to withhold U.S. federal income tax at a rate of 31% on distributions
that are otherwise exempt from withholding tax (or taxable at a reduced treaty
rate) unless the shareholder furnishes the Fund with proper notification of
their foreign status.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in the Fund,
including the applicability of foreign taxes.
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. 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
Class B and Class C 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 the 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. The Transfer Agent 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. OFS acts as Transfer Agent 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. The Bank of New York is the Custodian of the Fund's assets. The
Custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities 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. Deloitte & Touche 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 the Manager and for certain other funds
advised by the Manager and its affiliates.
<PAGE>
Financial Information About the Fund
Independent Auditors' Report
To the Board of Directors and Shareholder of
Oppenheimer Senior Floating Rate Fund
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Senior Floating Rate Fund as of August 26, 1999. This financial
statement is the responsibility of the Fund's management. Our responsibility is
to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such statement of assets and liabilities presents fairly, in all
material respects, the financial position of Oppenheimer Senior Floating Rate
Fund as of August 26, 1999 in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Denver, Colorado
August 26, 1999
<PAGE>
Oppenheimer Senior Floating Rate Fund
Statement of Assets and Liabilities
August 26, 1999
ASSETS: Composite Class A Class B Class C
Cash $102,000 $100,000 $1,000 $1,000
Total Assets $102,000
LIABILITIES:
Net Assets $102,000
---------
NET ASSETS - Applicable to 10,000 Class A shares, 100 Class B shares, and 100
Class C Shares of beneficial interest outstanding
$102,000 $100,000 $1,000 $1,000
NET ASSET VALUE PER SHARE: (net assets divided by 10,000, 100 and
100 shares of beneficial interest for Class A, B, and C respectively)
$10.00 $10.00 $10.00
Notes:
1. Oppenheimer Senior Floating Rate Fund (the "Fund"), a non-diversified,
closed-ended management investment company, was formed on June 2, 1999, and
has had no operations through August 26, 1999 other than those relating to
organizational matters and the sale and the issuance of 10,000 Class A
shares, 100 Class B shares, and 100 Class C shares of beneficial interest
to OppenheimerFunds, Inc. (OFI).
2. On August 24, 1999 the Fund's Board approved an Investment Advisory
Agreement with OFI, a Service Plan and Agreement for Class A and
Distribution and Service Plans and Agreements for Class B and Class C
shares of the Fund with OppenheimerFunds Distributor, Inc. (OFDI) and a
General Distributor's Agreement with OFDI as explained in the Fund's
Prospectus and Statement of Additional Information.
3. OFI has assumed all organization costs, which were estimated at $52,500,
and has assumed certain offering costs estimated to be $43,000 associated
with the initial registration of Class A, B, and C shares.
4. The Fund intends to comply in its initial fiscal year and thereafter with
provisions of the Internal Revenue Code applicable to regulated investment
companies and as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) distributed
to shareholders.
<PAGE>
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
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 - Technology
Electrical Equipment Telephone - Utility
Electronics Textile/Apparel
Energy Services & Producers Tobacco
Entertainment/Film Trucks and Parts
Environmental Wireless Services
Food
<PAGE>
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 or Class C shares may be waived. 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. Other waivers
apply only to shareholders of certain funds that were merged into or became
Oppenheimer funds. For Oppenheimer Senior Floating Rate Fund, all references to
"redemptions" refer to repurchases of shares of that Fund.
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 plans2 (4)
Group Retirement Plans3 (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. 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. 3. 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."3 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.
|_| 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
to not more than 12% of the account value annually (the annual holding
period is measured at the time of each Automatic Withdrawal Plan
payment).
|_| 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) To return contributions made due to a mistake of fact.
(4) Hardship withdrawals, as defined in the plan.
(5) Under a Qualified Domestic Relations Order, as defined
in the Internal Revenue Code, 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.
(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 and Class C Sales Charges of Oppenheimer Funds
The Class B and Class C 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 and Class C 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.6
(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.
(9) On account of the participant's separation from service.
(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 annually (the
annual holding period is measured at the time of each
Automatic Withdrawal Plan payment).
|_| Redemptions of Class B shares (or Class C shares, effective
August 1, 1999) 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 (the annual
holding period is measured at the time of each Automatic Withdrawal
Plan payment).
B. Waivers for Shares Sold or Issued in Certain Transactions.
The contingent deferred sales charge is also waived on Class B and Class C
shares sold or issued in the following cases:
|_| Shares sold to the Manager or its affiliates.
|_| Shares sold to registered management investment companies or
separate accounts of insurance companies having an agreement with
the Manager or the Distributor for that purpose.
|_| Shares issued in plans of reorganization to which the Fund is a party.
<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, Inc. Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Balanced Value
Fund Oppenheimer Quest Global 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
Income Fund Quest for Value New York Tax-Exempt Fund
Quest for Value Investment
Quality Income Fund Quest for Value National Tax-Exempt Fund
Quest for Value Global Income Fund Quest for Value California 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.
<TABLE>
<CAPTION>
Number of Eligible Employees Initial Sales Charge as a Initial Sales Charge as a Commission as % of
or Members % of Offering Price % of Net Amount Invested Offering Price
<S> <C> <C> <C>
- ------------------------------ ---------------------------- ---------------------------- ---------------------------
- ------------------------------ ---------------------------- ---------------------------- ---------------------------
9 or Fewer 2.50% 2.56% 2.00%
- ------------------------------ ---------------------------- ---------------------------- ---------------------------
- ------------------------------ ---------------------------- ---------------------------- ---------------------------
At least 10 but not more 2.00% 2.04% 1.60%
than 49
- ------------------------------ ---------------------------- ---------------------------- ---------------------------
</TABLE>
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 account value annually (the annual holding period is
measured at the time of each Automatic Withdrawal Plan payment),
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 account value annually (the annual holding period is
measured at the time of each Automatic Withdrawal Plan payment), 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
Securities Account CMIA LifeSpan Capital 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.
|X| 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.
|X| 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.
I. 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 Senior Floating Rate 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
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
1. Financial Statements: Not applicable
2. Exhibits
(a) Amended and Restated Declaration of Trust dated 08/13/1999 of
Registrant: Filed herewith. (b) By-Laws dated 08/24/1999 of
Registrant: Filed herewith.
(c) Not Applicable.
(d) Articles Fourth, Fifth and Seventh of Registrant's
Declaration of Trust define the rights of holders of the securities
being registered hereby.
(e) Not Applicable.
(f) Not Applicable.
(g) Form of Investment Advisory Agreement between Registrant and
OppenheimerFunds, Inc.: Filed herewith.
(h) (1) Form of General Distributor's Agreement between
Registrant and OppenheimerFunds Distributors, Inc.: Filed herewith.
(2) Form of Dealer Agreement of OppenheimerFunds Distributor, Inc.:
Filed with Pre-Effective Amendment No. 2 of Oppenheimer Trinity Value
Fund (Reg. No. 333-79707), 08/25/1999, and incorporated herein by
reference. (3) Form Broker Agreement of OppenheimerFunds Distributor,
Inc.: Filed with Pre-Effective Amendment No. 2 of Oppenheimer Trinity
Value Fund (Reg. No. 333-79707), 08/25/1999, and incorporated herein
by reference. (4) Form of Agency Agreement of OppenheimerFunds
Distributor, Inc.: Filed with Pre-Effective Amendment No. 2 of
Oppenheimer Trinity Value Fund (Reg. No. 333-79707), 08/25/1999, and
incorporated herein by reference.
(i) Form of Deferred Compensation Plan for Disinterested
Trustees: Filed with Post-Effective Amendment No. 40 to the
Registration Statement of Oppenheimer High Yield Fund (Reg. No.
2-62076), 10/27/98, and incorporated herein by reference.
(j) Form of Custodian Agreement: Filed herewtih.
(k) (1) Form of Service Plan for Class A shares: Filed herewith.
(2) Form of Distribution and Service Plan for Class B shares:
Filed herewith.
(3) Form of Distribution and Service Plan for Class C shares:
Filed herewith.
(4) Form of Multiple Class Plan under Rule 18f-3 updated through
08/24/1999: Filed herewith.
(l) (1) Opinion of Myer, Swanson Adams & Wolf, P.C., counsel to
Registrant, as to the legality of the Fund's shares: Filed herewith.
(2) Opinion of Goodwin, Proctor & Hoar, special Massachusetts counsel
to Registrant, as to the legality of the Fund's shares: Filed
herewith.
(m) Not Applicable.
(n) Independent Auditors' Consent: Filed herewith.
(o) Not Applicable.
(p) Subscription Agreement for Initial Capital: Filed herewith.
(q) Not Applicable.
-- Powers of Attorney for Trustees: Filed with Post-Effective
Amendment No. 41 to the registration statement of Oppenheimer High
Yield Fund (Reg. No. 2-62078), 8/26/1999, and incorporated herein by
reference.
ITEM 25. MARKETING ARRANGEMENTS
See Form of General Distributor's Agreement to be filed by amendment as
Exhibit (h) to this Registration Statement.
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION*
- -------------
*All of the Registrant's initial organization and offering expenses have been
absorbed by OppenheimerFunds, Inc.
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
Not applicable.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
Title of Class Number of Record Holders*
Class A 1
Class B 1
Class C 1
- ------------
* As of the date of this Amendment, all issued shares are owned by
OppenheimerFunds, Inc.
ITEM 29. INDEMNIFICATION
Reference is made to the provisions of Article Seven of Registrant's
Amended and Restated Declaration of Trust filed as Exhibit 2(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 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The description of the business of OppenheimerFunds, Inc. is set forth
under the caption "How the Fund is Managed" in the Prospectus and the Statement
of Additional Information forming part of this Registration Statement.
The information as to the Directors and Officers of OppenheimerFunds,
Inc. set forth in OppenheimerFunds, Inc.'s Form ADV filed with the Securities
and Exchange Commission (File No. 801-825), as amended through the date hereof,
is incorporated herein by reference.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
1. Accounts and records of the Fund are maintained at (i) the Fund's office at
6803 South Tucson Way, Englewood, Colorado 80112 and (ii) the offices of
OppenheimerFunds, Inc. at Two World Trade Center, New York, New York 10048.
2. OppenheimerFunds Services, P.O. Box 5270 Denver, Colorado 80217, maintains
all the required records in its capacity as transfer, dividend paying and
shareholder service agent of the Registrant.
ITEM 32. MANAGEMENT SERVICES
Not Applicable.
ITEM 33. UNDERTAKINGS
1. Not Applicable.
2. Not Applicable.
3. Not Applicable.
4. a. To file during any period in which offers or sales are being
made, a post-effective amendment to this registration statement: (i) to include
any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii)
to reflect in the Prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement; and (iii) to include
any material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
b. That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
c. To remove from registration by means of post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
5. Not Applicable.
6. The Registrant undertakes to send by first class mail or
other means designed to ensure equally prompt delivery, within two business days
of receipt of a written or oral request, any Statement of Additional
Information.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the County of Arapahoe, and State of Colorado, on this 27th day
of August, 1999.
OPPENHEIMER SENIOR FLOATING RATE FUND
By: /s/ James C. Swain*
----------------------------------------
James C. Swain, Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
Signatures Title Date
<S> <C> <C>
/s/ James C. Swain* Chairman of the August 27, 1999
- -------------------------------------- Board of Trustees
James C. Swain and Principal Executive
Officer
/s/ Bridget A. Macaskill* President
- ------------------------------------- and Trustee August 27, 1999
Bridget A. Macaskill
/s/ Brian W. Wixted* Treasurer August 27, 1999
- -------------------------------------
Brian W. Wixted
/s/ William L. Armstrong Trustee August 27, 1999
- ------------------------------
William L. Armstrong
/s/ Robert G. Avis* Trustee August 27, 1999
- -------------------------------------
Robert G. Avis
/s/ William A. Baker* Trustee August 27, 1999
- -------------------------------------
William A. Baker
/s/ George C. Bowen* Trustee August 27, 1999
- -------------------------------------
George C. Bowen
/s/ Jon S. Fossel* Trustee August 27, 1999
- -------------------------------------
Jon S. Fossel
/s/ Sam Freedman* Trustee August 27, 1999
- -------------------------------------
Sam Freedman
/s/ Raymond J. Kalinowski* Trustee August 27, 1999
- -------------------------------------
Raymond J. Kalinowski
/s/ C. Howard Kast* Trustee August 27, 1999
- -------------------------------------
C. Howard Kast
/s/ Robert M. Kirchner* Trustee August 27, 1999
- -------------------------------------
Robert M. Kirchner
/s/ Ned M. Steel* Trustee August 27, 1999
- -------------------------------------
Ned M. Steel
*By: /s/ Robert G. Zack
- -----------------------------------------
Robert G. Zack, Attorney-in-Fact
</TABLE>
<PAGE>
OPPENHEIMER SENIOR FLOATING RATE FUND
EXHIBITS FILED
Exhibit No. Exhibit
2(a) Amended and Restated Declaration of Trust dated 08/13/1999
2(b) By-Laws dated 08/24/1999 2(g) Form of Investment Advisory
Agreement between Registrant and OppenheimerFunds, Inc.
2(h)(1) Form of General Distributor's Agreement
2(j) Form of Custody Agreement
2(k)(1) Form of Service Plan for Class A Shares
2(k)(2) Form of Distribution and Service Plan and Agreement for Class B
Shares
2(k)(3) Form of Distribution and Service Plan and Agreement for Class C
Shares
2(k)(4) Multiple Class Plan under Rule 18f-3
2(l)(1) Opinion of Goodwin, Proctor & Hoar
2(l)(2) Opinion of Myer, Swanson, Adams & Wolf, P.C.
2(n) Independent Auditors' Consent
2(p) Subscription Agreement for Initial Capital
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
OPPENHEIMER SENIOR FLOATING RATE FUND
This AMENDED AND RESTATED DECLARATION OF TRUST, made this 13th
day of August, 1999, by and among the individuals executing this
Declaration of Trust as the Trustees.
WHEREAS, the Trustees established a trust fund under the laws of
the Commonwealth of Massachusetts, for the investment and reinvestment
of funds contributed thereto, pursuant to a Declaration of Trust dated
May 27, 1999;
WHEREAS, the Trustees desire to execute this Amended and Restated
Declaration of Trust ("Declaration of Trust");
NOW, THEREFORE, the Trustees declare that all money and property
contributed to the trust fund thereunder shall be held and managed
under this Declaration of Trust in trust as herein set forth below.
FIRST: This Trust shall be known as OPPENHEIMER SENIOR FLOATING
RATE FUND. The address of Oppenheimer Senior Floating Rate Fund is
6803 South Tucson Way, Denver, Colorado 80112. The Registered Agent
for Service is Massachusetts Mutual Life Insurance Company, 1295 State
Street, Springfield, Massachusetts 01111, Attention: Stephen Kuhn,
Esq.
SECOND: Whenever used herein, unless otherwise required by the
context or specifically provided:
1. All terms used in this Declaration of Trust that are defined
in the 1940 Act (defined below) shall have the meanings given to them
in the 1940 Act.
2. "Board" or "Board of Trustees" or the "Trustees" means the
Board of Trustees of the Trust.
3. "By-Laws" means the By-Laws of the Trust as amended from time
to time.
4. "Class" means a class of a series of shares of the Trust
established and designated under or in accordance with the provisions
of Article FOURTH.
5. "Commission" means the Securities and Exchange Commission.
6. "Declaration of Trust" shall mean this Declaration of Trust as
it may be amended or restated from time to time.
7. The "1940 Act" refers to the Investment Company Act of 1940
and the Rules and Regulations of the Commission thereunder, all as
amended from time to time.
8. "Series" refers to series of shares of the Trust established
and designated under or in accordance with the provisions of Article
FOURTH.
9. "Shareholder" means a record owner of Shares of the Trust.
10. "Shares" refers to the transferable units of interest into
which the beneficial interest in the Trust or any Series or Class of
the Trust (as the context may require) shall be divided from time to
time and includes fractions of Shares as well as whole Shares.
11. The "Trust" refers to the Massachusetts business trust
created by this Declaration of Trust, as amended or restated from time
to time.
12. "Trustees" refers to the individual trustees in their
capacity as trustees hereunder of the Trust and their successor or
successors for the time being in office as such trustees.
THIRD: The purpose or purposes for which the Trust is formed and
the business or objects to be transacted, carried on and promoted by
it are as follows:
1. To hold, invest or reinvest its funds, and in connection
therewith to hold part or all of its funds in cash, and to purchase or
otherwise acquire, hold for investment or otherwise, sell, sell short,
assign, negotiate, transfer, exchange or otherwise dispose of or turn
to account or realize upon, securities (which term "securities" shall
for the purposes of this Declaration of Trust, without limitation of
the generality thereof, be deemed to include any stocks, shares,
bonds, financial futures contracts, indexes, debentures, notes,
mortgages or other obligations, and any certificates, receipts,
warrants or other instruments representing rights to receive, purchase
or subscribe for the same, or evidencing or representing any other
rights or interests therein, or in any property or assets) created or
issued by any issuer (which term "issuer" shall for the purposes of
this Declaration of Trust, without limitation of the generality
thereof, be deemed to include any persons, firms, associations,
corporations, syndicates, business trusts, partnerships, investment
companies, combinations, organizations, governments, or subdivisions
thereof) and in financial instruments (whether they are considered as
securities or commodities); and to exercise, as owner or holder of any
securities or financial instruments, all rights, powers and privileges
in respect thereof; and to do any and all acts and things for the
preservation, protection, improvement and enhancement in value of any
or all such securities or financial instruments.
2. To borrow money and pledge assets in connection with any of
the objects or purposes of the Trust, and to issue notes or other
obligations evidencing such borrowings, to the extent permitted by the
1940 Act and by the Trust's fundamental investment policies under the
1940 Act.
3. To issue and sell its Shares in such Series and Classes and
amounts and on such terms and conditions, for such purposes and for
such amount or kind of consideration (including without limitation
thereto, securities) now or hereafter permitted by the laws of the
Commonwealth of Massachusetts and by this Declaration of Trust, as the
Trustees may determine.
4. To purchase or otherwise acquire, hold, dispose of, resell,
transfer, reissue, redeem or cancel its Shares, or to classify or
reclassify any unissued Shares or any Shares previously issued and
reacquired of any Series or Class into one or more Series or Classes
that may have been established and designated from time to time, all
without the vote or consent of the Shareholders of the Trust, in any
manner and to the extent now or hereafter permitted by this
Declaration of Trust.
5. To conduct its business in all its branches at one or more
offices in New York, Colorado and elsewhere in any part of the world,
without restriction or limit as to extent.
6. To carry out all or any of the foregoing objects and purposes
as principal or agent, and alone or with associates or to the extent
now or hereafter permitted by the laws of Massachusetts, as a member
of, or as the owner or holder of any stock of, or share of interest
in, any issuer, and in connection therewith or make or enter into such
deeds or contracts with any issuers and to do such acts and things and
to exercise such powers, as a natural person could lawfully make,
enter into, do or exercise.
7. To do any and all such further acts and things and to exercise
any and all such further powers as may be necessary, incidental,
relative, conducive, appropriate or desirable for the accomplishment,
carrying out or attainment of all or any of the foregoing purposes or
objects.
The foregoing objects and purposes shall, except as otherwise
expressly provided, be in no way limited or restricted by reference
to, or inference from, the terms of any other clause of this or any
other Article of this Declaration of Trust, and shall each be regarded
as independent and construed as powers as well as objects and
purposes, and the enumeration of specific purposes, objects and powers
shall not be construed to limit or restrict in any manner the meaning
of general terms or the general powers of the Trust now or hereafter
conferred by the laws of the Commonwealth of Massachusetts nor shall
the expression of one thing be deemed to exclude another, though it be
of at similar or dissimilar nature, not expressed; provided, however,
that the Trust shall not carry on any business, or exercise any
powers, in any state, territory, district or country except to the
extent that the same may lawfully be carried on or exercised under the
laws thereof.
FOURTH:
1. The beneficial interest in the Trust shall be divided into
Shares, all with par value of $0.001 per share, but the Trustees shall
have the authority from time to time, without obtaining shareholder
approval, to create one or more Series of Shares in addition to the
Series specifically established and designated in part 3 of this
Article FOURTH, and to divide the shares of any Series into three or
more Classes pursuant to part 2 of this Article FOURTH, all as they
deem necessary or desirable, to establish and designate such Series
and Classes, and to fix and determine the relative rights and
preferences as between the different Series of Shares or Classes as to
right of redemption and the price, terms and manner of redemption,
liabilities and expenses to be borne by any Series or Class, special
and relative rights as to dividends and other distributions and on
liquidation, sinking or purchase fund provisions, conversion on
liquidation, conversion rights, and conditions under which the several
Series or Classes shall have individual voting rights or no voting
rights. Except as aforesaid, all Shares of the different Series shall
be identical.
(a) The number of authorized Shares and the number of Shares of
each Series and each Class of a Series that may be issued is
unlimited, and the Trustees may issue Shares of any Series or Class of
any Series for such consideration and on such terms as they may
determine (or for no consideration if pursuant to a Share dividend or
split-up), all without action (or approval of the Shareholders. All
Shares when so issued on the terms determined by the Trustees shall be
fully paid and non-assessable. The Trustees may classify or reclassify
any unissued Shares or any Shares previously issued and reacquired of
any Series into one or more Series or Classes of Series that may be
established and designated from time to time. The Trustees may hold as
treasury Shares (of the same or some other Series), reissue for such
consideration and on such terms as they may determine, or cancel, at
their discretion from time to time, any Shares of any Series
reacquired by the Trust.
(b) The establishment and designation of any Series or any Class
of any Series in addition to that established and designated in part 3
of this Article FOURTH shall be effective upon the execution by a
majority of the Trustees of an instrument setting forth such
establishment and designation and the relative rights and preferences
of such Series or such Class of such Series or as otherwise provided
in such instrument. At any time that there are no Shares outstanding
of any particular Class or Series previously established and
designated, the Trustees may by an instrument executed by a majority
of their number abolish that Class or Series and the establishment and
designation thereof. Each instrument referred to in this paragraph
shall be an amendment to this Declaration of Trust, and the Trustees
may make any such amendment without shareholder approval.
(c) Any Trustee, officer or other agent of the Trust, and any
organization in which any such person is interested may acquire, own,
hold and dispose of Shares of any Series or Class of any Series of the
Trust to the same extent as if such person were not a Trustee, officer
or other agent of the Trust; and the Trust may issue and sell or cause
to be issued and sold and may purchase Shares of any Series or Class
of any Series from any such person or organization; such organization
subject only to the general limitations, restrictions or other
provisions applicable to the sale or purchase of Shares of such Series
or Class generally.
2. The Trustees shall have the authority from time to time, without
obtaining shareholder approval, to divide the Shares of any Series such Class or
Classes as they deem necessary or desirable, and to establish and designate such
Classes. In such event, each Class of a Series shall represent interests in the
designated Series of the Trust and have such voting, dividend, liquidation and
other rights as may be established and designated by the Trustees. Expenses and
liabilities related directly or indirectly to the Shares of a Class of a Series
may be borne solely by such Class (as shall be determined by the Trustees) and,
as provided in Article FIFTH, a Class of a Series may have exclusive voting
rights with respect to matters relating solely to such Class. The bearing of
expenses and liabilities solely by a Class of Shares of a Series shall be
appropriately reflected (in the manner determined by the Trustees) in the net
asset value, dividend and liquidation rights of the Shares of such Class of a
Series. The division of the Shares of a Series into Classes and the terms and
conditions pursuant to which the Shares of the Classes of a Series will be
issued must be made in compliance with the 1940 Act. No division of Shares of a
Series into Classes shall result in the creation of a Class of Shares having a
preference as to dividends or distributions or a preference in the event of any
liquidation, termination or winding up of the Trust, to the extent such a
preference is prohibited by Section 18 of the 1940 Act as to the Trust.
The relative rights and preferences of Class A shares, Class B shares
and Class C shares shall be the same in all respects except that, and unless and
until the Board of Trustees shall determine otherwise: (i) when a vote of
Shareholders is required under this Declaration of Trust or when a meeting of
Shareholders is called by the Board of Trustees, the Shares of a Class shall
vote exclusively on matters that affect that Class only; (ii) the expenses and
liabilities related to a Class shall be borne solely by such Class (as
determined and allocated to such Class by the Trustees from time to time in a
manner consistent with parts 2 and 3 of Article FOURTH); and (iii) pursuant to
paragraph 10 of Article NINTH, the Shares of each Class shall have such other
rights and preferences as are set forth from time to time in the then effective
prospectus and/or statement of additional information relating to the Shares.
Dividends and distributions on any one Class of shares may differ from the
dividends and distributions on any other Class, and the net asset value of any
one Class of shares may differ from the net asset value of any other such Class.
3. Without limiting the authority of the Trustees set forth in part 1
of this Article FOURTH to establish and designate any further Series, the
Trustees hereby establish one Series of Shares having the same name as the
Trust, and said Shares shall be divided into three Classes, which shall be
designated Class A, Class B and Class C. The Shares of that Series and any
Shares of any further Series or Classes that may from time to time be
established and designated by the Trustees shall (unless the Trustees otherwise
determine with respect to some further Series or Classes at the time of
establishing and designating the same) have the following relative rights and
preferences:
(a) Assets Belonging to Series and Classes. All consideration
received by the Trust for the issue or sale of Shares of a particular Series or
any Class thereof, together with all assets in which such consideration is
invested or reinvested, all income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any reinvestment of such proceeds
in whatever form the same may be, shall irrevocably belong to that Series or
Class thereof for all purposes, subject only to the rights of creditors, and
shall be so recorded upon the books of account of the Trust. Such consideration,
assets, income, earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds, in whatever form the
same may be, together with any General Items allocated to that Series or Class
as provided in the following sentence, are herein referred to as "assets
belonging to" that Series or Class and are allocable to such Series or Class
thereof. In the event that there are any assets, income, earnings, profits, and
proceeds thereof, funds, or payments which are not readily identifiable as
belonging to any particular Series or Class (collectively "General Items"), the
Trustees shall allocate such General Items to and among any one or more of the
Series or Classes established and designated from time to time in such manner
and on such basis as they, in their sole discretion, deem fair and equitable;
and any General Items so allocated to a particular Series or Class shall belong
to that Series or Class. Each such allocation by the Trustees shall be
conclusive and binding upon the shareholders of all Series and Classes for all
purposes.
(b) (1) Liabilities Belonging to Series. The liabilities,
expenses, costs, charges and reserves attributable to each Series shall be
charged and allocated to the assets belonging to each particular Series. Any
general liabilities, expenses, costs, charges and reserves of the Trust which
are not identifiable as belonging to any particular Series shall be allocated
and charged by the Trustees to and among any one or more of the Series
established and designated from time to time in such manner and on such basis as
the Trustees in their sole discretion deem fair and equitable. The liabilities,
expenses, costs, charges and reserves allocated and so charged to each Series
are herein referred to as "liabilities belonging to" that Series. Each
allocation of liabilities, expenses, costs, charges and reserves by the Trustees
shall be conclusive and binding upon the shareholders of all Series for all
purposes.
(2) Liabilities Belonging to a Class. If a Series is divided into more than one
Class, the liabilities, expenses, costs, charges and reserves attributable to a
Class shall be charged and allocated to the Class to which such liabilities,
expenses, costs, charges or reserves are attributable. Any general liabilities,
expenses, costs, charges or reserves belonging to the Series that are not
identifiable as belonging to any particular Class shall be allocated and charged
by the Trustees to and among any one or more of the Classes of that Series
established and designated from time to time in such manner and on such basis as
the Trustees in their sole discretion deem fair and equitable. The liabilities,
expenses, costs, charges and reserves allocated and so charged to each Class are
herein referred to as "liabilities belonging to" that Class. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the holders of all Classes for all purposes.
(c) Dividends. Dividends and distributions on Shares of a
particular Series or Class may be paid to the holders of Shares of that Series
or Class, with such frequency as the Trustees may determine, which may be daily
or otherwise pursuant to a standing resolution or resolutions adopted only once
or with such frequency as the Trustees may determine, from such of the income,
capital gains accrued or realized, and capital and surplus, from the assets
belonging to that Series, as the Trustees may determine, after providing for
actual and accrued liabilities belonging to such Series or Class. All dividends
and distributions on Shares of a particular Series or Class shall be distributed
pro rata to the Shareholders of such Series or Class in proportion to the number
of Shares of such Series or Class held by such Shareholders at the date and time
of record established for the payment of such dividends or distributions, except
that in connection with any dividend or distribution program or procedure the
Trustees may determine that no dividend or distribution shall be payable on
Shares as to which the Shareholder's purchase order and/or payment have not been
received by the time or times established by the Trustees under such program or
procedure. Such dividends and distributions may be made in cash or Shares or a
combination thereof as determined by the Trustees or pursuant to any program
that the Trustees may have in effect at the time for the election by each
Shareholder of the mode of the making of such dividend or distribution to that
Shareholder. Any such dividend or distribution paid in Shares will be paid at
the net asset value thereof as determined in accordance with paragraph 13 of
Article SEVENTH.
(d) Liquidation. In the event of the liquidation or
dissolution of the Trust, the Shareholders of each Series and all Classes of
each Series that have been established and designated shall be entitled to
receive, as a Series or Class, when and as declared by the Trustees, the excess
of the assets belonging to that Series over the liabilities belonging to that
Series or Class. The assets so distributable to the Shareholders of any
particular Class and Series shall be distributed among such Shareholders in
proportion to the number of Shares of such Class of that Series held by them and
recorded on the books of the Trust.
(e) Transfer. All Shares of each particular Series or Class
shall be transferable, but transfers of Shares of a particular Class and Series
will be recorded on the Share transfer records of the Trust applicable to such
Series or Class of that Series only at such times as Shareholders shall have the
right to require the Trust to redeem Shares of such Series or Class of that
Series and at such other times as may be permitted by the Trustees.
(f) Equality. Each Share of a Series shall represent an equal
proportionate interest in the assets belonging to that Series (subject to the
liabilities belonging to such Series or any Class of that Series), and each
Share of any particular Series shall be equal to each other Share of that Series
and shares of each Class of a Series shall be equal to each other Share of such
Class; but the provisions of this sentence shall not restrict any distinctions
permissible under this Article FOURTH that may exist with respect to Shares of
the different Classes of a Series. The Trustees may from time to time divide or
combine the Shares of any particular Class or Series into a greater or lesser
number of Shares of that Class or Series without thereby changing the
proportionate beneficial interest in the assets belonging to that Series or
allocable to that Class in any way affecting the rights of Shares of any other
Class or Series.
(g) Fractions. Any fractional Share of any Class and Series,
if any such fractional Share is outstanding, shall carry proportionately all the
rights and obligations of a whole Share of that Class and Series, including
those rights and obligations with respect to voting, receipt of dividends and
distributions, redemption of Shares, and liquidation of the Trust.
(h) Conversion Rights. Subject to compliance with the
requirements of the 1940 Act, the Trustees shall have the authority to provide
that (i) holders of Shares of any Series shall have the right to exchange said
Shares into Shares of one or more other Series of Shares, (ii) holders of Shares
of any Class shall have the right to exchange said Shares into Shares of one or
more other Classes of the same or a different Series, (iii) Shares of a Class
shall convert into Shares of another Class of the same Series on such terms and
conditions as the Trustees may require, and/or (iv) the Trust shall have the
right to carry out exchanges of the aforesaid kind, in each case in accordance
with such requirements and procedures as may be established by the Trustees.
(i) Ownership of Shares. The ownership of Shares shall be
recorded on the books of the Trust or of a transfer or similar agent for the
Trust, which books shall be maintained separately for the Shares of each Class
and Series that has been established and designated. No certification certifying
the ownership of Shares need be issued except as the Trustees may otherwise
determine from time to time. The Trustees may make such rules as they consider
appropriate for the issuance of Share certificates, the use of facsimile
signatures, the transfer of Shares and similar matters. The record books of the
Trust as kept by the Trust or any transfer or similar agent, as the case may be,
shall be conclusive as to who are the Shareholders and as to the number of
Shares of each Class and Series held from time to time by each such Shareholder.
(j) Investments in the Trust. The Trustees may accept
investments in the Trust from such persons and on such terms and for such
consideration, not inconsistent with the provisions of the 1940 Act, as they
from time to time authorize. The Trustees may authorize any distributor,
principal underwriter, custodian, transfer agent or other person to accept
orders for the purchase or sale of Shares that conform to such authorized terms
and to reject any purchase or sale orders for Shares whether or not conforming
to such authorized terms.
(k) Status of Shares and Limitation of Personal Liability.
Shares shall be deemed to be personal property giving only the rights provided
in this instrument. Every Shareholder by virtue of having become a Shareholder
shall be held to have expressly assented and agreed to the terms hereof and to
have become a party hereto. The death of a Shareholder during the continuance of
the Trust shall not operate to terminate the Trust nor entitle the
representative of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees, but only to the
rights of said decedent under this Trust. Ownership of Shares shall not entitle
the Shareholder to any title in or to the whole or any part of the Trust
property or right to call for a partition or division of the same or for an
accounting, nor shall the ownership of Shares constitute the Shareholders
partners. Neither the Trust nor the Trustees, nor any officer, employee or agent
of the Trust shall have any power to bind personally any Shareholder, nor except
as specifically provided herein to call upon any Shareholder for the payment of
any sum of money or assessment whatsoever other than such as the Shareholder may
at any time personally agree to pay.
FIFTH: The following, provisions are hereby adopted with respect to voting
Shares of the Trust and certain other rights:
1. The Shareholders shall have the power to vote (a) for the election
of Trustees when that issue is submitted to them, (b) to the same extent as the
shareholders of a Massachusetts business corporation, as to whether or not a
court action, proceeding or claim should be brought or maintained derivatively
or as a class action on behalf of the Trust or the Shareholders, provided
however, that any Trustee that is not an interested person of the Trust as
defined by the 1940 Act shall be deemed to be independent and disinterested when
making any determination or taking any action with respect to such court action,
proceeding or claim, and (c) with respect to amendments to the Trust and other
matters relating to the Trust only to the extent required by the 1940 Act or
required by law, by this Declaration of Trust, or the By-Laws of the Trust or
any registration statement of the Trust filed with the Commission or any State,
or as the Trustees may consider desirable.
2. The Trust will not hold shareholder meetings unless required by the
1940 Act, the provisions of this Declaration of Trust, or any other applicable
law. The Trustees may call a meeting of shareholders from time to time.
3. (a) Except as herein otherwise provided, at all meetings of
Shareholders, each Shareholder shall be entitled to one vote on each matter
submitted to a vote of the Shareholders of the affected Series for each Share
standing in his name on the books of the Trust on the date, fixed in accordance
with the By-Laws, for determination of Shareholders of the affected Series
entitled to vote at such meeting (except, if the Board so determines, for Shares
redeemed prior to the meeting), and each such Series shall vote separately
("Individual Series Voting"); a Series shall be deemed to be affected when a
vote of the holders of that Series on a matter is required by the 1940 Act;
provided, however, that as to any matter with respect to which a vote of
Shareholders is required by the 1940 Act or by any applicable law that must be
complied with, such requirements as to a vote by Shareholders shall apply in
lieu of Individual Series Voting as described above. If the Shares of a Series
shall be divided into Classes as provided in Article FOURTH, the Shares of each
Class shall have identical voting rights except that the Trustees, in their
discretion, may provide a Class of a Series with separate voting rights with
respect to matters in which the interests of one Class differ from the interests
of any other Class, and with exclusive voting rights with respect to matters
which relate solely to such Classes. If the Shares of any Series shall be
divided into Classes with a Class having exclusive or separate voting rights
with respect to certain matters, the quorum and voting requirements described
below with respect to action to be taken by the Shareholders of the Class of
such Series on such matters shall be applicable only to the Shares of such
Class. Any fractional Share shall carry proportionately all the rights of a
whole Share, including the right to vote and the right to receive dividends.
(b) The presence in person or by proxy of the holders of one-third of
the Shares, or of the Shares of any Series or Class of any Series, outstanding
and entitled to vote thereat shall constitute a quorum at any meeting of the
Shareholders or of that Series or Class, respectively; provided however, that if
any action to be taken by the Shareholders or by a Series or Class at a meeting
requires an affirmative vote of a majority, or more than a majority, of the
shares outstanding and entitled to vote, then in such event the presence in
person or by proxy of the holders of a majority of the shares outstanding and
entitled to vote at such a meeting shall constitute a quorum for all purposes.
At a meeting at which is a quorum is present, a vote of a majority of the quorum
shall be sufficient to transact all business at the meeting, except as otherwise
provided in Article NINTH and except that a plurality shall elect a Trustee. If
at any meeting of the Shareholders there shall be less than a quorum present,
the Shareholders or the Trustees present at such meeting may, without further
notice, adjourn the same from time to time until a quorum shall attend, but no
business shall be transacted at any such adjourned meeting except such as might
have been lawfully transacted had the meeting not been adjourned.
(c) If at the time any session of a meeting is called to order a quorum
is not present in person or by proxy, the persons named as proxies may vote
those proxies which have been received to adjourn the meeting to a later date.
In the event that a quorum is present but sufficient votes in favor of a
proposal have not been received, the persons named as proxies may propose one or
more adjournments of the meeting to permit further solicitation of proxies. All
such adjournments will require the affirmative vote of a majority of the shares
present in person or by proxy at the session of the meeting to be adjourned. The
persons named as proxies will vote those proxies which they are entitled to vote
in favor of a proposal in favor of such an adjournment, and will vote those
proxies required to be voted against the proposal against any such adjournment.
Any adjourned session or sessions may be held within 120 days after the date set
for the original meeting without the necessity of further notice.
Proxies may be given by or on behalf of a Shareholder orally or in
writing or pursuant to any electronic, telephonic, or mechanical data gathering
process. A proxy with respect to Shares held in the name of two or more persons
shall be valid if executed by any of them unless at or prior to exercise of the
proxy and the Trust receives a specific written notice to the contrary from any
of them. A proxy purporting to be executed by or on behalf of a shareholder
shall be deemed valid unless challenged at or prior to its exercise and the
burden of proving invalidity shall rest on the challenger. Until Shares are
issued, the Trustees may exercise all rights of Shareholders and may take any
action required by law, this Declaration of Trust or the By-Laws to be taken by
Shareholders.
4. Each Share of each Series or Class thereof that has been established
and designated is subject to redemption or repurchase by the Trust upon such
terms and conditions as may from time to time be determined by the Trustees and
set forth in the then current Prospectus of the Trust. Upon the Trust's
acceptance of a tender for repurchase of Shares by the holders of the Shares,
the holders of the Shares so repurchased shall have no further right with
respect thereto other than to receive payment of such repurchase price. The
method of computing net asset value, the time at which such net asset value
shall be computed and the time within which the Trust shall make payment
therefor, shall be determined as hereinafter provided in Article SEVENTH of this
Declaration of Trust. Notwithstanding the foregoing, the Trustees, when
permitted or required to do so by the 1940 Act, may suspend the right of the
Shareholders to require the Trust to repurchase Shares.
5. No Shareholder shall, as such holder, have any right to purchase or
subscribe for any Shares of the Trust which it may issue or sell, other than
such right, if any, as the Trustees, in their discretion, may determine.
6. All persons who shall acquire Shares shall acquire the same subject
to the provisions of the Declaration of Trust.
7. Cumulative voting for the election of Trustees shall not be allowed.
8. (a) Notwithstanding any other provision of this Declaration of Trust
and subject to the exceptions provided in paragraph (d) of this paragraph, the
types of transactions described in paragraph (c) of this paragraph shall require
the affirmative vote or consent of the holders of not less than two thirds of
the Shares outstanding and entitled to vote when a Principal Shareholder (as
defined in paragraph (b) of this paragraph) is a party to the transaction. Such
affirmative vote or consent shall be in addition to the vote or consent of the
holders of Shares otherwise required by law or any agreement between the Trust
and any national securities exchange.
(b) The term "Principal Shareholder" shall mean any
corporation, person or other entity which is the beneficial owner, directly or
indirectly, of five percent (5%) or more of the outstanding Shares and shall
include any affiliate or associate, as such terms are defined in clause (ii)
below, of a Principal Shareholder. For the purposes of this paragraph, in
addition to the Shares which a corporation, person or other entity beneficially
owns directly, (a) any corporation, person or other entity shall be deemed to be
the beneficial owner of any Shares (i) which it has the right to acquire
pursuant to any agreement or upon exercise of conversion rights or warrants, or
otherwise (but excluding share options granted by the Trust) or (ii) which are
beneficially owned, directly or indirectly (including Shares deemed owned
through application of clause (i) above), by any other corporation, person or
entity with which it or its "affiliate" or "associate" (as defined below) has
any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of Shares, or which is its "affiliate", or
"associate" as those terms are defined in Rule 12b-2 under the Securities
Exchange Act of 1934, as amended, and (b) the outstanding Shares shall include
Shares deemed owned through application of clauses (i) and (ii) above but shall
not include any other Shares that may be issuable pursuant to any agreement, or
upon exercise of conversion rights or warrants, or otherwise.
(c) This paragraph shall apply to the following transactions:
(i) The merger or consolidation of the Trust or any subsidiary of
the Trust with or into any Principal Shareholder.
(ii) Conversion of the Trust from a closed-end to an open-end
investment company (except that if the Board of Trustees recommends
such conversion, the approval of a majority of the Trust's outstanding
voting shares (as defined in the 1940 Act) shall be sufficient).
(iii) The issuance of any securities of the Trust to any
Principal Shareholder (other than the Adviser or the Distributor) for
cash.
(iv) The sale, lease or exchange of all or any substantial part
of the assets of the Trust to any Principal Shareholder (except assets
having an aggregate fair market value of less than $1,000,000,
aggregating for the purpose of such computation all assets sold,
leased or exchanged in any series of similar transactions within a
twelve-month period).
(v) The sale, lease or exchange to the Trust or any subsidiary
thereof, in exchange for securities of the Trust of any assets of any
Principal Shareholder (except assets having an aggregate fair market
value of less than $1,000,000, aggregating for the purposes of such
computation all assets sold, leased or exchanged in any series of
similar transactions within a twelve-month period).
(d) The provisions of this paragraph shall not be applicable
to (i) any of the transactions described in paragraph (c) of this paragraph if
the Board of Trustees of the Trust shall by resolution have approved such
transaction, or (ii) any such transaction with any corporation of which a
majority of the outstanding shares of all classes of stock normally entitled to
vote in elections of directors is owned of record or beneficially by the Trust
and its subsidiaries.
(e) The Board of Trustees shall have the power to determine
for the purposes of this paragraph on the basis of information known to the
Trust, whether (i) a corporation, person or entity beneficially owns more than
five percent (5%) of the outstanding Shares, (ii) a corporation, person or
entity is an "affiliate" or "associate" (as defined above) of another, (iii) the
assets being acquired or leased to or by the Trust or any subsidiary thereof,
constitute a substantial part of the assets of the Trust and have an aggregate
fair market value of less than $1,000,000, and (iv) the memorandum of
understanding referred to in paragraph (d) hereof is substantially consistent
with the transaction covered thereby. Any such determination shall be conclusive
and binding for all purposes of this paragraph.
SIXTH:
1. The persons who shall act as initial Trustees until the first
meeting or until their successors are duly chosen and qualify are the initial
trustees executing this Declaration of Trust or any counterpart thereof.
However, the By-Laws of the Trust may fix the number of Trustees at a number
greater or lesser than the number of initial Trustees and may authorize the
Trustees to increase or decrease the number of Trustees, to fill any vacancies
on the Board which may occur for any reason including any vacancies created by
any such increase in the number of Trustees, to set and alter the terms of
office of the Trustees and to lengthen or lessen their own terms of office or
make their terms of office of indefinite duration, all subject to the 1940 Act.
Unless otherwise provided by the By-Laws of the Trust, the Trustees need not be
Shareholders.
2. A Trustee at any time may be removed either with or without cause by
resolution duly adopted by the affirmative vote of the holders of two-thirds of
the outstanding Shares, present in person or by proxy at any meeting of
Shareholders called for such purpose; such a meeting shall be called by the
Trustees when requested in writing to do so by the record holders of not less
than ten per centum of the outstanding Shares. A Trustee may also be removed by
the Board of Trustees as provided in the By-Laws of the Trust as amended from
time to time.
3. The Trustees shall make available a list of names and addresses of
all Shareholders as recorded on the books of the Trust, upon receipt of the
request in writing signed by not less than ten Shareholders (who have been
shareholders for at least six months) holding in the aggregate shares of the
Trust valued at not less than $25,000 at current offering price (as defined in
the then effective Prospectus and/or Statement of Additional Information
relating to the Shares under the Securities Act of 1933, as amended from time to
time) or holding not less than 1% in amount of the entire amount of Shares
issued and outstanding; such request must state that such Shareholders wish to
communicate with other Shareholders with a view to obtaining signatures to a
request for a meeting to take action pursuant to part 2 of this Article SIXTH
and be accompanied by a form of communication to the Shareholders. The Trustees
may, in their discretion, satisfy their obligation under this part 3 by either
making available the Shareholder list to such Shareholders at the principal
offices of the Trust, or at the offices of the Trust's transfer agent, during
regular business hours, or by mailing a copy of such communication and form of
request, at the expense of such requesting Shareholders, to all other
Shareholders, and the Trustees may also take such other action as may be
permitted under Section 16(c) of the 1940 Act.
4. The Trust may at any time or from time to time apply to the
Commission for one or more exemptions from all or part of said Section 16(c) of
the 1940 Act, and, if an exemptive order or orders are issued by the Commission,
such order or orders shall be deemed part of said Section 16(c) for the purposes
of parts 2 and 3 of this Article SIXTH.
SEVENTH: The following provisions are hereby adopted for the
purpose of defining, limiting and regulating the powers of the Trust,
the Trustees and the Shareholders.
1. As soon as any Trustee is duly elected by the Shareholders or the
Trustees and shall have accepted this Trust, the Trust estate shall vest in the
new Trustee or Trustees, together with the continuing Trustees, without any
further act or conveyance, and he or she shall be deemed a Trustee hereunder.
2. The death, declination, resignation, retirement, removal, or
incapacity of the Trustees, or any one of them, shall not operate to annul or
terminate the Trust but the Trust shall continue in full force and effect
pursuant to the terms of this Declaration of Trust.
3. The assets of the Trust shall be held separate and apart from any
assets now or hereafter held in any capacity other than as Trustee hereunder by
the Trustees or any successor Trustees. All of the assets of the Trust shall at
all times be considered as vested in the Trustees. No Shareholder shall have, as
a holder of beneficial interest in the Trust, any authority, power or right
whatsoever to transact business for or on behalf of the Trust, or on behalf of
the Trustees, in connection with the property or assets of the Trust, or in any
part thereof.
4. The Trustees in all instances shall act as principals, and are and
shall be free from the control of the Shareholders. The Trustees shall have full
power and authority to do any and all acts and to make and execute, and to
authorize the officers and agents of the Trust to make and execute, any and all
contracts and instruments that they may consider necessary or appropriate in
connection with the management of the Trust. The Trustees shall not in any way
be bound or limited by present or future laws or customs in regard to Trust
investments, but shall have full authority and power to make any and all
investments which they, in their uncontrolled discretion, shall deem proper to
accomplish the purpose of this Trust. Subject to any applicable limitation in
this Declaration of Trust or by the By-Laws of the Trust, the Trustees shall
have power and authority:
(a) to adopt By-Laws not inconsistent with this Declaration of
Trust providing for the conduct of the business of the Trust and to amend and
repeal them to the extent that they do not reserve that right to the
Shareholders;
(b) to elect and remove such officers and appoint and
terminate such officers as they consider appropriate with or without cause, and
to appoint and designate from among the Trustees such committees as the Trustees
may determine, and to terminate any such committee and remove any member of such
committee;
(c) to employ as custodian of any assets of the Trust a bank
or trust company or any other entity qualified and eligible to act as a
custodian, subject to any conditions set forth in this Declaration of Trust or
in the By-Laws, as amended from time to time;
(d) to retain a transfer agent and shareholder servicing
agent, or both;
(e) to provide for the distribution of Shares either through
a principal underwriter or the Trust itself or both;
(f) to set record dates in the manner provided for in the
By-Laws of the Trust;
(g) to delegate such authority as they consider desirable to
any officer of the Trust and to any agent, custodian or underwriter;
(h) to vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities or property held in Trust
hereunder; and to execute and deliver powers of attorney to such person or
persons as the Trustees shall deem proper, granting to such person or persons
such power and discretion with relation to securities or property as the
Trustees shall deem proper;
(i) to exercise powers and rights of subscription or otherwise
which in any manner arise out of ownership of securities held in trust
hereunder;
(j) to hold any security or property in a form not indicating
any trust, whether in bearer, unregistered or other negotiable form, either in
its own name or in the name of a custodian or a nominee or nominees, subject in
either case to proper safeguards according to the usual practice of
Massachusetts business trusts or investment companies;
(k) to consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or concern, any
security of which is held in the Trust; to consent to any contract, lease,
mortgage, purchase, or sale of property by such corporation or concern, and to
pay calls or subscriptions with respect to any security held in the Trust;
(l) to compromise, arbitrate, or otherwise adjust claims in
favor of or against the Trust or any matter in controversy including, but not
limited to, claims for taxes;
(m) to make, in the manner provided in the By-Laws or approved
by the Trustees, distributions of income and of capital gains and capital
surplus to Shareholders;
(n) to borrow money to the extent and in the manner permitted
by the 1940 Act and the Trust's fundamental policy thereunder as to borrowing;
(o) to enter into investment advisory or management contracts,
subject to the 1940 Act, with any one or more corporations, partnerships,
trusts, associations or other persons or entities;
(p) to change the name of the Trust or any Class or Series of
the Trust as they consider appropriate without shareholder approval;
(q) to establish officers' and Trustees' fees or compensation
and fees or compensation for committees of the Trustees to be paid by the Trust
or each Series thereof in such manner and amount as the Trustees may determine;
(r) to invest all or substantially all of the Trust's assets
in another registered investment company;
(s) to determine whether a minimum and/or maximum value should
apply to accounts holding Shares, to fix such values and establish the
procedures to cause the involuntary redemption of accounts that do not satisfy
such criteria; and
(t) to engage, employ or appoint any person or entities to
perform any act for the Trust or the Trustees and to authorize their
compensation.
5. No one dealing with the Trustees shall be under any obligation to
make any inquiry concerning the authority of the Trustees, or to see to the
application of any payments made or property transferred to the Trustees or upon
their order.
6. (a) The Trustees shall have no power to bind any Shareholder
personally or to call upon any Shareholder for the payment of any sum of money
or assessment whatsoever other than such as the Shareholder may at any time
personally agree to pay by way of subscription to any Shares or otherwise. This
paragraph shall not limit the right of the Trustees to assert claims against any
shareholder based upon the acts or omissions of such shareholder or for any
other reason. There is hereby expressly disclaimed shareholder and Trustee
liability for the acts and obligations of the Trust. Every note, bond, contract
or other undertaking issued by or on behalf of the Trust or the Trustees
relating to the Trust shall include a notice and provision limiting the
obligation represented thereby to the Trust and its assets (but the omission of
such notice and provision shall not operate to impose any liability or
obligation on any Shareholder).
(b) Whenever this Declaration of Trust calls for or permits
any action to be taken by the Trustees hereunder, such action shall mean that
taken by the Board of Trustees by vote of the majority of a quorum of Trustees
as set forth from time to time in the By-Laws of the Trust or as required by the
1940 Act.
(c) The Trustees shall possess and exercise any and all such
additional powers as are reasonably implied from the powers herein contained
such as may be necessary or convenient in the conduct of any business or
enterprise of the Trust, to do and perform anything necessary, suitable, or
proper for the accomplishment of any of the purposes, or the attainment of any
one or more of the objects, herein enumerated, or which shall at any time appear
conducive to or expedient for the protection or benefit of the Trust, and to do
and perform all other acts and things necessary or incidental to the purposes
herein before set forth, or that may be deemed necessary by the Trustees.
(d) The Trustees shall have the power, to the extent not
inconsistent with the 1940 Act, to determine conclusively whether any moneys,
securities, or other properties of the Trust are, for the purposes of this
Trust, to be considered as capital or income and in what manner any expenses or
disbursements are to be borne as between capital and income whether or not in
the absence of this provision such moneys, securities, or other properties would
be regarded as capital or income and whether or not in the absence of this
provision such expenses or disbursements would ordinarily be charged to capital
or to income.
7. The By-Laws of the Trust may divide the Trustees into classes and
prescribe the tenure of office of the several classes, but if such division into
classes is made, no class of Trustee shall be elected for a period shorter than
that from the time of the election following the division into classes until the
next meeting and thereafter for a period shorter than the interval between
meetings or for a period longer than five years, and the term of office of at
least one class shall expire each year.
8. The Shareholders shall have the right to inspect the records,
documents, accounts and books of the Trust, subject to reasonable regulations of
the Trustees, not contrary to Massachusetts law, as to whether and to what
extent, and at what times and places, and under what conditions and regulations,
such right shall be exercised.
9. Any officer elected or appointed by the Trustees or by the
Shareholders or otherwise, may be removed at any time, with or without cause, in
such lawful manner as may be provided in the By-Laws of the Trust.
10. The Trustees shall have power to hold their meetings, to have an
office or offices and, subject to the provisions of the laws of Massachusetts,
to keep the books of the Trust outside of said Commonwealth at such places as
may from time to time be designated by them. Action may be taken by the Trustees
without a meeting by unanimous written consent or by telephone, teleconferencing
or other method of electronic communication.
11. Securities held by the Trust shall be voted in person or by proxy
by the President or a Vice-President, or such officer or officers of the Trust
as the Trustees shall designate for the purpose, or by a proxy or proxies
thereunto duly authorized by the Trustees, except as otherwise ordered by vote
of the holders of a majority of the Shares outstanding and entitled to vote in
respect thereto.
12. (a) Subject to the provisions of the 1940 Act and Article FIFTH,
paragraph 8 hereof, any Trustee, officer or employee, individually, or any
partnership of which any Trustee, officer or employee may be a member, or any
corporation, association or entity of which any Trustee, officer or employee may
be an officer, partner, director, trustee, employee, member or stockholder, or
otherwise may have an interest, may be a party to, or may be pecuniarily or
otherwise interested in, any contract or transaction of the Trust, and in the
absence of fraud no contract or other transaction shall be thereby affected or
invalidated; provided that in such case a Trustee, officer or employee or a
partnership, corporation, association or entity of which a Trustee, officer or
employee is a member, officer, director, trustee, employee or stockholder is so
interested, such fact shall be disclosed or shall have been known to the
Trustees including those Trustees who are not so interested and who are neither
"interested" nor "affiliated" persons as those terms are defined in the 1940
Act, or a majority thereof; and any Trustee who is so interested, or who is also
a director, officer, partner, trustee, employee, member or stockholder of such
other corporation or a member of such partnership, entity or association that is
so interested, may be counted in determining the existence of a quorum at any
meeting of the Trustees which shall authorize any such contract or transaction,
and may vote thereat to authorize any such contract or transaction, with like
force and effect as if he were not so interested.
(b) Specifically, but without limitation of the foregoing, the
Trust may enter into a management or investment advisory contract or
underwriting contract and other contracts with, and may otherwise do business
with any manager or investment adviser for the Trust and/or principal
underwriter of the Shares of the Trust or any subsidiary or affiliate of any
such manager or investment adviser and/or principal underwriter and may permit
any such firm or corporation to enter into any contracts or other arrangements
with any other firm or corporation relating to the Trust notwithstanding that
the Trustees of the Trust may be composed in part of partners, directors,
officers or employees of any such firm or corporation, and officers of the Trust
may have been or may be or become partners, directors, officers or employees of
any such firm or corporation, and in the absence of fraud the Trust and any such
firm or corporation may deal freely with each other, and no such contract or
transaction between the Trust and any such firm or corporation shall be
invalidated or in any way affected thereby, nor shall any Trustee or officer of
the Trust be liable to the Trust or to any Shareholder or creditor thereof or to
any other person for any loss incurred by it or him solely because of the
existence of any such contract or transaction; provided that nothing herein
shall protect any director or officer of the Trust against any liability to the
Trust or to its security holders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office.
(c) As used in this paragraph the following terms shall have
the meanings set forth below:
(i) the term "indemnitee" shall mean any present or former
Trustee, officer or employee of the Trust, any present or former
Trustee, partner, director or officer of another trust, partnership,
corporation or association whose securities are or were owned by the
Trust or of which the Trust is or was a creditor and who served or
serves in such capacity at the request of the Trust, and the heirs,
executors, administrators, successors and assigns of any of the
foregoing; however, whenever conduct by an indemnitee is referred to,
the conduct shall be that of the original indemnitee rather than that
of the heir, executor, administrator, successor or assignee;
(ii) the term "covered proceeding" shall mean any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, to which an indemnitee is
or was a party or is threatened to be made a party by reason of the
fact or facts under which he or it is an indemnitee as defined above;
(iii) the term "disabling conduct" shall mean willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office in question;
(iv) the term "covered expenses" shall mean expenses (including
attorney's fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by an indemnitee in connection with a
covered proceeding; and
(v) the term "adjudication of liability" shall mean, as to any
covered proceeding and as to any indemnitee, an adverse determination
as to the indemnitee whether by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent.
(d) The Trust shall not indemnify any indemnitee for any covered
expenses in any covered proceeding if there has been an adjudication
of liability against such indemnitee expressly based on a finding of
disabling conduct.
(e) Except as set forth in paragraph (d) above, the Trust
shall indemnify any indemnitee for covered expenses in any covered proceeding,
whether or not there is an adjudication of liability as to such indemnitee, such
indemnification by the Trust to be to the fullest extent now or hereafter
permitted by any applicable law unless the By-Laws limit or restrict the
indemnification to which any indemnitee may be entitled. The Board of Trustees
may adopt by-law provisions to implement subparagraphs (c), (d) and (e) hereof.
(f) Nothing herein shall be deemed to affect the right of the
Trust and/or any indemnitee to acquire and pay for any insurance covering any or
all indemnities to the extent permitted by applicable law or to affect any other
indemnification rights to which any indemnitee may be entitled to the extent
permitted by applicable law. Such rights to indemnification shall not, except as
otherwise provided by law, be deemed exclusive of any other rights to which such
indemnitee may be entitled under any statute, By-Laws, contract or otherwise.
13. The Trustees are empowered, in their absolute discretion, to
establish bases or times, or both, for determining the net asset value per Share
of any Class and Series in accordance with the 1940 Act and to authorize the
voluntary purchase by any Class and Series, either directly or through an agent,
of Shares of any Class and Series upon such terms and conditions and for such
consideration as the Trustees shall deem advisable in accordance with the 1940
Act.
14. Payment of the net asset value per Share of any Class and Series
properly surrendered to it for redemption or repurchase shall be made by the
Trust in a manner consistent with the prospectus and any applicable law or
regulation. Any payment may be made in portfolio securities of such Series or
Class of that Series and/or in cash, as the Trustees shall deem advisable, and
no Shareholder shall have a right, other than as determined by the Trustees, to
have Shares redeemed in kind.
15. The Trust shall have the right, at any time and without prior
notice to the Shareholder, to redeem Shares of the Class and Series held by such
Shareholder held in any account registered in the name of such Shareholder for
its current net asset value, if and to the extent that such redemption is
necessary to reimburse either that Series or Class of the Trust or the
distributor (i.e., principal underwriter) of the Shares for any loss either has
sustained by reason of the failure of such Shareholder to make timely and good
payment for Shares purchased or subscribed for by such Shareholder, regardless
of whether such Shareholder was a Shareholder at the time of such purchase or
subscription, subject to and upon such terms and conditions as the Trustees may
from time to time prescribe.
EIGHTH: The name "Oppenheimer" included in the name of the Trust and of
any Series shall be used pursuant to a royalty-free, non-exclusive license from
OppenheimerFunds, Inc. ("OFI"), incidental to and as part of any one or more
advisory, management or supervisory contracts which may be entered into by the
Trust with OFI. Such license shall allow OFI to inspect and subject to the
control of the Board of Trustees to control the nature and quality of services
offered by the Trust under such name. The license may be terminated by OFI upon
termination of such advisory, management or supervisory contracts or without
cause upon 60 days' written notice, in which case neither the Trust nor any
Series or Class shall have any further right to use the name "Oppenheimer" in
its name or otherwise and the Trust, the Shareholders and its officers and
Trustees shall promptly take whatever action may be necessary to change its name
and the names of the Trust and any Series or Classes accordingly.
NINTH:
1. In case any Shareholder or former Shareholder shall be held to be
personally liable solely by reason of his being or having been a Shareholder and
not because of his acts or omissions or for some other reason, the Shareholder
or former Shareholder (or the Shareholders, heirs, executors, administrators or
other legal representatives or in the case of a corporation or other entity, its
corporate or other general successor) shall be entitled out of the Trust estate
to be held harmless from and indemnified against all loss and expense arising
from such liability. The Trust shall, upon request by the Shareholder, assume
the defense of any such claim made against any Shareholder for any act or
obligation of the Trust and satisfy any judgment thereon.
2. It is hereby expressly declared that a trust and not a partnership
is created hereby. No individual Trustee hereunder shall have any power to bind
the Trust, the Trust's officers or any Shareholder. All persons extending credit
to, doing business with, contracting with or having or asserting any claim
against the Trust or the Trustees shall look only to the assets of the Trust for
payment under any such credit, transaction, contract or claim; and neither the
Shareholders nor the Trustees, nor any of their agents, whether past, present or
future, shall be personally liable therefor; notice of such disclaimer shall be
given in each agreement, obligation or instrument entered into or executed by
the Trust or the Trustees. Nothing in this Declaration of Trust shall protect a
Trustee against any liability to which such Trustee would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of Trustee
hereunder.
3. The exercise by the Trustees of their powers and discretion
hereunder in good faith and with reasonable care under the circumstances then
prevailing, shall be binding upon everyone interested. Subject to the provisions
of paragraph 2 of this Article NINTH, the Trustees shall not be liable for
errors of judgment or mistakes of fact or law. The Trustees may take advice of
counsel or other experts with respect to the meaning and operations of this
Declaration of Trust, applicable laws, contracts, obligations, transactions or
any other business the Trust may enter into, and subject to the provisions of
paragraph 2 of this Article NINTH, shall be under no liability for any act or
omission in accordance with such advice or for failing to follow such advice.
The Trustees shall not be required to give any bond as such, nor any surety if a
bond is required.
4. This Trust shall continue without limitation of time but subject to
the provisions of sub-sections (a), (b), (c) and (d) of this paragraph 4.
(a) The Trustees, subject to the applicable provisions of the
1940 Act, may sell and convey the assets of a Series (which sale may be subject
to the retention of assets for the payment of liabilities and expenses) to
another issuer for a consideration which may be or include securities of such
issuer. Upon making provision for the payment of liabilities, by assumption by
such issuer or otherwise, the Trustees shall distribute the remaining proceeds
ratably among the holders of the outstanding Shares of the Series the assets of
which have been so transferred.
(b) The Trustees, subject to the applicable provisions of the
1940 Act, may at any time sell and convert into money all the assets of a
Series. Upon making provisions for the payment of all outstanding obligations,
taxes and other liabilities, accrued or contingent, of that Series, the Trustees
shall distribute the remaining assets of that Series ratably among the holders
of the outstanding Shares of that Series in proportion to the number of Shares
that the Series or Class thereof held by them.
(c) The Trustees, subject to the applicable provisions of the
1940 Act, may otherwise alter, convert or transfer the assets of a Series.
(d) Upon completion of the distribution of the remaining
proceeds or the remaining assets as provided in sub-sections (a) and (b), and in
subsection (c) where applicable, the Series the assets of which have been so
transferred shall terminate, and if all the assets of the Trust have been so
transferred, the Trust shall terminate and the Trustees shall be discharged of
any and all further liabilities and duties hereunder and the right, title and
interest of all parties shall be canceled and discharged.
5. The original or a copy of this instrument and of each restated
declaration of trust or instrument supplemental hereto shall be kept at the
office of the Trust where it may be inspected by any Shareholder. A copy of this
instrument and of each supplemental or restated declaration of trust shall be
filed with the Secretary of the Commonwealth of Massachusetts, as well as any
other governmental office where such filing may from time to time be required.
Anyone dealing with the Trust may rely on a certificate by an officer of the
Trust as to whether or not any such supplemental or restated declarations of
trust have been made and as to any matters in connection with the Trust
hereunder, and, with the same effect as if it were the original, may rely on a
copy certified by an officer of the Trust to be a copy of this instrument or of
any such supplemental or restated declaration of trust. In this instrument or in
any such supplemental or restated declaration of trust, references to this
instrument, and all expressions like "herein", "hereof" and "hereunder" shall be
deemed to refer to this instrument as amended or affected by any such
supplemental or restated declaration of trust. This instrument may be executed
in any number of counterparts, each of which shall be deemed an original.
6. The Trust set forth in this instrument is created under and is to be
governed by and construed and administered according to the laws of the
Commonwealth of Massachusetts. The Trust shall be of the type commonly called a
Massachusetts business trust, and without limiting the provisions hereof, the
Trust may exercise all powers which are ordinarily exercised by such a trust.
7. In the event that any person advances the organizational expenses of
the Trust, such advances shall become an obligation of the Trust subject to such
terms and conditions as may be fixed by, and on a date fixed by, or determined
with criteria fixed by the Board of Trustees, to be amortized over a period or
periods to be fixed by the Board.
8. Whenever any action is taken under this Declaration of Trust
including action which is required or permitted by the 1940 Act or any other
applicable law, such action shall be deemed to have been properly taken if such
action is in accordance with the construction of the 1940 Act or such other
applicable law then in effect as expressed in "no action" letters of the staff
of the Commission or any release, rule, regulation or order under the 1940 Act
or any decision of a court of competent jurisdiction, notwithstanding that any
of the foregoing shall later be found to be invalid or otherwise reversed or
modified by any of the foregoing.
9. Any action which may be taken by the Board of Trustees under this
Declaration of Trust or its By-Laws may be taken by the description thereof in
the then effective prospectus and/or statement of additional information
relating to the Shares under the Securities Act of 1933 or in any proxy
statement of the Trust rather than by formal resolution of the Board.
10. Whenever under this Declaration of Trust, the Board of Trustees is
permitted or required to place a value on assets of the Trust, such action may
be delegated by the Board, and/or determined in accordance with a formula
determined by the Board, to the extent permitted by the 1940 Act.
11. The Trustees may amend or otherwise supplement this instrument, by
making a Restated Declaration of Trust or a Declaration of Trust supplemental
hereto, which thereafter shall form a part hereof. Such amendment may be made if
authorized by vote of the Trustees, and, if approval of Shareholders is also
required under applicable law, such approval shall be made by a favorable vote
of number of shareholders required by applicable law. Amendments having the
purpose of changing the name of the Trust or any Series or Class of Shares, or
of adding or designating Series or Classes of Series of Shares, or of adding
correcting any omission, curing any ambiguity or curing, correcting or
supplementing any provision that is defective or inconsistent with the 1940 Act
or with the requirements of the Internal Revenue Code or regulations thereunder
for the Trust's obtaining the most favorable treatment thereunder available to
regulated investment companies or of taking such other actions permitted
hereunder without the necessity of obtaining Shareholder approval or action
shall not require authorization by shareholder vote. No amendment to amend,
alter, change or repeal any of the provisions of Article FIFTH, paragraph 8 of
this Declaration of Trust shall be made unless the amendment effecting such
amendment, alteration, change or repeal shall receive the affirmative vote or
consent of the holders of two-thirds of the Shares of the Trust outstanding and
entitled to vote. Such affirmative vote or consent shall be in addition to the
vote or consent of the holders of Shares otherwise required by applicable law.
12. The Board of Trustees is empowered to cause the redemption or
repurchase by the Trust of the Shares held by any Shareholder in an account if
the aggregate net asset value of such Shares (taken at cost or value, as
determined by the Board of Trustees) has been reduced to $200 or less, upon such
notice to the Shareholder in question which shall include the conditions by
which the Shareholder may increase the amount of the account holdings and may
include such other terms and conditions as the Board may fix in accordance with
the 1940 Act.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this instrument as of the 13th
day of August, 1999.
/s/ Andrew J. Donohue /s/ Robert G. Zack
Andrew J. Donohue Robert G. Zack
Two Word Trade Center, 34th Floor Two Word Trade Center, 34th Floor
New York, NY 10048 New York, NY 10048
OPPENHEIMER SENIOR FLOATING RATE FUND
(the "Fund")
BY-LAWS
as
of August 24, 1999
ARTICLE I
SHAREHOLDERS
Section 1. Place of Meeting. All meetings of the Shareholders (which
terms as used herein shall, together with all other terms defined in the Fund's
Declaration of Trust as amended from time to time, have the same meaning as in
the Declaration of Trust) shall be held at the principal office of the Fund or
at such other place as may from time to time be designated by the Board of
Trustees and stated in the notice of meeting.
Section 2. Shareholder Meetings. Meetings of the Shareholders for any
purpose or purposes may be called by the Chairman of the Board of Trustees, if
any, or by the President or by the Board of Trustees and shall be called by the
Secretary upon receipt of the request in writing signed by Shareholders holding
not less than one third in amount of the entire number of Shares issued and
outstanding and entitled to vote thereat. Such request shall state the purpose
or purposes of the proposed meeting. In addition, meetings of the Shareholders
shall be called by the Board of Trustees upon receipt of the request in writing
signed by Shareholders that hold in the aggregate not less than ten percent in
amount of the entire number of Shares issued and outstanding and entitled to
vote thereat, stating that the purpose of the proposed meeting is the removal of
a Trustee.
Section 3. Notice of Meetings of Shareholders. Not less than ten days'
and not more than 120 days' written or printed notice of every meeting of
Shareholders, stating the time and place thereof (and the general nature of the
business proposed to be transacted at any special or extraordinary meeting),
shall be given to each Shareholder entitled to vote thereat either by mail or by
presenting it to him personally or by leaving it at his residence or usual place
of business. If mailed, such notice shall be deemed to be given when deposited
in the United States mail addressed to the Shareholder at his post office
address as it appears on the records of the Fund, with postage thereon prepaid.
No notice of the time, place or purpose of any meeting of Shareholders
need be given to any Shareholder who attends in person or by proxy or to any
Shareholder who, in writing executed and filed with the records of the meeting,
either before or after the holding thereof, waives such notice.
Section 4. Record Dates. The Board of Trustees may fix, in advance, a
date, not exceeding 120 days and not less than ten days preceding the date of
any meeting of Shareholders or of the Shareholders of any Series or Class, and
not exceeding 120 days preceding any dividend or distribution payment date or
for any date for the allotment of rights, as a record date for the determination
of the Shareholders of record entitled to notice of and to vote at such meeting,
or entitled to receive such dividend or rights, as the case may be; and only
Shareholders of record on such date shall be entitled to notice of and to vote
at such meeting or to receive such dividends or rights, as the case may be.
Section 5. Access to Shareholder List. The Board of Trustees shall make
available a list of the names and addresses of all shareholders as recorded on
the books of the Fund, upon receipt of the request in writing signed by not less
than ten Shareholders of the Fund (who have been such for at least six months)
holding in the aggregate the lesser of (i) Shares valued at $25,000 or more at
current offering price (as defined in the Fund's Prospectus), or (ii) one
percent in amount of the entire number of shares of the Fund issued and
outstanding; such request must state that such Shareholders wish to communicate
with other Shareholders with a view to obtaining signatures to a request for a
meeting pursuant to Section 2 of Article I of these By-Laws and accompanied by a
form of communication to the Shareholders. The Board of Trustees may, in its
discretion, satisfy its obligation under this Section 5 by either making
available the Shareholder List to such Shareholders at the principal offices of
the Fund, or at the offices of the Fund's transfer agent, during regular
business hours, or by mailing a copy of such Shareholders' proposed
communication and form of request, at their expense, to all other Shareholders.
Section 6. Quorum, Adjournment of Meetings. The presence in person or
by proxy of the holders of record of more than 50% of the Shares of the stock of
the Fund or any series or class issued and outstanding and entitled to vote
thereat, shall constitute a quorum at all meetings of the Shareholders. If at
any meeting of the Shareholders there shall be less than a quorum present, the
Shareholders present at such meeting may, without further notice, adjourn the
same from time to time until a quorum shall attend, but no business shall be
transacted at any such adjourned meeting except such as might have been lawfully
transacted had the meeting not been adjourned.
Section 7. Voting and Inspectors. At all meetings of Shareholders,
every Shareholder of record entitled to vote thereat shall be entitled to one
vote for each Share of the Fund standing in his name on the books of the Fund
(and such Shareholders of record holding fractional shares shall have
proportionate voting rights as provided in the Declaration of Trust) on the date
for the determination of Shareholders entitled to vote at such meeting, either
in person or by proxy authorized or appointed by electronic transmission or by
instrument in writing subscribed by such Shareholder or his duly authorized
attorney-in-fact. No proxy which is dated more than three months before the
meeting shall be accepted unless such proxy shall, on its face, name a longer
period for which it is to remain in force.
All elections of Trustees shall be had by a plurality of the votes cast
and all questions shall be decided by a majority of the votes cast, in each case
at a duly constituted meeting, except as otherwise provided in the Declaration
of Trust or in these By-Laws or by specific statutory provision superseding the
restrictions and limitations contained in the Declaration of Trust or in these
By-Laws.
At any election of Trustees, the Board of Trustees prior thereto may,
or, if they have not so acted, the Chairman of the meeting may, and upon the
request of the holders of ten per cent (10%) of the Shares entitled to vote at
such election shall, appoint two inspectors of election who shall first
subscribe an oath or affirmation to execute faithfully the duties of inspectors
at such election with strict impartiality and according to the best of their
ability, and shall after the election make a certification of the result of the
vote taken. No candidate for the office of Trustee shall be appointed such
Inspector.
The Chairman of the meeting may cause a vote by ballot to be taken upon
any election or matter, and such vote shall be taken upon the request of the
holders of ten per cent (10%) of the Shares entitled to vote on such election or
matter.
Section 8. Conduct of Shareholders' Meetings. The meetings of the
Shareholders shall be presided over by the Chairman of the Board of Trustees, if
any, or if he shall not be present, by the President, or if he shall not be
present, by a Vice-President or other officer, or if none of them is present, by
a chairman to be elected at the meeting. The Secretary of the Fund, if present,
shall act as Secretary of such meetings, or if he is not present, an Assistant
Secretary shall so act; if neither the Secretary nor an Assistant Secretary is
present, then the chairman shall elect the secretary.
Section 9. Concerning Validity of Proxies, Ballots, Etc. At every
meeting of the Shareholders, all proxies shall be received and taken in charge
of and all ballots shall be received and canvassed by the secretary of the
meeting, who shall decide all questions touching the qualification of voters,
the validity of the proxies, and the acceptance or rejection of votes, unless
inspectors of election shall have been appointed as provided in Section 7, in
which event such inspectors of election shall decide all such questions.
ARTICLE II
BOARD OF TRUSTEES
Section 1. Number and Tenure of Office. The business and property of
the Fund shall be conducted and managed by a Board of Trustees consisting of the
number of initial Trustees, which number may be increased or decreased as
provided in Section 2 of this Article. Each Trustee shall, except as otherwise
provided herein, hold office until the meeting of Shareholders of the Fund next
succeeding his election or until his successor is duly elected and qualifies.
Trustees need not be Shareholders.
Section 2. Increase or Decrease in Number of Trustees. The Board of
Trustees, by the vote of a majority of the entire Board, may increase the number
of Trustees to a number not exceeding fifteen, and may elect Trustees to fill
the vacancies created by any such increase in the number of Trustees until the
next meeting called for the purpose of electing Trustees or until their
successors are duly elected and qualify; the Board of Trustees, by the vote of a
majority of the entire Board, may likewise decrease the number of Trustees to a
number not less than three but the tenure of office of any Trustee shall not be
affected by any such decrease. Vacancies occurring other than by reason of any
such increase shall be filled by a majority of the Board of Trustees then
sitting. In the event that after the proxy material has been printed for a
meeting of Shareholders at which Trustees are to be elected and any one or more
nominees named in such proxy material dies or become incapacitated or fail to
stand for election, the authorized number of Trustees shall be automatically
reduced by the number of such nominees, unless the Board of Trustees prior to
the meeting shall otherwise determine.
Section 3. Removal, Resignation and Retirement. A Trustee at any time
may be removed either with or without cause by resolution duly adopted by the
affirmative votes of the holders of at least two-thirds of the outstanding
Shares of the Fund, present in person or by proxy at any meeting of Shareholders
at which such vote may be taken. Any Trustee at any time may be removed for
cause by resolution duly adopted at any meeting of the Board of Trustees
provided that notice thereof is contained in the notice of such meeting and that
such resolution is adopted by the vote of at least two thirds of the Trustees
whose removal is not proposed. As used herein, "for cause" shall mean any cause
which under Massachusetts law would permit the removal of a Trustee of a
business trust.
Any Trustee may resign or retire as Trustee by written instrument
signed by him and delivered to the other Trustees or to any officer of the Fund,
and such resignation or retirement shall take effect upon such delivery or upon
such later date as is specified in such instrument and shall be effective as to
the Fund and each Series of the Fund hereunder.
Section 4. Place of Meeting. The Trustees may hold their meetings, have
one or more offices, and keep the books of the Fund outside Massachusetts, at
any office or offices of the Fund or at any other place as they may from time to
time by resolution determine, or, in the case of meetings, as shall be specified
or fixed in the respective notices or waivers of notice thereof.
Section 5. Regular Meetings. Regular meetings of the Board of Trustees
shall be held at such time and on such notice, if any, as the Trustees may from
time to time determine. One such regular meeting during each fiscal year of the
Fund shall be designated an annual meeting of the Board of Trustees.
Section 6. Special Meetings. Special meetings of the Board of Trustees
may be held from time to time upon call of the Chairman of the Board of
Trustees, if any, the President or two or more of the Trustees, by oral or
telegraphic or written notice duly served on or sent or mailed to each Trustee
not less than one day before such meeting. No notice need be given to any
Trustee who attends in person, or to any Trustee who in writing executed and
filed with the records of the meeting either before or after the holding thereof
waives such notice. Such notice or waiver of notice need not state the purpose
or purposes of such meeting.
Section 7. Quorum. A majority of the Trustees then in office shall
constitute a quorum for the transaction of business, provided that a quorum
shall in no case be less than two Trustees. If at any meeting of the Board there
shall be less than a quorum present (in person or by open telephone line, to the
extent permitted by the Investment Company Act of 1940 (the "1940 Act")), a
majority of those present may adjourn the meeting from time to time until a
quorum shall have been obtained. The act of the majority of the Trustees present
at any meeting at which there is a quorum shall be the act of the Board, except
as may be otherwise specifically provided by statute, by the Declaration of
Trust, by these By-Laws or by any contract or agreement to which the Fund is a
party.
Section 8. Executive Committee. The Board of Trustees may, by the
affirmative vote of a majority of the entire Board, elect from the Trustees an
Executive Committee to consist of such number of Trustees (not less than three)
as the Board may from time to time determine. The Board of Trustees by such
affirmative vote shall have power at any time to change the members of such
Committee, may fill vacancies in the Committee by election from the Trustees or
discharge the Committee. When the Board of Trustees is not in session, the
Executive Committee shall have and may exercise any or all of the powers of the
Board of Trustees in the management of the business and affairs of the Fund
(including the power to authorize the seal of the Fund to be affixed to all
papers which may require it) except as provided by law or by any contract or
agreement to which the Fund is a party and except the power to increase or
decrease the size of, or fill vacancies on, the Board, to remove or appoint
executive officers or to dissolve or change the permanent membership of the
Executive Committee, and the power to make or amend the By-Laws of the Fund. The
Executive Committee may fix its own rules of procedure, and may meet when and as
provided by such rules or by resolution of the Board of Trustees, but in every
case the presence of a majority shall be necessary to constitute a quorum. In
the absence of any member of the Executive Committee, the members thereof
present at any meeting, whether or not they constitute a quorum, may appoint a
member of the Board of Trustees to act in the place of such absent member.
Section 9. Other Committees. The Board of Trustees, by the affirmative
vote of a majority of the entire Board, may appoint other committees which shall
in each case consist of such number of members (not less than two) and shall
have and may exercise, to the extent permitted by law, such powers as the Board
may determine in the resolution appointing them. A majority of all members of
any such committee may determine its action, and fix the time and place of its
meetings, unless the Board of Trustees shall otherwise provide. The Board of
Trustees shall have power at any time to change the members and, to the extent
permitted by law, powers of any such committee, to fill vacancies, and to
discharge any such committee.
Section 10. Informal Action by and Telephone Meetings of Trustees and
Committees. Any action required or permitted to be taken at any meeting of the
Board of Trustees or any committee thereof may be taken without a meeting, if a
written consent to such action is signed by all members of the Board, or of such
committee, as the case may be. Trustees or members of the Board of Trustees may
participate in a meeting by means of a conference telephone or similar
communications equipment; such participation shall, except as otherwise required
by the 1940 Act, have the same effect as presence in person.
Section 11. Compensation of Trustees and Committee Members. Trustees
and committee members shall be entitled to receive such compensation from the
Fund for their services as may from time to time be voted by the Board of
Trustees.
Section 12. Dividends. Dividends or distributions payable on the Shares
of any Series may, but need not be, declared by specific resolution of the Board
as to each dividend or distribution; in lieu of such specific resolutions, the
Board may, by general resolution, determine the method of computation thereof,
the method of determining the Shareholders of the Series or Class to which they
are payable and the methods of determining whether and to which Shareholders
they are to be paid in cash or in additional Shares and the amount of the
dividend or distribution and the date on which it is payable.
Section 13. Indemnification. Before an indemnitee shall be indemnified
by the Trust, there shall be a reasonable determination upon review of the facts
that the person to be indemnified was not liable by reason of disabling conduct
as defined in the Declaration of Trust. Such determination may be made either by
vote of a majority of a quorum of the Board who are neither "interested persons"
of the Trust or the investment adviser nor parties to the proceeding or by
independent legal counsel. The Trust may advance attorneys' fees and expenses
incurred in a covered proceeding to the indemnitee if the indemnitee undertakes
to repay the advance unless it is determined that he is entitled to
indemnification under the Declaration of Trust. Also at least one of the
following conditions must be satisfied: (1) the indemnitee provides security for
his undertaking; or (2) the Trust is insured against losses arising by reason of
lawful advances; or (3) a majority of the disinterested nonparty Trustees or
independent legal counsel in a written opinion shall determine, based upon
review of all of the facts, that there is reason to believe that the indemnitee
will ultimately be found entitled to indemnification, and in making said
determination the independent legal counsel or the disinterested nonparty
Trustees may presume that an indemnitee did not engage in any disabling conduct.
ARTICLE III
OFFICERS
Section 1. Executive Officers. The executive officers of the Fund may
include a Chairman of the Board of Trustees, and shall include a President, one
or more Vice Presidents (the number thereof to be determined by the Board of
Trustees), a Secretary and a Treasurer. The Chairman of the Board of Trustees,
if any, shall be selected from among the Trustees. The Board of Trustees or the
Executive Committee may also in its discretion appoint Assistant Secretaries,
Assistant Treasurers, and other officers, agents and employees, who shall have
such authority and perform such duties as the Board or the Executive Committee
may determine. The Board of Trustees may fill any vacancy which may occur in any
office. Any two offices, except those of President and Secretary, may be held by
the same person, but no officer shall execute, acknowledge or verify any
instrument in more than one capacity, if such instrument is required by law or
these By-Laws to be executed, acknowledged or verified by two or more officers.
Section 2. Term of Office. The term of office of all officers shall be
until their respective successors are chosen and qualify; however, any officer
may be removed from office at any time with or without cause by the vote of a
majority of the entire Board of Trustees.
Section 3. Powers and Duties. The officers of the Fund shall have such
powers and duties as generally pertain to their respective offices, as well as
such powers and duties as may from time to time be conferred by the Board of
Trustees or the Executive Committee.
ARTICLE IV
SHARES
Section 1. Certificates of Shares. Each Shareholder of any Series of
the Fund may be issued a certificate or certificates for his Shares of that
Series, in such form as the Board of Trustees may from time to time prescribe,
but only if and to the extent and on the conditions described by the Board.
Section 2. Transfer of Shares. Shares of any Series or Class shall be
transferable on the books of the Fund by the holder thereof in person or by his
duly authorized attorney or legal representative, upon surrender and
cancellation of certificates, if any, for the same number of Shares of that
Series or Class, duly endorsed or accompanied by proper instruments of
assignment and transfer, with such proof of the authenticity of the signature as
the Fund or its agent may reasonably require; in the case of shares not
represented by certificates, the same or similar requirements may be imposed by
the Board of Trustees.
Section 3. Share Ledgers. The share ledgers of the Fund, containing the
name and address of the Shareholders of each Series or Class and the number of
shares of that Series or Class, held by them respectively, shall be kept at the
principal offices of the Fund or, if the Fund employs a transfer agent, at the
offices of the transfer agent of the Fund.
Section 4. Lost, Stolen or Destroyed Certificates. The Board of
Trustees may determine the conditions upon which a new certificate may be issued
in place of a certificate which is alleged to have been lost, stolen or
destroyed; and may, in their discretion, require the owner of such certificate
or his legal representative to give bond, with sufficient surety to the Fund and
the transfer agent, if any, to indemnify it and such transfer agent against any
and all loss or claims which may arise by reason of the issue of a new
certificate in the place of the one so lost, stolen or destroyed.
ARTICLE V
SEAL
The Board of Trustees shall provide a suitable seal of the Fund, in
such form and bearing such inscriptions as it may determine.
ARTICLE VI
FISCAL YEAR
The fiscal year of the Fund shall be fixed by the Board of Trustees.
ARTICLE VII
AMENDMENT OF BY-LAWS
The By-Laws of the Fund may be altered, amended, added to or repealed
by the Shareholders or by majority vote of the entire Board of Trustees, but any
such alteration, amendment, addition or repeal of the By-Laws by action of the
Board of Trustees may be altered or repealed by the Shareholders.
2
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of the 24th day of August, 1999, by and between
Oppenheimer Senior Floating Rate Fund (the "Fund"), and
OppenheimerFunds, Inc. ("OFI").
WHEREAS, the Fund is a closed-end management investment company
registered as such with the Securities and Exchange Commission (the
"Commission") pursuant to the Investment Company Act of 1940 (the
"Investment Company Act"), and OFI is an investment adviser registered
as such with the Commission under the Investment Advisers Act of 1940;
WHEREAS, the Fund desires that OFI shall act as its investment
adviser pursuant to this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and
covenants hereinafter set forth, it is agreed by and between the
parties, as follows:
1. General Provision.
The Fund hereby employs OFI and OFI hereby undertakes to act as
the investment adviser of the Fund and to perform for the Fund such
other duties and functions as are hereinafter set forth. OFI shall, in
all matters, give to the Fund and its Board of Trustees the benefit of
its best judgment, effort, advice and recommendations and shall, at
all times conform to, and use its best efforts to enable the Fund to
conform to (i) the provisions of the Investment Company Act and any
rules or regulations thereunder; (ii) any other applicable provisions
of state or federal law; (iii) the provisions of the Declaration of
Trust and By-Laws of the Fund as amended from time to time; (iv)
policies and determinations of the Board of Trustees of the Fund; (v)
the fundamental policies and investment restrictions of the Fund as
reflected in its registration statement under the Investment Company
Act or as such policies may, from time to time, be amended by the
Fund's shareholders; and (vi) the Prospectus and Statement of
Additional Information of the Fund in effect from time to time. The
appropriate officers and employees of OFI shall be available upon
reasonable notice for consultation with any of the Trustees and
officers of the Fund with respect to any matters dealing with the
business and affairs of the Fund, including, without limitation the
valuation of any of the Fund's portfolio securities that are either
not registered for public sale or not being traded on any securities
market.
2. Investment Management.
(a) OFI shall, subject to the direction and control by the Fund's Board
of Trustees, (i) regularly provide investment advice and recommendations to the
Fund with respect to its investments, investment policies and the purchase and
sale of securities; (ii) supervise continuously the investment program of the
Fund and the composition of its portfolio and determine what securities shall be
purchased or sold by the Fund; and (iii) arrange, subject to the provisions of
paragraph 7 hereof, for the purchase of securities and other investments for the
Fund and the sale of securities and other investments held in the portfolio of
the Fund.
(b) Provided that the Fund shall not be required to pay any
compensation other than as provided by the terms of this Agreement and subject
to the provisions of paragraph "7" hereof, OFI may obtain investment
information, research or assistance from any other person, firm or corporation
to supplement, update or otherwise improve its investment management services.
(c) Provided that nothing herein shall be deemed to protect OFI from
willful misfeasance, bad faith or gross negligence in the performance of its
duties, or reckless disregard of its obligations and duties under the Agreement,
OFI shall not be liable for any loss sustained by reason of good faith errors or
omissions in connection with any matters to which this Agreement relates.
(d) Nothing in this Agreement shall prevent OFI or any officer or
affiliate thereof from acting as investment adviser for any other person, firm,
fund, corporation or other entity and shall not in any way limit or restrict OFI
or any of its directors, officers, employees or affiliates from buying, selling
or trading any securities for its own account or for the account of others for
whom it or they may be acting, provided that such activities will not adversely
affect or otherwise impair the performance by OFI of its duties and obligations
under this Agreement and under the Investment Advisers Act of 1940.
3. Other Duties of OFI.
OFI shall, at its own expense, provide and supervise the activities of
all administrative and clerical personnel as shall be required to provide
effective corporate administration for the Fund, including the compilation and
maintenance of such records with respect to its operations as may reasonably be
required; the preparation and filing of such reports with respect thereto as
shall be required by the Commission, including, without limitation, notices
pursuant to Rule 23c-3 under the Investment Company Act; composition of periodic
reports and notices with respect to the Fund's operations for the shareholders
of the Fund, including, without limitation, notification of repurchase offers
pursuant to Rule 23c-3 under the Investment Company Act; composition of proxy
materials for meetings of the Fund's shareholders and the composition of such
registration statements as may be required by federal securities laws and
notices required under applicable state securities laws for continuous public
sale of shares of the Fund. OFI shall, at its own cost and expense, also provide
the Fund with adequate office space, facilities and equipment.
4. Allocation of Expenses.
All other costs and expenses not expressly assumed by OFI under this
Agreement, or to be paid by the General Distributor of the shares of the Fund,
shall be paid by the Fund, including, but not limited to (i) interest and taxes;
(ii) brokerage commissions; (iii) premiums for fidelity and other insurance
coverage requisite to its operations; (iv) the fees and expenses of its
Trustees; (v) legal and audit expenses; (vi) custodian and transfer agent fees
and expenses; (vii) expenses incident to the repurchase of its shares; (viii)
expenses incident to the issuance of its shares against payment therefor by or
on behalf of the subscribers thereto; (ix) fees and expenses, other than as
hereinabove provided, incident to the registration under federal securities laws
and notice filings or registration under state securities laws of shares of the
Fund for public sale; (x) expenses of printing and mailing reports, notices and
proxy materials to shareholders of the Fund; (xi) except as noted above, all
other expenses incidental to holding meetings of the Fund's shareholders; and
(xii) such extraordinary non-recurring expenses as may arise, including
litigation affecting the Fund and any obligation which the Fund may have to
indemnify its officers and Trustees with respect thereto. Any officers or
employees of OFI or any entity controlling, controlled by or under common
control with OFI, who may also serve as officers, Trustees or employees of the
Fund shall not receive any compensation from the Fund for their services.
5. Compensation of OFI.
The Fund agrees to pay OFI and OFI agrees to accept as full
compensation for the performance of all functions and duties on its part to be
performed pursuant to the provisions hereof, a fee computed on the aggregate net
assets of the Fund as of the close of each business day and payable monthly at
the following annual rates:
0.75% of the first $200 million of average net
assets; 0.72% of the next $200 million; 0.69% of the
next $200 million; 0.66% of the next $200 million;
and 0.60% of average net assets over $800 million.
6. Use of Name "Oppenheimer."
OFI hereby grants to the Fund a royalty-free, non-exclusive license to
use the name "Oppenheimer" in the name of the Fund for the duration of this
Agreement and any extensions or renewals thereof. Such license may, upon
termination of this Agreement, be terminated by OFI, in which event the Fund
shall promptly take whatever action may be necessary to change its name and
discontinue any further use of the name "Oppenheimer" in the name of the Fund or
otherwise. The name "Oppenheimer" may be used or licensed by OFI in connection
with any of its activities or licensed by OFI to any other party.
7. Portfolio Transactions and Brokerage.
(a) OFI is authorized, in arranging the Fund's portfolio transactions,
to employ or deal with such members of securities or commodities exchanges,
brokers or dealers, including "affiliated" broker dealers (as that term is
defined in the Investment Company Act) (hereinafter all of the foregoing are
referred to as "broker-dealers"), as may, in its best judgment, implement the
policy of the Fund to obtain, at reasonable expense, the "best execution"
(prompt and reliable execution at the most favorable security price obtainable)
of the Fund's portfolio transactions as well as to obtain, consistent with the
provisions of subparagraph (c) of this paragraph 7, the benefit of such
investment information or research as may be of significant assistance to the
performance by OFI of its investment management functions.
(b) OFI shall select broker-dealers to effect the Fund's portfolio
transactions on the basis of its estimate of their ability to obtain best
execution of particular and related portfolio transactions. The abilities of a
broker-dealer to obtain best execution of particular portfolio transaction(s)
will be judged by OFI on the basis of all relevant factors and considerations
including, insofar as feasible, the execution capabilities required by the
transaction or transactions; the ability and willingness of the broker-dealer to
facilitate the Fund's portfolio transactions by participating therein for its
own account; the importance to the Fund of speed, efficiency or confidentiality;
the broker-dealer's apparent familiarity with sources from or to whom particular
securities might be purchased or sold; as well as any other matters relevant to
the selection of a broker-dealer for particular and related transactions of the
Fund.
(c) OFI shall have discretion, in the interests of the Fund, to allocate
brokerage on the Fund's portfolio transactions to broker-dealers other than
affiliated broker-dealers, qualified to obtain best execution of such
transactions who provide brokerage and/or research services (as such services
are defined in Section 23(e)(3) of the Securities Exchange Act of 1934) for the
Fund and/or other accounts for which OFI and its affiliates exercise "investment
discretion" (as that term is defined in Section 3(a)(35) of the Securities
Exchange Act of 1934) and to cause the Fund to pay such broker-dealers a
commission for effecting a portfolio transaction for the Fund that is in excess
of the amount of commission another broker-dealer adequately qualified to effect
such transaction would have charged for effecting that transaction, if OFI
determines, in good faith, that such commission is reasonable in relation to the
value of the brokerage and/or research services provided by such broker-dealer,
viewed in terms of either that particular transaction or the overall
responsibilities of OFI and its investment advisory affiliates with respect to
the accounts as to which they exercise investment discretion. In reaching such
determination, OFI will not be required to place or attempt to place a specific
dollar value on the brokerage and/or research services provided or being
provided by such broker-dealer. In demonstrating that such determinations were
made in good faith, OFI shall be prepared to show that all commissions were
allocated for the purposes contemplated by this Agreement and that the total
commissions paid by the Fund over a representative period selected by the Fund's
trustees were reasonable in relation to the benefits to the Fund.
(d) OFI shall have no duty or obligation to seek advance competitive
bidding for the most favorable commission rate applicable to any particular
portfolio transactions or to select any broker-dealer on the basis of its
purported or "posted" commission rate but will, to the best of its ability,
endeavor to be aware of the current level of the charges of eligible
broker-dealers and to minimize the expense incurred by the Fund for effecting
its portfolio transactions to the extent consistent with the interests and
policies of the Fund as established by the determinations of its Board of
Trustees and the provisions of this paragraph 7.
(e) The Fund recognizes that an affiliated broker-dealer (i) may act
as one of the Fund's regular brokers so long as it is lawful for it so to act;
(ii) may be a major recipient of brokerage commissions paid by the Fund; and
(iii) may effect portfolio transactions for the Fund only if the commissions,
fees or other remuneration received or to be received by it are determined in
accordance with procedures contemplated by any rule, regulation or order adopted
under the Investment Company Act for determining the permissible level of such
commissions.
(f) Subject to the foregoing provisions of this paragraph 7, OFI may
also consider sales of Fund shares and shares of other investment companies
managed by OFI or its affiliates as a factor in the selection of broker-dealers
for the Fund's portfolio transactions.
8. Duration.
This Agreement will take effect on the date first set forth above.
Unless earlier terminated pursuant to paragraph 9 hereof, this Agreement shall
remain in effect until two years from the date of execution hereof, and
thereafter will continue in effect from year to year, so long as such
continuance shall be approved at least annually by the Fund's Board of Trustees,
including the vote of the majority of the trustees of the Fund who are not
parties to this Agreement or "interested persons" (as defined in the Investment
Company Act) of any such party, cast in person at a meeting called for the
purpose of voting on such approval, or by the holders of a "majority" (as
defined in the Investment Company Act) of the outstanding voting securities of
the Fund and by such a vote of the Fund's Board of Trustees.
9. Termination.
This Agreement may be terminated (i) by OFI at any time without penalty
upon giving the Fund sixty days' written notice (which notice may be waived by
the Fund); or (ii) by the Fund at any time without penalty upon sixty days'
written notice to OFI (which notice may be waived by OFI) provided that such
termination by the Fund shall be directed or approved by the vote of a majority
of all of the Trustees of the Fund then in office or by the vote of the holders
of a "majority" (as defined in the Investment Company Act) of the outstanding
voting securities of the Fund.
10. Assignment or Amendment.
This Agreement may not be amended without the affirmative vote or
written consent of the holders of a "majority" (as defined in the Investment
Company Act) of the outstanding voting securities of the Fund, and shall
automatically and immediately terminate in the event of its "assignment," as
defined in the Investment Company Act.
11. Disclaimer of Shareholder Liability.
OFI understands that the obligations of the Fund under this Agreement
are not binding upon any Trustee or shareholder of the Fund personally, but bind
only the Fund and the Fund's property. OFI represents that it has notice of the
provisions of the Declaration of Trust of the Fund disclaiming Trustee and
shareholder liability for acts or obligations of the Fund.
12. Definitions.
The terms and provisions of this Agreement shall be interpreted and
defined in a manner consistent with the provisions and definitions of the
Investment Company Act.
Oppenheimer Senior Floating Rate Fund
By: /s/ Andrew J. Donohue
Andrew J. Donohue
Vice President & Secretary
OppenheimerFunds, Inc.
By: /s/ Robert G. Zack
Robert G. Zack
Senior Vice President
GENERAL DISTRIBUTOR'S AGREEMENT
BETWEEN
Oppenheimer Senior Floating Rate Fund
And
Oppenheimerfunds Distributor, Inc.
Date: August 24, 1999
OppenheimerFunds Distributor, Inc.
Two World Trade Center, Suite 3400
New York, NY 10048
Dear Sirs:
Oppenheimer Senior Floating Rate Fund, a Massachusetts business trust (the
"Fund"), is registered as an investment company under the Investment Company Act
of 1940 (the "1940 Act"), and one or more classes of its shares of beneficial
interest ("Shares") have been registered under the Securities Act of 1933 (the
"1933 Act") to be offered for sale to the public in a continuous public offering
in accordance with the terms and conditions set forth in the Prospectus and
Statement of Additional Information ("SAI") included in the Fund's Registration
Statement as it may be amended from time to time (the "current Prospectus and/or
SAI").
In this connection, the Fund desires that your firm (the "General Distributor")
act in a principal capacity as General Distributor for the sale and distribution
of Shares which have been registered as described above and of any additional
Shares which may become registered during the term of this Agreement. You have
advised the Fund that you are willing to act as such General Distributor, and it
is accordingly agreed by and between us as follows:
1. Appointment of the Distributor. The Fund hereby appoints you as the sole
General Distributor, pursuant to the aforesaid continuous public offering of its
Shares, and the Fund further agrees from and after the date of this Agreement,
that it will not, without your consent, sell or agree to sell any Shares
otherwise than through you, except (a) the Fund may itself sell shares without
sales charge as an investment to the officers, trustees or directors and bona
fide present and former full-time employees of the Fund, the Fund's Investment
Adviser and affiliates thereof, and to other investors who are identified in the
current Prospectus and/or SAI as having the privilege to buy Shares at net asset
value; (b) the Fund may issue shares in connection with a merger, consolidation
or acquisition of assets on such basis as may be authorized or permitted under
the 1940 Act; (c) the Fund may issue shares for the reinvestment of dividends
and other distributions of the Fund or of any other Fund if permitted by the
current Prospectus and/or SAI; and (d) the Fund may issue shares as underlying
securities of a unit investment trust if such unit investment trust has elected
to use Shares as an underlying investment; provided that in no event as to any
of the foregoing exceptions shall Shares be issued and sold at less than the
then-existing net asset value.
<PAGE>
2. Sale of Shares. You hereby accept such appointment and agree to use your best
efforts to sell Shares, provided, however, that when requested by the Fund at
any time because of market or other economic considerations or abnormal
circumstances of any kind, or when agreed to by mutual consent of the Fund and
the General Distributor, you will suspend such efforts. The Fund may also
withdraw the offering of Shares at any time when required by the provisions of
any statute, order, rule or regulation of any governmental body having
jurisdiction. It is understood that you do not undertake to sell all or any
specific number of Shares.
3. Sales Charge. Shares shall be sold by you at net asset value plus a front-end
sales charge not in excess of 8.5% of the offering price, but which front-end
sales charge shall be proportionately reduced or eliminated for larger sales and
under other circumstances, in each case on the basis set forth in the current
Prospectus and/or SAI. The repurchase proceeds of shares offered and sold at net
asset value with or without a front-end sales charge may be subject to an early
withdrawal charge ("EWC") under the circumstances described in the current
Prospectus and\or SAI. You may reallow such portion of the front-end sales
charge to dealers or cause payment (which may exceed the front-end sales charge,
if any) of commissions to brokers through which sales are made, as you may
determine, and you may pay such amounts to dealers and brokers on sales of
shares from your own resources (such dealers and brokers shall collectively
include all domestic or foreign institutions eligible to offer and sell the
Shares), and in the event the Fund has more than one class of Shares
outstanding, then you may impose a front-end sales charge and/or an EWC on
Shares of one class that is different from the charges imposed on Shares of the
Fund's other class(es), in each case as set forth in the current Prospectus
and/or SAI, provided the front-end sales charge and EWC to the ultimate
purchaser do not exceed the respective levels set forth for such category of
purchaser in the current Prospectus and/or SAI.
4. Purchase of Shares.
(a) As General Distributor, you shall have the right to
accept or reject orders for the purchase of Shares at your
discretion. Any consideration which you may receive in
connection with a rejected purchase order will be returned
promptly.
(b) You agree promptly to issue or to cause the duly
appointed transfer or shareholder servicing agent of the
Fund to issue as your agent confirmations of all accepted
purchase orders and to transmit a copy of such confirmations
to the Fund. The net asset value of all Shares which are the
subject of such confirmations, computed in accordance with
the applicable rules under the 1940 Act, shall be a
liability of the General Distributor to the Fund to be paid
promptly after receipt of payment from the originating
dealer or broker (or investor, in the case of direct
purchases) and not later than eleven business days after
such confirmation even if you have not actually received
payment from the originating dealer or broker, or investor.
In no event shall the General Distributor make payment to
the Fund later than permitted by applicable rules of the
National Association of Securities Dealers, Inc.
<PAGE>
(c) If the originating dealer or broker shall fail to make
timely settlement of its purchase order in accordance with
applicable rules of the National Association of Securities
Dealers, Inc., or if a direct purchaser shall fail to make
good payment for shares in a timely manner, you shall have
the right to cancel such purchase order and, at your account
and risk, to hold responsible the originating dealer or
broker, or investor. You agree promptly to reimburse the
Fund for losses suffered by it that are attributable to any
such cancellation, or to errors on your part in relation to
the effective date of accepted purchase orders, limited to
the amount that such losses exceed contemporaneous gains
realized by the Fund for either of such reasons with respect
to other purchase orders.
(d) In the case of a canceled purchase for the account of a
directly purchasing shareholder, the Fund agrees that if
such investor fails to make you whole for any loss you pay
to the Fund on such canceled purchase order, the Fund will
reimburse you for such loss to the extent of the aggregate
redemption proceeds of any other shares of the Fund owned by
such investor, on your demand that the Fund exercise its
right to claim such redemption proceeds. The Fund shall
register or cause to be registered all Shares sold to you
pursuant to the provisions hereof in such names and amounts
as you may request from time to time and the Fund shall
issue or cause to be issued certificates evidencing such
Shares for delivery to you or pursuant to your direction if
and to the extent that the shareholder account in question
contemplates the issuance of such certificates. All Shares,
when so issued and paid for, shall be fully paid and
non-assessable by the Fund (which shall not prevent the
imposition of any EWC that may apply) to the extent set
forth in the current Prospectus and/or SAI.
5. 1933 Act Registration. The Fund has delivered to you a copy of its current
Prospectus and SAI. The Fund agrees that it will use its best efforts to
continue the effectiveness of the Registration Statement under the 1933 Act. The
Fund further agrees to prepare and file any amendments to its Registration
Statement as may be necessary and any supplemental data in order to comply with
the 1933 Act. The Fund will furnish you at your expense with a reasonable number
of copies of the Prospectus and SAI and any amendments thereto for use in
connection with the sale of Shares.
<PAGE>
6. 1940 Act Registration. The Fund has already registered under the 1940 Act as
an investment company, and it will use its best efforts to maintain such
registration and to comply with the requirements of the 1940 Act.
7. State Blue Sky Qualification. At your request, the Fund will take such steps
as may be necessary and feasible to qualify Shares for sale in states,
territories or dependencies of the United States, the District of Columbia, the
Commonwealth of Puerto Rico and in foreign countries, in accordance with the
laws thereof, and to renew or extend any such qualification; provided, however,
that the Fund shall not be required to qualify shares or to maintain the
qualification of shares in any jurisdiction where it shall deem such
qualification disadvantageous to the Fund.
8. Duties of Distributor You agree that:
(a) Neither you nor any of your officers will take any long or
short position in the Shares, but this provision shall not
prevent you or your officers from acquiring Shares for
investment purposes only;
(b) You shall furnish to the Fund any pertinent information
required to be inserted with respect to you as General
Distributor within the purview of the Securities Act of 1933
in any reports or registration required to be filed with any
governmental authority; and
(c) You will not make any representations inconsistent with the
information contained in the current Prospectus and/or SAI.
(d) You shall maintain such records as may be reasonably required
for the Fund or its transfer or shareholder servicing agent to
respond to shareholder requests or complaints, and to permit
the Fund to maintain proper accounting records, and you shall
make such records available to the Fund and its transfer agent
or shareholder servicing agent upon request.
(e) In performing under this Agreement, you shall comply with all
requirements of the Fund's current Prospectus and/or SAI and
all applicable laws, rules and regulations with respect to the
purchase, sale and distribution of Shares.
9. Allocation of Costs. The Fund shall pay the cost of composition and printing
of sufficient copies of its Prospectus and SAI as shall be required for periodic
distribution to its shareholders and the expense of registering Shares for sale
under federal securities laws. You shall pay the expenses normally attributable
to the sale of Shares, other than as paid under the Fund's Distribution Plans,
including the cost of printing and mailing of the Prospectus (other than those
furnished to existing shareholders) and any sales literature used by you in the
public sale of the Shares and for registering such shares under state blue sky
laws pursuant to paragraph 7.
<PAGE>
10. Duration. This Agreement shall take effect on the date first written above.
Unless earlier terminated pursuant to paragraph 11 hereof, this Agreement shall
remain in effect until two years from the date of execution hereof, and shall
continue in effect from year to year thereafter, provided that such continuance
shall be specifically approved at least annually: (a) by the Fund's Board of
Trustees or by vote of a majority of the voting securities of the Fund; and (b)
by the vote of a majority of the Trustees, who are not parties to this Agreement
or "interested persons" (as defined in the 1940 Act) of any such person, cast in
person at a meeting called for the purpose of voting on such approval.
11. Termination This Agreement may be terminated (a) by the General Distributor
at any time without penalty by giving sixty days' written notice (which notice
may be waived by the Fund); (b) by the Fund at any time without penalty upon
sixty days' written notice to the General Distributor (which notice may be
waived by the General Distributor); or (c) by mutual consent of the Fund and the
General Distributor, provided that such termination by the Fund shall be
directed or approved by the Board of Trustees of the Fund or by the vote of the
holders of a majority of the outstanding voting securities of the Fund. In the
event this Agreement is terminated by the Fund, the General Distributor shall be
entitled to be paid the CDSC under paragraph 3 hereof on the redemption proceeds
of Shares sold prior to the effective date of such termination.
12. Assignment. This Agreement may not be amended or changed except in writing
and shall be binding upon and shall ensure to the benefit of the parties hereto
and their respective successors; however, this Agreement shall not be assigned
by either party and shall automatically terminate upon assignment.
13. Disclaimer of Shareholder Liability. The General Distributor understands and
agrees that the obligations of the Fund under this Agreement are not binding
upon any Trustee or shareholder of the Fund personally, but bind only the Fund
and the Fund's property; the General Distributor represents that it has notice
of the provisions of the Amended and Restated Declaration of Trust of the Fund
disclaiming Trustee and shareholder liability for acts or obligations of the
Fund.
14. Section Headings The headings of each section is for descriptive purposes
only, and such headings are not to be construed or interpreted as part of this
Agreement.
If the foregoing is in accordance with your understanding, so indicate by
signing in the space provided below.
Oppenheimer Senior Floating Rate Fund
/s/ Andrew J. Donohue
By:_________________________________
Andrew J. Donohue, Secretary
Accepted:
OppenheimerFunds Distributor, Inc.
/s/ Katherine P. Feld
By: _______________________________________
Katherine P. Feld, Vice President & Secretary
OPPENHEIMER SENIOR FLOATING RATE FUND
CUSTODY AGREEMENT
Agreement made as of this 24th day of August, 1999, between OPPENHEIMER SENIOR
FLOATING RATE FUND, a business trust organized and existing under the laws of
the Commonwealth of Massachusetts, having its principal office and place of
business at Two World Trade Center, New York, New York 10048 (hereinafter called
the "Fund"), and THE BANK OF NEW YORK, a New York corporation authorized to do a
banking business, having its principal office and place of business at 48 Wall
Street, New York, New York 10286 (hereinafter called the "Custodian").
WITNESSETH, that for and in consideration of the mutual promises hereinafter set
forth, the Fund and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, shall have the
following meanings:
1."Agreement" shall mean this Custody Agreement and all Appendices and
Certifications described in the Exhibits delivered in connection herewith.
2. "Authorized Person" shall mean any person, whether or not such person is an
Officer or employee of the Fund, duly authorized by the Board of Trustees of the
Fund to give Oral Instructions and Written Instructions on behalf of the Fund
and listed in the Certificate annexed hereto as Appendix A or such other
Certificate as may be received by the Custodian from time to time, provided that
each person who is designated in any such Certificate as an "Officer of OSS"
shall be an Authorized Person only for purposes of Articles XII and XIII hereof.
3. "Book-Entry System" shall mean the Federal Reserve/Treasury book-entry system
for United States and federal agency securities, its successor or successors and
its nominee or nominees.
4. "Call Option" shall mean an exchange traded Option with respect to Securities
other than Index, Futures Contracts, and Futures Contract Options entitling the
holder, upon timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified underlying
instruments, currency, or Securities.
5. "Certificate" shall mean any notice, instruction, or other instrument in
writing, authorized or required by this Agreement to be given to the Custodian
which is actually received (irrespective of constructive receipt) by the
Custodian and signed on behalf of the Fund by any two Officers. The term
Certificate shall also include instructions by the Fund to the Custodian
communicated by a Terminal Link.
6. "Clearing Member" shall mean a registered broker-dealer which is a clearing
member under the rules of O.C.C. and a member of a national securities exchange
qualified to act as a custodian for an investment company, or any broker-dealer
reasonably believed by the Custodian to be such a clearing member.
7. "Collateral Account" shall mean a segregated account so denominated which is
specifically allocated to a Series and pledged to the Custodian as security for,
and in consideration of, the Custodian's issuance of any Put Option guarantee
letter or similar document described in paragraph 8 of Article V herein.
8. "Covered Call Option" shall mean an exchange traded Option entitling the
holder, upon timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified underlying
instruments, currency, or Securities (excluding Futures Contracts) which are
owned by the writer thereof.
9. "Depository" shall mean The Depository Trust Company ("DTC"), a clearing
agency registered with the Securities and Exchange Commission, its successor or
successors and its nominee or nominees. The term "Depository" shall further mean
and include any other person authorized to act as a depository under the
Investment Company Act of 1940, its successor or successors and its nominee or
nominees, specifically identified in a certified copy of a resolution of the
Fund's Board of Trustees specifically approving deposits therein by the
Custodian, including, without limitation, a Foreign Depository.
10. "Financial Futures Contract" shall mean the firm commitment to buy or sell
financial instruments on a U.S. commodities exchange or board of trade at a
specified future time at an agreed upon price.
11. "Foreign Subcustodian" shall mean an "Eligible Foreign Custodian" as defined
in Rule 17-5 which is appointed by the Custodian to perform or coordinate the
receipt, custody and delivery of Foreign Property of the Fund outside the United
States in a manner consistent with the provisions of this Agreement and whose
written contract is approved by the Board of Trustees of the Fund in accordance
with Rule 17f-5. References to the Custodian herein shall, when appropriate,
include reference to its Foreign Subcustodians.
12. "Foreign Depository" shall mean an entity organized under the laws of a
foreign country which operates a system outside the United States in general use
by foreign banks and securities brokers for the central or transnational
handling of securities or equivalent book-entries which is regulated by a
foreign government or agency thereof and which is an "Eligible Foreign
Custodian" as defined in Rule 17f-5.
13. "Foreign Securities" shall mean securities and/or short term paper as
defined in Rule 17f-5 under the Act, whether issued in registered or bearer
form.
14. "Foreign Property" shall mean Foreign Securities and money of any currency
which is held outside of the United States.
15."Futures Contract" shall mean a Financial Futures Contract and/or Index
Futures Contracts.
16. "Futures Contract Option" shall mean an Option with respect to a Futures
Contract.
17. "Investment Company Act of 1940" shall mean the Investment Company Act of
1940, as amended, and the rules and regulations thereunder.
18. "Index Futures Contract" shall mean a bilateral agreement pursuant to which
the parties agree to take or make delivery of an amount of cash equal to a
specified dollar amount times the difference between the value of a particular
index at the close of the last business day of the contract and the price at
which the futures contract is originally struck.
19. "Index Option" shall mean an exchange traded Option entitling the holder,
upon timely exercise, to receive an amount of cash determined by reference to
the difference between the exercise price and the value of the index on the date
of exercise.
20. "Margin Account" shall mean a segregated account in the name of a broker,
dealer, futures commission merchant, or a Clearing Member, or in the name of the
Fund for the benefit of a broker, dealer, futures commission merchant, or
Clearing Member, or otherwise, in accordance with an agreement between the Fund,
the Custodian and a broker, dealer, futures commission merchant or a Clearing
Member (a "Margin Account Agreement"), separate and distinct from the custody
account, in which certain Securities and/or money of the Fund shall be deposited
and withdrawn from time to time in connection with such transactions as the Fund
may from time to time determine. Securities held in the Book-Entry System or a
Depository shall be deemed to have been deposited in, or withdrawn from, a
Margin Account upon the Custodian's effecting an appropriate entry in its books
and records.
21. "Money Market Security" shall mean all instruments and obligations commonly
known as a money market instruments, where the purchase and sale of such
securities normally requires settlement in federal funds on the same day as such
purchase or sale, including, without limitation, certain Reverse Repurchase
Agreements, debt obligations issued or guaranteed as to interest and/or
principal by the government of the United States or agencies or
instrumentalities thereof, any tax, bond or revenue anticipation note issued by
any state or municipal government or public authority, commercial paper,
certificates of deposit and bankers' acceptances, repurchase agreements with
respect to Securities and bank time deposits.
22. "Nominee" shall mean, in addition to the name of the registered nominee of
the Custodian, (i) a partnership or other entity of a Foreign Subcustodian which
is used solely for the assets of its customers other than the Custodian and the
Foreign Subcustodian, if any, by which it was appointed; or (ii) the nominee of
a Foreign Depository which is used for the securities and other assets of its
customers, members or participants.
23. "O.C.C." shall mean the Options Clearing Corporation, a clearing agency
registered under Section 17A of the Securities Exchange Act of 1934, its
successor or successors, and its nominee or nominees.
24. "Officers" shall mean the President, any Vice President, the Secretary, the
Treasurer, the Controller, any Assistant Secretary, any Assistant Treasurer, and
any other person or persons, whether or not any such other person is an officer
or employee of the Fund, but in each case only if duly authorized by the Board
of Trustees of the Fund to execute any Certificate, instruction, notice or other
instrument on behalf of the Fund and listed in the Certificate annexed hereto as
Appendix B or such other Certificate as may be received by the Custodian from
time to time; provided that each person who is designated in any such
Certificate as holding the position of "Officer of OSS" shall be an Officer only
for purposes of Articles XII and XIII hereof.
25. "Option" shall mean a Call Option, Covered Call Option, Index Option and/or
a Put Option.
26. "Oral Instructions" shall mean verbal instructions actually received
(irrespective of constructive receipt) by the Custodian from an Authorized
Person or from a person reasonably believed by the Custodian to be an Authorized
Person.
27. "Put Option" shall mean an exchange traded Option with respect to
instruments, currency, or Securities other than Index Options, Futures
Contracts, and Futures Contract Options entitling the holder, upon timely
exercise and tender of the specified underlying instruments, currency, or
Securities, to sell such instruments, currency, or Securities to the writer
thereof for the exercise price.
28. "Repurchase Agreement" shall mean an agreement pursuant to which the Fund
buys Securities and agrees to resell such Securities at a described or specified
date and price.
29. "Reverse Repurchase Agreement" shall mean an agreement pursuant to which the
Fund sells Securities and agrees to repurchase such Securities at a described or
specified date and price.
30. "Rule 17f-5" shall mean Rule 17f-5 (Reg. Section 270.17f-5) promulgated by
the Securities and Exchange Commission under the Investment Company Act of 1940,
as amended.
31. "Security" shall be deemed to include, without limitation, Money Market
Securities, Call Options, Put Options, Index Options, Index Futures Contracts,
Index Futures Contract Options, Financial Futures Contracts, Financial Futures
Contract Options, Reverse Repurchase Agreements, over the counter Options on
Securities, common stocks and other securities having characteristics similar to
common stocks, preferred stocks, debt obligations issued by state or municipal
governments and by public authorities, (including, without limitation, general
obligation bonds, revenue bonds, industrial bonds and industrial development
bonds), bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights to
receive, purchase, sell or subscribe for the same, or evidencing or representing
any other rights or interest therein, or rights to any property or assets.
32. "Senior Security Account" shall mean an account maintained and specifically
allocated to a Series under the terms of this Agreement as a segregated account,
by recordation or otherwise, within the custody account in which certain
Securities and/or other assets of the Fund specifically allocated to such Series
shall be deposited and withdrawn from time to time in accordance with
Certificates received by the Custodian in connection with such transactions as
the Fund may from time to time determine.
33. "Series" shall mean the various portfolios, if any, of the Fund as described
from time to time in the current and effective prospectus for the Fund, except
that if the Fund does not have more than one portfolio, "Series" shall mean the
Fund or be ignored where a requirement would be imposed on the Fund or the
Custodian which is unnecessary if there is only one portfolio.
34. "Shares" shall mean the shares of beneficial interest of the Fund and its
Series.
35. "Terminal Link" shall mean an electronic data transmission link between the
Fund and the Custodian requiring in connection with each use of the Terminal
Link the use of an authorization code provided by the Custodian and at least two
access codes established by the Fund, provided, that the Fund shall have
delivered to the Custodian a Certificate substantially in the form of Appendix
C.
36. "Transfer Agent" shall mean OppenheimerFunds Services, a division of
OppenheimerFunds, Inc., its successors and assigns.
37. "Transfer Agent Account" shall mean any account in the name of the Fund, or
the Transfer Agent, as agent for the Fund, maintained with United Missouri Bank
or such other Bank designated by the Fund in a Certificate.
38, "Written Instructions" shall mean written communications actually received
(irrespective of constructive receipt) by the Custodian from an Authorized
Person or from a person reasonably believed by the Custodian to be an Authorized
Person by telex or any other such system whereby the receiver of such
communications is able to verify by codes or otherwise with a reasonable degree
of certainty the identity of the sender of such communication.
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as custodian of the
Securities and moneys at any time owned or held by the Fund during the period of
this Agreement.
2. The Custodian hereby accepts appointment as such custodian and agrees to
perform the duties thereof as hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except for monies received and maintained in the Transfer Agent Account, or
as otherwise provided in paragraph 7 of this Article or in Article VIII or XV,
the Fund will deliver or cause to be delivered to the Custodian all Securities
and all moneys owned by it, at any time during the period of this Agreement, and
shall specify with respect to such Securities and money the Series to which the
same are specifically allocated, and the Custodian shall not be responsible for
any Securities or money not so delivered. Except for assets held at DTC, the
Custodian shall physically segregate, keep and maintain the Securities of the
Series separate and apart from each other Series and from other assets held by
the Custodian. Except as otherwise expressly provided in this Agreement, the
Custodian will not be responsible for any Securities and moneys not actually
received by it, unless the Custodian has been negligent or has engaged in
willful misconduct with respect thereto. The Custodian will be entitled to
reverse any credit of money made on the Fund's behalf where such credits have
been previously made and moneys are not finally collected, unless the Custodian
has been negligent or has engaged in willful misconduct with respect thereto;
provided that if such reversal is thirty (30) days or more after the credit was
issued, the Custodian will give five (5) days' prior notice of such reversal.
The Fund shall deliver to the Custodian a certified resolution of the Board of
Trustees of the Fund, substantially in the form of Exhibit A hereto, approving,
authorizing and instructing the Custodian on a continuous and on-going basis to
deposit in the Book-Entry System all Securities eligible for deposit therein,
regardless of the Series to which the same are specifically allocated and to
utilize the Book-Entry System to the extent possible in connection with its
performance hereunder, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of Securities and
deliveries and returns of Securities collateral. Prior to a deposit of
Securities specifically allocated to a Series in any Depository, the Fund shall
deliver to the Custodian a certified resolution of the Board of Trustees of the
Fund, substantially in the form of Exhibit B hereto, approving, authorizing and
instructing the Custodian on a continuous and ongoing basis until instructed to
the contrary by a Certificate to deposit in such Depository all Securities
specifically allocated to such Series eligible for deposit therein, and to
utilize such Depository to the extent possible with respect to such Securities
in connection with its performance hereunder, including, without limitation, in
connection with settlements of purchases and sales of Securities, loans of
Securities, and deliveries and returns of Securities collateral. Securities and
moneys deposited in either the Book-Entry System or a Depository will be
represented in accounts which include only assets held by the Custodian for
customers, including, but not limited to, accounts in which the Custodian acts
in a fiduciary or representative capacity and will be specifically allocated on
the Custodian's books to the separate account for the applicable Series. Prior
to the Custodian's accepting, utilizing and acting with respect to Clearing
Member confirmations for Options and transactions in Options for a Series as
provided in this Agreement, the Custodian shall have received a certified
resolution of the Fund's Board of Trustees, substantially in the form of Exhibit
C hereto, approving, authorizing and instructing the Custodian on a continuous
and on-going basis, until instructed to the contrary by a Certificate to accept,
utilize and act in accordance with such confirmations as provided in this
Agreement with respect to such Series. All Securities are to be held or disposed
of by the Custodian for, and subject at all times to the instructions of, the
Fund pursuant to the terms of this Agreement. The Custodian shall have no power
or authority to assign, hypothecate, pledge or otherwise dispose of any
Securities except as provided by the terms of this Agreement, and shall have the
sole power to release and deliver Securities held pursuant to this Agreement.
2. The Custodian shall establish and maintain separate accounts, in the name of
each Series, and shall credit to the separate account for each Series all moneys
received by it for the account of the Fund with respect to such Series. Money
credited to a separate account for a Series shall be subject only to drafts,
orders, or charges of the Custodian pursuant to this Agreement and shall be
disbursed by the Custodian only:
(a) As hereinafter provided;
(b) Pursuant to Certificates or Resolutions of the Fund's Board of
Trustees certified by an Officer and by the Secretary or Assistant Secretary of
the Fund setting forth the name and address of the person to whom the payment is
to be made, the Series account from which payment is to be made, the purpose for
which payment is to be made, and declaring such purpose to be a proper corporate
purpose; provided, however, that amounts representing dividends, distributions,
or redemptions proceeds with respect to Shares shall be paid only to the
Transfer Agent Account;
(c) In payment of the fees and in reimbursement of the expenses and
liabilities of the Custodian attributable to such Series and authorized by this
Agreement; or
(d) Pursuant to Certificates to pay interest, taxes, management fees or
operating expenses (including, without limitation thereto, Board of Trustees'
fees and expenses, and fees for legal accounting and auditing services), which
Certificates set forth the name and address of the person to whom payment is to
be made, state the purpose of such payment and designate the Series for whose
account the payment is to be made.
3. Promptly after the close of business on each day, the Custodian shall furnish
the Fund with confirmations and a summary, on a per Series basis, of all
transfers to or from the account of the Fund for a Series, either hereunder or
with any co-custodian or subcustodian appointed in accordance with this
Agreement during said day. Where Securities are transferred to the account of
the Fund for a Series but held in a Depository, the Custodian shall upon such
transfer also by book-entry or otherwise identify such Securities as belonging
to such Series in a fungible bulk of Securities registered in the name of the
Custodian (or its nominee) or shown on the Custodian's account on the books of
the Book-Entry System or the Depository. At least monthly and from time to time,
the Custodian shall furnish the Fund with a detailed statement, on a per Series
basis, of the Securities and moneys held under this Agreement for the Fund.
4. Except as otherwise provided in paragraph 7 of this Article and in Article
VIII, all Securities held by the Custodian hereunder, which are issued or
issuable only in bearer form, except such Securities as are held in the
Book-Entry System, shall be held by the Custodian in that form; all other
Securities held hereunder may be registered in the name of the Fund, in the name
of any duly appointed registered nominee of the Custodian as the Custodian may
from time to time determine, or in the name of the Book-Entry System or a
Depository or their successor or successors, or their nominee or nominees. The
Fund agrees to furnish to the Custodian appropriate instruments to enable the
Custodian to hold or deliver in proper form for transfer, or to register in the
name of its registered nominee or in the name of the Book-Entry System or a
Depository any Securities which it may hold hereunder and which may from time to
time be registered in the name of the Fund. The Custodian shall hold all such
Securities specifically allocated to a Series which are not held in the
Book-Entry System or in a Depository in a separate account in the name of such
Series physically segregated at all times from those of any other person or
persons.
5. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or through
the use of the Book-Entry System or a Depository with respect to Securities held
hereunder and therein deposited, shall with respect to all Securities held for
the Fund hereunder in accordance with preceding paragraph 4:
(a) Promptly collect all income, dividends and distributions due or payable;
(b) Promptly give notice to the Fund and promptly present for payment
and collect the amount of money or other consideration payable upon such
Securities which are called, but only if either (i) the Custodian receives a
written notice of such call, or (ii) notice of such call appears in one or more
of the publications listed in Appendix D annexed hereto, which can be amended at
any time by the Custodian without the prior consent of the Fund, provided the
Custodian gives prior notice of such amendment to the Fund;
(c) Promptly present for payment and collect for the Fund's account the
amount payable upon all Securities which mature;
(d) Promptly surrender Securities in temporary form in exchange for
definitive Securities;
(e) Promptly execute, as custodian, any necessary declarations or
certificates of ownership under the Federal Income Tax Laws or the laws or
regulations of any other taxing authority now or hereafter in effect;
(f) Hold directly, or through the Book-Entry System or the Depository
with respect to Securities therein deposited, for the account of a Series, all
rights and similar securities issued with respect to any Securities held by the
Custodian for such Series hereunder; and
(g) Promptly deliver to the Fund all notices, proxies, proxy soliciting
materials, consents and other written information (including, without
limitation, notices of tender offers and exchange offers, pendency of calls,
maturities of Securities and expiration of rights) relating to Securities held
pursuant to this Agreement which are actually received by the Custodian, such
proxies and other similar materials to be executed by the registered holder (if
Securities are registered otherwise than in the name of the Fund), but without
indicating the manner in which proxies or consents are to be voted.
6. Upon receipt of a Certificate and not otherwise, the Custodian, directly or
through the use of the Book-Entry System or the Depository, shall:
(a) Promptly execute and deliver to such persons as may be designated
in such Certificate proxies, consents, authorizations, and any other instruments
whereby the authority of the Fund as owner of any Securities held hereunder for
the Series specified in such Certificate may be exercised;
(b) Promptly deliver any Securities held hereunder for the Series
specified in such Certificate in exchange for other Securities or cash issued or
paid in connection with the liquidation, reorganization, refinancing, merger,
consolidation or recapitalization of any corporation, or the exercise of any
right, warrant or conversion privilege and receive and hold hereunder
specifically allocated to such Series any cash or other Securities received in
exchange;
(c) Promptly deliver any Securities held hereunder for the Series
specified in such Certificate to any protective committee, reorganization
committee or other person in connection with the reorganization, refinancing,
merger, consolidation, recapitalization or sale of assets of any corporation,
and receive and hold hereunder specifically allocated to such Series in exchange
therefor such certificates of deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such delivery or such Securities as
may be issued upon such delivery; and
(d) Promptly present for payment and collect the amount payable upon
Securities which may be called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the Custodian shall
not be required to obtain possession of any instrument or certificate
representing any Futures Contract, any Option, or any Futures Contract Option
until after it shall have determined, or shall have received a Certificate from
the Fund stating, that any such instruments or certificates are available. The
Fund shall deliver to the Custodian such a Certificate no later than the
business day preceding the availability of any such instrument or certificate.
Prior to such availability, the Custodian shall comply with Section 17(f) of the
Investment Company Act of 1940 in connection with the purchase, sale,
settlement, closing out or writing of Futures Contracts, Options, or Futures
Contract Options by making payments or deliveries specified in Certificates in
connection with any such purchase, sale, writing, settlement or closing out upon
its receipt from a broker, dealer, or futures commission merchant of a statement
or confirmation reasonably believed by the Custodian to be in the form
customarily used by brokers, dealers, or future commission merchants with
respect to such Futures Contracts, Options, or Futures Contract Options, as the
case may be, confirming that such Security is held by such broker, dealer or
futures commission merchant, in book-entry form or otherwise in the name the
Custodian (or any nominee of the Custodian) as custodian for the Fund; provided,
however, that notwithstanding the foregoing, payments to or deliveries from the
Margin Account and payments with respect to Securities to which a Margin Account
relates, shall be made in accordance with the terms and conditions of the Margin
Account Agreement. Whenever any such instruments or certificates are available,
the Custodian shall, notwithstanding any provision in this Agreement to the
contrary, make payment for any Futures Contract, Option, or Futures Contract
Option for which such instruments or such certificates are available only
against the delivery to the Custodian of such instrument or such certificate,
and deliver any Futures Contract, Option or Futures Contract Option for which
such instruments or such certificates are available only against receipt by the
Custodian of payment therefor. Any such instrument or certificate delivered to
the Custodian shall be held by the Custodian hereunder in accordance with, and
subject to, the provisions of this Agreement.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS,
FUTURES CONTRACT OPTIONS, REPURCHASE AGREEMENTS,
REVERSE REPURCHASE AGREEMENTS AND SHORT SALES
1. Promptly after each execution of a purchase of Securities by the Fund, other
than a purchase of an Option, a Futures Contract, a Futures Contract Option, a
Repurchase Agreement, a Reverse Repurchase Agreement or a Short Sale, the Fund
shall deliver to the Custodian (i) with respect to each purchase of Securities
which are not Money Market Securities, a Certificate, and (ii) with respect to
each purchase of Money Market Securities, a Certificate, oral Instructions or
Written Instructions, specifying with respect to each such purchase: (a) the
Series to which such Securities are to be specifically allocated; (b) the name
of the issuer and the title of the Securities; (c) the number of shares or the
principal amount purchased and accrued interest, if any; (d) the date of
purchase and settlement; (e) the purchase price per unit; (f) the total amount
payable upon such purchase; (g) the name of the person from whom or the broker
through whom the purchase was made, and the name of the clearing broker, if any;
and (h) the name of the broker or other party to whom payment is to be made.
Custodian shall, upon receipt of such Securities purchased by or for the Fund,
pay to the broker specified in the Certificate out of the moneys held for the
account of such Series the total amount payable upon such purchase, provided
that the same conforms to the total amount payable as set forth in such
Certificate, oral Instructions or Written Instructions.
2. Promptly after each execution of a sale of Securities by the Fund, other than
a sale of any Option, Futures Contract, Futures Contract Option, Repurchase
Agreement, Reverse Repurchase Agreement or Short Sale, the Fund shall deliver
such to the Custodian (i) with respect to each sale of Securities which are not
Money Market Securities, a Certificate, and (ii) with respect to each sale of
Money Market Securities, a Certificate, Oral Instructions or Written
Instructions, specifying with respect to each such sale: (a) the Series to which
such Securities were specifically allocated; (b) the name of the issuer and the
title of the Security; (c) the number of shares or principal amount sold, and
accrued interest, if any; (d) the date of sale and settlement; (e) the sale
price per unit; (f) the total amount payable to the Fund upon such sale; (g) the
name of the broker through whom or the person to whom the sale was made, and the
name of the clearing broker, if any; and (h) the name of the broker to whom the
Securities are to be delivered. On the settlement date, the Custodian shall
deliver the Securities specifically allocated to such Series to the broker in
accordance with generally accepted street practices and as specified in the
Certificate upon receipt of the total amount payable to the Fund upon such sale,
provided that the same conforms to the total amount payable as set forth in such
Certificate, oral Instructions or Written Instructions.
ARTICLE V
OPTIONS
1. Promptly after each execution of a purchase of any Option by the Fund other
than a closing purchase transaction, the Fund shall deliver to the Custodian a
Certificate specifying with respect to each Option purchased: (a) the Series to
which such Option is specifically allocated; (b) the type of Option (put or
call); (c) the instrument, currency, or Security underlying such Option and the
number of Options, or the name of the in the case of an Index Option, the index
to which such Option relates and the number of Index Options purchased; (d) the
expiration date; (e) the exercise price; (f) the dates of purchase and
settlement; (g) the total amount payable by the Fund in connection with such
purchase; and (h) the name of the Clearing Member through whom such Option was
purchased. The Custodian shall pay, upon receipt of a Clearing Member's written
statement confirming the purchase of such Option held by such Clearing Member
for the account of the Custodian (or any duly appointed and registered nominee
of the Custodian) as Custodian for the Fund, out of moneys held for the account
of the Series to which such Option is to be specifically allocated, the total
amount payable upon such purchase to the Clearing Member through whom the
purchase was made, provided that the same conforms to the amount payable as set
forth in such Certificate.
2. Promptly after the execution of a sale of any Option purchased by the Fund,
other than a closing sale transaction, pursuant to paragraph 1 hereof, the Fund
shall deliver to the Custodian a Certificate specifying with respect to each
such sale: (a) the Series to which such Option was specifically allocated; (b)
the type of Option (put or call); (c) the instrument, currency, or Security
underlying such Option and the number of Options, or the name of the issuer and
the title and number of shares subject to such Option or, in the case of a Index
Option, the index to which such Option relates and the number of Index Options
sold; (d) the date of sale; (e) the sale price; (f) the date of settlement; (g)
the total amount payable to the Fund upon such sale; and (h) the name of the
Clearing Member through whom the sale was made. The Custodian shall consent to
the delivery of the Option sold by the Clearing Member which previously supplied
the confirmation described in preceding paragraph of this Article with respect
to such Option upon receipt by the Custodian of the total amount payable to the
Fund, provided that the same conforms to the total amount payable as set forth
in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option purchased by the
Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian a
Certificate specifying with respect to such Call Option: (a) the Series to which
such Call Option was specifically allocated; (b) the name of the issuer and the
title and number of shares subject to the Call Option; (c) the expiration date;
(d) the date of exercise and settlement; (e) the exercise price per share; (f)
the total amount to be paid by the Fund upon such exercise; and (g) the name of
the Clearing Member through whom such Call Option was exercised. The Custodian
shall, upon receipt of the Securities underlying the Call Option which was
exercised, pay out of the moneys held for the account of the Series to which
such Call Option was specifically allocated the total amount payable to the
Clearing Member through whom the Call Option was exercised, provided that the
same conforms to the total amount payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put Option purchased by the
Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian a
Certificate specifying with respect to such Put Option: (a) the Series to which
such Put Option was specifically allocated; (b) the name of the issuer and the
title and number of shares subject to the Put Option; (c) the expiration date;
(d) the date of exercise and settlement; (e) the exercise price per share; (f)
the total amount to be paid to the Fund upon such exercise; and (g) the name of
the Clearing Member through whom such Put Option was exercised. The Custodian
shall, upon receipt of the amount payable upon the exercise of the Put Option,
deliver or direct a Depository to deliver the Securities specifically allocated
to such Series, provided the same conforms to the amount payable to the Fund as
set forth in such Certificate.
5. Promptly after the exercise by the Fund of any Index Option purchased by the
Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian a
Certificate specifying with respect to such Index Option: (a) the Series to
which such Index Option was specifically allocated; (b) the type of Index Option
(put or call) (c) the number of Options being exercised; (d) the index to which
such Option relates; (e) the expiration date; (f) the exercise price; (g) the
total amount to be received by the Fund in connection with such exercise; and
(h) the Clearing Member from whom such payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Covered
Call Option: (a) the Series for which such Covered Call Option was written; (b)
the name of the issuer and the title and number of shares for which the Covered
Call Option was written and which underlie the same; (c) the expiration date;
(d) the exercise price; (e) the premium to be received by the Fund; (f) the date
such Covered Call Option was written; and (g) the name of the Clearing Member
through whom the premium is to be received. The Custodian shall deliver or cause
to be delivered, upon receipt of the premium specified in the Certificate with
respect to such Covered Call Option, such receipts as are required in accordance
with the customs prevailing among Clearing Members dealing in Covered Call
Options and shall impose, or direct a Depository to impose, upon the underlying
Securities specified in the Certificate specifically allocated to such Series
such restrictions as may be required by such receipts. Notwithstanding the
foregoing, the Custodian has the right, upon prior written notification to the
Fund, at any time to refuse to issue any receipts for Securities in the
possession of the Custodian and not deposited with a Depository underlying a
Covered Call Option.
7. Whenever a Covered Call Option written by the Fund and described in the
preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate instructing the Custodian to deliver, or
to direct the Depository to deliver, the Securities subject to such Covered Call
Option and specifying: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares subject
to the Covered Call Option; (c) the Clearing Member to whom the underlying
Securities are to be delivered; and (d) the total amount payable to the Fund
upon such delivery. Upon the return and/or cancellation of any receipts
delivered pursuant to paragraph 6 of this Article, the Custodian shall deliver,
or direct a Depository to deliver, the underlying Securities as specified in the
Certificate upon payment of the amount to be received as set forth in such
Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to such Put Option: (a) the
Series for which such Put Option was written; (b) the name of the issuer and the
title and number of shares for which the Put Option is written and which
underlie the same; (c) the expiration date; (d) the exercise price; (e) the
premium to be received by the Fund; (f) the date such Put Option is written; (g)
the name of the Clearing Member through whom the premium is to be received and
to whom a Put Option guarantee letter is to be delivered; (h) the amount of
cash, and/or the amount and kind of Securities, if any, specifically allocated
to such Series to be deposited in the Senior Security Account for such Series;
and (i) the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be deposited into the Collateral Account for such
Series. The Custodian shall, after making the deposits into the Collateral
Account specified in the Certificate, issue a Put Option guarantee letter
substantially in the form utilized by the Custodian on the date hereof, and
deliver the same to the Clearing Member specified in the Certificate upon
receipt of the premium specified in said Certificate. Notwithstanding the
foregoing, the Custodian shall be under no obligation to issue any Put Option
guarantee letter or similar document if it is unable to make any of the
representations contained therein.
9. Whenever a Put Option written by the Fund and described in the preceding
paragraph is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Put Option was written; (b)
the name of the issuer and title and number of shares subject to the Put Option;
(c) the Clearing Member from whom the underlying Securities are to be received;
(d) the total amount payable by the Fund upon such delivery; (e) the amount of
cash and/or the amount and kind of Securities specifically allocated to such
Series to be withdrawn from the Collateral Account for such Series and (f) the
amount of cash and/or the amount and kind of Securities, specifically allocated
to such series, if any, to be withdrawn from the Senior Security Account. Upon
the return and/or cancellation of any Put Option guarantee letter or similar
document issued by the Custodian in connection with such Put Option, the
Custodian shall pay out of the moneys held for the account of the series to
which such Put Option was specifically allocated the total amount payable to the
Clearing Member specified in the Certificate as set forth in such Certificate,
upon delivery of such Securities, and shall make the withdrawals specified in
such Certificate.
10. Whenever the Fund writes an Index Option, the Fund shall promptly deliver to
the Custodian a Certificate specifying with respect to such Index Option: (a)
the Series for which such Index Option was written; (b) whether such Index
Option is a put or a call; (c) the number of Options written; (d) the index to
which such Option relates; (e) the expiration date; (f) the exercise price; (g)
the Clearing Member through whom such Option was written; (h) the premium to be
received by the Fund; (i) the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such Series to be deposited in the
Senior Security Account for such Series; (j) the amount of cash and/or the
amount and kind of Securities, if any, specifically allocated to such Series to
be deposited in the Collateral Account for such Series; and (k) the amount of
cash and/or the amount and kind of Securities, if any, specifically allocated to
such Series to be deposited in a Margin Account, and the name in which such
account is to be or has been established. The Custodian shall, upon receipt of
the premium specified in the Certificate, make the deposits, if any, into the
Senior Security Account specified in the Certificate, and either (1) deliver
such receipts, if any, which the Custodian has specifically agreed to issue,
which are in accordance with the customs prevailing among Clearing Members in
Index Options and make the deposits into the Collateral Account specified in the
Certificate, or (2) make the deposits into the Margin Account specified in the
Certificate.
11. Whenever an Index Option written by the Fund and described in the preceding
paragraph of this Article is exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to such Index Option: (a) the
Series for which such Index Option was written; (b) such information as may be
necessary to identify the Index Option being exercised; (c) the Clearing Member
through whom such Index Option is being exercised; (d) the total amount payable
upon such exercise, and whether such amount is to be paid by or to the Fund; (e)
the amount of cash and/or amount and kind of Securities, if any, to be withdrawn
from the Margin Account; and (f) the amount of cash and/or amount and kind of
Securities, if any, to be withdrawn from the Senior Security Account for such
Series; and the amount of cash and/or the amount and kind of Securities, if any,
to be withdrawn from the Collateral Account for such Series. Upon the return
and/or cancellation of the receipt, if any, delivered pursuant to the preceding
paragraph of this Article, the Custodian shall pay out of the moneys held for
the account of the Series to which such Stock Index Option was specifically
allocated to the Clearing Member specified in the Certificate the total amount
payable, if any, as specified therein.
12. Promptly after the execution of a purchase or sale by the Fund of any Option
identical to a previously written Option described in paragraphs, 6, 8 or 10 of
this Article in a transaction expressly designated as a "Closing Purchase
Transaction" or a "Closing Sale Transaction", the Fund shall promptly deliver to
the Custodian a Certificate specifying with respect to the Option being
purchased: (a) that the transaction is a Closing Purchase Transaction or a
Closing Sale Transaction; (b) the Series for which the Option was written; (c)
the instrument, currency, or Security subject to the Option, or, in the case of
an Index Option, the index to which such Option relates and the number of
Options held; (d) the exercise price; (e) the premium to be paid by or the
amount to be paid to the Fund; (f) the expiration date; (g) the type of Option
(put or call); (h) the date of such purchase or sale; (i) the name of the
Clearing Member to whom the premium is to be paid or from whom the amount is to
be received; and (j) the amount of cash and/or the amount and kind of
Securities, if any, to be withdrawn from the Collateral Account, a specified
Margin Account, or the Senior Security Account for such Series. Upon the
Custodian's payment of the premium or receipt of the amount, as the case may be,
specified in the Certificate and the return and/or cancellation of any receipt
issued pursuant to paragraphs 6, 8 or 10 of this Article with respect to the
Option being liquidated through the Closing Purchase Transaction or the Closing
Sale Transaction, the Custodian shall remove, or direct a Depository to remove,
the previously imposed restrictions on the Securities underlying the Call
Option.
13. Upon the expiration, exercise or consummation of a Closing Purchase
Transaction with respect to any Option purchased or written by the Fund and
described in this Article, the Custodian shall delete such Option from the
statements delivered to the Fund pursuant to paragraph 3 Article III herein, and
upon the return and/or cancellation of any receipts issued by the Custodian,
shall make such withdrawals from the Collateral Account, and the Margin Account
and/or the Senior Security Account as may be specified in a Certificate received
in connection with such expiration, exercise, or consummation.
14. Securities acquired by the Fund through the exercise of an Option described
in this Article shall be subject to Article IV hereof.
ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the Fund shall deliver
to the Custodian a Certificate specifying with respect to such Futures Contract,
(or with respect to any number of identical Futures Contract (s)): (a) the
Series for which the Futures Contract is being entered; (b) the category of
Futures Contract (the name of the underlying index or financial instrument); (c)
the number of identical Futures Contracts entered into; (d) the delivery or
settlement date of the Futures Contract(s); (e) the date the Futures Contract(s)
was (were) entered into and the maturity date; (f) whether the Fund is buying
(going long) or selling (going short) such Futures Contract(s); (g) the amount
of cash and/or the amount and kind of Securities, if any, to be deposited in the
Senior Security Account for such Series; (h) the name of the broker, dealer, or
futures commission merchant through whom the Futures Contract was entered into;
and (i) the amount of fee or commission, if any, to be paid and the name of the
broker, dealer, or futures commission merchant to whom such amount is to be
paid. The Custodian shall make the deposits, if any, to the Margin Account in
accordance with the terms and conditions of the Margin Account Agreement. The
Custodian shall make payment out of the moneys specifically allocated to such
Series of the fee or commission, if any, specified in the Certificate and
deposit in the Senior Security Account for such Series the amount of cash and/or
the amount and kind of Securities specified in said Certificate.
2. (a) Any variation margin payment or similar payment required to be made by
the Fund to a broker, dealer, or futures commission merchant with respect to an
outstanding Futures Contract shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment from a broker,
dealer, or futures commission merchant to the Fund with respect to an
outstanding Futures Contract shall be received and dealt with by the Custodian
in accordance with the terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder is retained by
the Fund until delivery or settlement is made on such Futures Contract, the Fund
shall deliver to the Custodian prior to the delivery or settlement date a
Certificate specifying: (a) the Futures Contract and the Series to which the
same relates; (b) with respect to an Index Futures Contract, the total cash
settlement amount to be paid or received, and with respect to a Financial
Futures Contract, the Securities and/or amount of cash to be delivered or
received; (c) the broker, dealer, or futures commission merchant to or from whom
payment or delivery is to be made or received; and (d) the amount of cash and/or
Securities to be withdrawn from the Senior Security Account for such Series. The
Custodian shall make the payment or delivery specified in the Certificate, and
delete such Futures Contract from the statements delivered to the Fund pursuant
to paragraph 3 of Article III herein.
4. Whenever the Fund shall enter into a Futures Contract to offset a Futures
Contract held by the Custodian hereunder, the Fund shall deliver to the
Custodian a Certificate specifying: (a) the items of information required in a
Certificate described in paragraph 1 of this Article, and (b) the Futures
Contract being offset. The Custodian shall make payment out of the money
specifically allocated to such Series of the fee or commission, if any,
specified in the Certificate and delete the Futures Contract being offset from
the statements delivered to the Fund pursuant to paragraph 3 of Article III
herein, and make such withdrawals from the Senior Security Account for such
Series as may be specified in the Certificate. The withdrawals, if any, to be
made from the Margin Account shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the execution of a purchase of any Futures Contract Option by
the Fund, the Fund shall deliver to the Custodian a Certificate specifying with
respect to such Futures Contract Option: (a) the Series to which such Option is
specifically allocated; (b) the type of Futures Contract Option (put or call);
(c) the type of Futures Contract and such other information as may be necessary
to identify the Futures Contract underlying the Futures Contract Option
purchased; (d) the expiration date; (e) the exercise price; (f) the dates of
purchase and settlement; (g) the amount of premium to be paid by the Fund upon
such purchase; (h) the name of the broker or futures commission merchant through
whom such Option was purchased; and (i) the name of the broker, or futures
commission merchant, to whom payment is to be made. The Custodian shall pay out
of the moneys specifically allocated to such Series the total amount to be paid
upon such purchase to the broker or futures commissions merchant through whom
the purchase was made, provided that the same conforms to the amount set forth
in such Certificate.
2. Promptly after the execution of a sale of any Futures Contract Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to
the Custodian a Certificate specifying with respect to each such sale: (a)
Series to which such Futures Contract Option was specifically allocated; (b) the
type of Future Contract Option (put or call); (c) the type of Futures Contract
and such other information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund upon
such sale; and (h) the name of the broker of futures commission merchant through
whom the sale was made. The Custodian shall consent to the cancellation of the
Futures Contract Option being closed against payment to the Custodian of the
total amount payable to the Fund, provided the same conforms to the total amount
payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the Fund pursuant to
paragraph 1 is exercised by the Fund, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Futures
Contract Option was specifically allocated; (b) the particular Futures Contract
Option (put or call) being exercised; (c) the type of Futures Contract
underlying the Futures Contract Option; (d) the date of exercise; (e) the name
of the broker or futures commission merchant through whom the Futures Contract
Option is exercised; (f) the net total amount, if any, payable by the Fund; (g)
the amount, if any, to be received by the Fund; and (h) the amount of cash
and/or the amount and kind of Securities to be deposited in the Senior Security
Account for such Series. The Custodian shall make, out of the moneys and
Securities specifically allocated to such Series, the payments of money, if any,
and the deposits of Securities, if any, into the Senior Security Account as
specified in the Certificate. The deposits, if any, to be made to the Margin
Account shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Futures
Contract Option: (a) the Series for which such Futures Contract Option was
written; (b) the type of Futures Contract Option (put or call); (c) the type of
Futures Contract and such other information as may be necessary to identify the
Futures Contract underlying the Futures Contract Option; (d) the expiration
date; (e) the exercise price; (f) the premium to be received by the Fund; (g)
the name of the broker or futures commission merchant through whom the premium
is to be received; and (h) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in the Senior Security Account for such
Series. The Custodian shall, upon receipt of the premium specified in the
Certificate, make out of the moneys and Securities specifically allocated to
such Series the deposits into the Senior Security Account, if any, as specified
in the Certificate. The deposits, if any, to be made to the Margin Account shall
be made by the Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
5. Whenever a Futures Contract Option written by the Fund which is a call is
exercised, the Fund shall promptly deliver to the Custodian a Certificate
specifying: (a) the Series to which such Futures Contract Option was
specifically allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying the Futures Contract Option; (d) the
name of the broker or futures commission merchant through whom such Futures
Contract Option was exercised; (e) the net total amount, if any, payable to the
Fund upon such exercise; (f) the net total amount, if any, payable by the Fund
upon such exercise; and (g) the amount of cash and/or the amount and kind of
Securities to be deposited in the Senior Security Account for such Series. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in such Certificate make the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
6. Whenever a Futures Contract Option which is written by the Fund and which is
a put is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Option was specifically
allocated; (b) the particular Futures Contract Option exercised; (c) the type of
Futures Contract underlying such Futures Contract Option; (d) the name of the
broker or futures commission merchant through whom such Futures Contract Option
is exercised; (e) the net total amount, if any, payable to the Fund upon such
exercise; (f) the net total amount, if any, payable by the Fund upon such
exercise; and (g) the amount and kind of Securities and/or cash to be withdrawn
from or deposited in, the Senior Security Account for such Series, if any. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in the Certificate, make out of the moneys and Securities
specifically allocated to such Series, the payments, if any, and the deposits,
if any, into the Senior Security Account as specified in the Certificate. The
deposits to and/or withdrawals from the Margin Account, if any, shall be made by
the Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
7. Promptly after the execution by the Fund of a purchase of any Futures
Contract Option identical to a previously written Futures Contract Option
described in this Article in order to liquidate its position as a writer of such
Futures Contract Option, the Fund shall deliver to the Custodian a Certificate
specifying with respect to the Futures Contract Option being purchased: (a) the
Series to which such Option is specifically allocated; (b) that the transaction
is a closing transaction; (c) the type of Future Contract and such other
information as may be necessary to identify the Futures Contract underlying the
Futures Option Contract; (d) the exercise price; (e) the premium to be paid by
the Fund; (f) the expiration date; (g) the name of the broker or futures
commission merchant to whom the premium is to be paid; and (h) the amount of
cash and/or the amount and kind of Securities, if any, to be withdrawn from the
Senior Security Account for such Series. The Custodian shall effect the
withdrawals from the Senior Security Account specified in the Certificate. The
withdrawals, if any, to be made from the Margin Account shall be made by the
Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
8. Upon the expiration, exercise, or consummation of a closing transaction with
respect to, any Futures Contract Option written or purchased by the Fund and
described in this Article, the Custodian shall (a) delete such Futures Contract
Option from the statements delivered to the Fund pursuant to paragraph 3 of
Article III herein and (b) make such withdrawals from and/or in the case of an
exercise such deposits into the Senior Security Account as may be specified in a
Certificate. The deposits to and/or withdrawals from the Margin Account, if any,
shall be made by the Custodian in accordance with the terms and conditions of
the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the exercise of a Futures
Contract Option described in this Article shall be subject to Article VI hereof.
ARTICLE VIII
SHORT SALES
1. Promptly after the execution of any short sales of Securities by any Series
of the Fund, the Fund shall deliver to the Custodian a Certificate specifying:
(a) the Series for which such short sale was made; (b) the name of the
issuer-and the title of the Security; (c) the number of shares or principal
amount sold, and accrued interest or dividends, if any; (d) the dates of the
sale and settlement; (e) the sale price per unit; (f) the total amount credited
to the Fund upon such sale, if any, (g) the amount of cash and/or the amount and
kind of Securities, if any, which are to be deposited in a Margin Account and
the name in which such Margin Account has been or is to be established; (h) the
amount of cash and/or the amount and kind of Securities, if any, to be deposited
in a Senior Security Account, and (i) the name of the broker through whom such
short sale was made. The Custodian shall upon its receipt of a statement from
such broker confirming such sale and that the total amount credited to the Fund
upon such sale, if any, as specified in the Certificate is held by such broker
for the account of the Custodian (or any nominee of the Custodian) as custodian
of the Fund, issue a receipt or make the deposits into the Margin Account and
the Senior Security Account specified in the Certificate.
2. Promptly after the execution of a purchase to close-out any short sale of
Securities, the Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to each such closing out: (a) the Series for which such
transaction is being made; (b) the name of the issuer and the title of the
Security; (c) the number of shares or the principal amount, and accrued interest
or dividends, if any, required to effect such closing-out to be delivered to the
broker; (d) the dates of closing-out and settlement; (e) the purchase price per
unit; (f) the net total amount payable to the Fund upon such closing-out; (g)
the net total amount payable to the broker upon such closing-out; (h) the amount
of cash and the amount and kind of Securities to be withdrawn, if any, from the
Margin Account; (i) the amount of cash and/or the amount and kind of Securities,
if any, to be withdrawn from the Senior Security Account; and (j) the name of
the broker through whom the Fund is effecting such closing-out. The Custodian
shall, upon receipt of the net total amount payable to the Fund upon such
closing-out, and the return and/or cancellation of the receipts, if any, issued
by the Custodian with respect to the short sale being closed-out, pay out of the
moneys held for the account of the Fund to the broker the net total amount
payable to the broker, and make the withdrawals from the Margin Account and the
Senior Security Account, as the same are specified in the Certificate.
ARTICLE IX
REPURCHASE AND REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Repurchase Agreement or a Reverse Repurchase
Agreement with respect to Securities and money held by the Custodian hereunder,
the Fund shall deliver to the Custodian a Certificate, or in the event such
Repurchase Agreement or Reverse Repurchase Agreement is a Money Market Security,
a Certificate, Oral Instructions, or Written Instructions specifying: (a) the
Series for which the Repurchase Agreement or Reverse Repurchase Agreement is
entered; (b) the total amount payable to or by the Fund in connection with such
Repurchase Agreement or Reverse Repurchase Agreement and specifically allocated
to such Series; (c) the broker, dealer, or financial institution with whom the
Repurchase Agreement or Reverse Repurchase Agreement is entered; (d) the amount
and kind of Securities to be delivered or received by the Fund to or from such
broker, dealer, or financial institution; (e) the date of such Repurchase
Agreement or Reverse Repurchase Agreement; and (f) the amount of cash and/or the
amount and kind of Securities, if any, specifically allocated to such Series to
be deposited in a Senior Security Account for such Series in connection with
such Reverse Repurchase Agreement. The Custodian shall, upon receipt of the
total amount payable to or by the Fund specified in the Certificate, Oral
Instructions, or Written Instructions make or accept the delivery to or from the
broker, dealer, or financial institution and the deposits, if any, to the Senior
Security Account, specified in such Certificate, Oral Instructions, or Written
Instructions.
2. Upon the termination of a Repurchase Agreement or a Reverse Repurchase
Agreement described in preceding paragraph 1 of this Article, the Fund shall
promptly deliver a Certificate or, in the event such Repurchase Agreement or
Reverse Repurchase Agreement is a Money Market Security, a Certificate, Oral
Instructions, or Written Instructions to the Custodian specifying: (a) the
Repurchase Agreement or Reverse Repurchase Agreement being terminated and the
Series for which same was entered; (b) the total amount payable to or by the
Fund in connection with such termination; (c) the amount and kind of Securities
to be received or delivered by the Fund and specifically allocated to such
Series in connection with such termination; (d) the date of termination; (e) the
name of the broker, dealer, or financial institution with whom the Repurchase
Agreement or Reverse Repurchase Agreement is to be terminated; and (f) the
amount of cash and/or the amount and kind of Securities, if any, to be withdrawn
from the Senior Securities Account for such Series. The Custodian shall, upon
receipt or delivery of the amount and kind of Securities or cash to be received
or delivered by the Fund specified in the Certificate, Oral Instructions, or
Written Instructions, make or receive the payment to or from the broker, dealer,
or financial institution and make the withdrawals, if any, from the Senior
Security Account, specified in such Certificate, Oral Instructions, or Written
Instructions.
3. The Certificates, Oral Instructions, or Written Instructions described in
paragraphs 1 and 2 of this Article may with respect to any particular Repurchase
Agreement or Reverse Repurchase Agreement be combined and delivered to the
Custodian at the time of entering into such Repurchase Agreement or Reverse
Repurchase Agreement.
ARTICLE X
LOANS OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically allocated to a
Series held by the Custodian hereunder, the Fund shall deliver or cause to be
delivered to the Custodian a Certificate specifying with respect to each such
loan: (a) the Series to which the loaned Securities are specifically allocated;
(b) the name of the issuer and the title of the Securities, (c) the number of
shares or the principal amount loaned, (d) the date of loan and delivery, (e)
the total amount to be delivered to the Custodian against the loan of the
Securities, including the amount of cash collateral and the premium, if any,
separately identified, and (f) the name of the broker, dealer, or financial
institution to which the loan was made. The Custodian shall deliver the
Securities thus designated to the broker, dealer or financial institution to
which the loan was made upon receipt of the total amount designated in the
Certificate as to be delivered against the loan of Securities. The Custodian may
accept payment in connection with a delivery otherwise than through the
Book-Entry System or a Depository only in the form of a certified or bank
cashier's check payable to the order of the Fund or the Custodian drawn on New
York Clearing House funds.
2. In connection with each termination of a loan of Securities by the Fund, the
Fund shall deliver or cause to be delivered to the Custodian a Certificate
specifying with respect to each such loan termination and return of Securities:
(a) the Series to which the loaned Securities are specifically allocated; (b)
the name of the issuer and the title of the Securities to be returned, (c) the
number of shares or the principal amount to be returned, (d) the date of
termination, (e) the total amount to be delivered by the Custodian (including
the cash collateral for such Securities minus any offsetting credits as
described in said Certificate), and (f) the name of the broker, dealer, or
financial institution from which the Securities will be returned. The Custodian
shall receive all Securities returned from the broker, dealer, or financial
institution to which such Securities were loaned and upon receipt thereof shall
pay, out of the moneys held for the account of the Fund, the total amount
payable upon such return of Securities as set forth in the Certificate.
ARTICLE XI
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall establish a Senior Security Account and from time to time
make such deposits thereto, or withdrawals therefrom, as specified in a
Certificate. Such Certificate shall specify the Series for which such deposit or
withdrawal is to be made and the amount of cash and/or the amount and kind of
Securities specifically allocated to such Series to be deposited in, or
withdrawn from, such Senior Security Account for such Series. In the event that
the Fund fails to specify in a Certificate the Series, the name of the issuer,
the title and the number of shares or the principal amount of any particular
Securities to be deposited by the Custodian into, or withdrawn from, a Senior
Securities Account, the Custodian shall be under no obligation to make any such
deposit or withdrawal and shall promptly notify the Fund that no such deposit
has been made.
2. The Custodian shall make deliveries or payments from a Margin Account to the
broker, dealer, futures commission merchant or Clearing Member in whose name, or
for whose benefit, the account was established as specified in the Margin
Account Agreement.
3. Amounts received by the Custodian as payments or distributions with respect
to Securities deposited in any Margin Account shall be dealt with in accordance
with the terms and conditions of the Margin Account Agreement.
4. The Custodian shall to the extent permitted by the Fund's Declaration of
Trust, investment restrictions and the Investment Company Act of 1940 have a
continuing lien and security interest in and to any property at any time held by
the Custodian in any Collateral Account described herein. In accordance with
applicable law the Custodian may enforce its lien and realize on any such
property whenever the Custodian has made payment or delivery pursuant to any Put
Option guarantee letter or similar document or any receipt issued hereunder by
the Custodian; provided, however, that the Custodian shall not be required to
issue any Put Option guarantee letter unless it shall have received an opinion
of counsel to the Fund or its investment adviser that the issuance of such
letters is authorized by the Fund and that the Custodian's continuing lien and
security interest is valid, enforceable and not limited by the Declaration of
Trust, any investment restrictions or the Investment Company Act of 1940. In the
event the Custodian should realize on any such property net proceeds which are
less than the Custodian's obligations under any Put Option guarantee letter or
similar document or any receipt, such deficiency shall be a debt owed the
Custodian by the Fund within the scope of Article XIV herein.
5. On each business day the Custodian shall furnish the Fund with a statement
with respect to each Margin Account in which money or Securities are held
specifying as of the close of business on the previous business day: (a) the
name of the Margin Account; (b) the amount and kind of Securities held therein;
and (c) the amount of money held therein. The Custodian shall make available
upon request to any broker, dealer, or futures commission merchant specified in
the name of a Margin Account a copy of the statement furnished the Fund with
respect to such Margin Account.
6. The Custodian shall establish a Collateral Account and from time to time
shall make such deposits thereto as may be specified in a Certificate. Promptly
after the close of business on each business day in which cash and/or Securities
are maintained in a Collateral Account for any Series, the Custodian shall
furnish the Fund with a statement with respect to such Collateral Account
specifying the amount of cash and/or the amount and kind of Securities held
therein. No later than the close of business next succeeding the delivery to the
Fund of such statement, the Fund shall furnish to the Custodian a Certificate or
Written Instructions specifying the then market value of the Securities
described in such statement. In the event such then market value is indicated to
be less than the Custodian's obligation with respect to any outstanding Put
Option guarantee letter or similar document, the Fund shall promptly specify in
a Certificate the additional cash and/or Securities to be deposited in such
Collateral Account to eliminate such deficiency.
ARTICLE XII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the resolution of the Board
of Trustees of the Fund, certified by the Secretary or any Assistant Secretary,
either (i) setting forth with respect to the Series specified therein the date
of the declaration of a dividend or distribution, the date of payment thereof,
the record date as of which shareholders entitled to payment shall be
determined, the amount payable per Share of such Series to the shareholders of
record as of that date and the total amount payable to the Transfer Agent
Account and any sub-dividend agent or co-dividend agent of the Fund on the
payment date, or (ii) authorizing with respect to the Series specified therein
and the declaration of dividends and distributions thereon the Custodian to rely
on Oral Instructions, Written Instructions, or a Certificate setting forth the
date of the declaration of such dividend or distribution, the date of payment
thereof, the record date as of which shareholders entitled to payment shall be
determined, the amount payable per Share of such Series to the shareholders of
record as of that date and the total amount payable to the Transfer Agent
Account on the payment date.
2. Upon the payment date specified in such resolution, Oral Instructions,
Written Instructions, or Certificate, as the case may be, the Custodian shall
pay to the Transfer Agent Account out of the moneys held for the account of the
Series specified therein the total amount payable to the Transfer Agent Account
and with respect to such Series.
ARTICLE XIII
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver or cause to be
delivered, to the Custodian a Certificate duly specifying:
(a) The Series, the number of Shares sold, trade date, and price; and
(b) The amount of money to be received by the Custodian for the sale of
such Shares and specifically allocated to the separate account in the name of
such Series. 2. Upon receipt of such money from the Fund's General Distributor,
the Custodian shall credit such money to the separate account in the name of the
Series for which such money was received.
3. Upon issuance of any Shares of any Series the Custodian shall pay, out of the
money held for the account of such Series, all original issue or other taxes
required to be paid by the Fund in connection with such issuance upon the
receipt of a Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund desires the Custodian to
make payment out of the money held by the Custodian hereunder in connection with
a redemption of any Shares, it shall furnish, or cause to be furnished, to the
Custodian a Certificate specifying:
(a) The number and Series of Shares redeemed; and
(b) The amount to be paid for such Shares.
5. Upon receipt of an advice from an Authorized Person setting forth the Series
and number of Shares received by the Transfer Agent for redemption and that such
Shares are in good form for redemption, the Custodian shall make payment to the
Transfer Agent Account out of the moneys held in the separate account in the
name of the Series the total amount specified in the Certificate issued pursuant
to the foregoing paragraph 4 of this Article.
ARTICLE XIV
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian should in its sole discretion advance funds on behalf of any
Series which results in an overdraft because the moneys held by the Custodian in
the separate account for such Series shall be insufficient to pay the total
amount payable upon a purchase of Securities specifically allocated to such
Series, as set forth in a Certificate, Oral Instructions, or Written
Instructions or which results in an overdraft in the separate account of such
Series for some other reason, or if the Fund is for any other reason indebted to
the Custodian with respect to a Series, (except a borrowing for investment or
for temporary or emergency purposes using Securities as collateral pursuant to a
separate agreement and subject to the provisions of paragraph 2 of this
Article), such overdraft or indebtedness shall be deemed to be a loan made by
the Custodian to the Fund for such Series payable on demand and shall bear
interest from the date incurred at a rate per annum (based on a 360-day year for
the actual number of days involved) equal to the Federal Funds Rate plus 2%,
such rate to be adjusted on the effective date of any change in such Federal
Funds Rate but in no event to be less than 6% per annum. In addition, unless the
Fund has given a Certificate that the Custodian shall not impose a lien and
security interest to secure such overdrafts (in which event it shall not do so),
the Custodian shall have a continuing lien and security interest in the
aggregate amount of such overdrafts and indebtedness as may from time to time
exist in and to any property specifically allocated to such Series at any time
held by it for the benefit of such Series or in which the Fund may have an
interest which is then in the Custodian's possession or control or in possession
or control of any third party acting in the Custodian's behalf. The Fund
authorizes the Custodian, in its sole discretion, at any time to charge any such
overdraft or indebtedness together with interest due thereon against any money
balance in an account standing in the name of such Series' credit on the
Custodian's books. In addition, the Fund hereby covenants that on each Business
Day on which either it intends to enter a Reverse Repurchase Agreement and/or
otherwise borrow from a third party, or which next succeeds a Business Day on
which at the close of business the Fund had outstanding a Reverse Repurchase
Agreement or such a borrowing, it shall prior to 9 a.m., New York City time,
advise the Custodian, in writing, of each such borrowing, shall specify the
Series to which the same relates, and shall not incur any indebtedness,
including pursuant to any Reverse Repurchase Agreement, not so specified other
than from the Custodian.
2. The Fund will cause to be delivered to the Custodian by any bank (including,
if the borrowing is pursuant to a separate agreement, the Custodian) from which
it borrows money for investment or for temporary or emergency purposes using
Securities held by the Custodian hereunder as collateral for such borrowings, a
notice or undertaking in the form currently employed by any such bank setting
forth the amount which such bank will loan to the Fund against delivery of a
stated amount of collateral. The Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to each such borrowing: (a) the Series to
which such borrowing relates; (b) the name of the bank, (c) the amount and terms
of the borrowing, which may be set forth by incorporating by reference an
attached promissory note, duly endorsed by the Fund, or other loan agreement,
(d) the time and date, if known, on which the loan is to be entered into, (e)
the date on which the loan becomes due and payable, (f) the total amount payable
to the Fund on the borrowing date, (g) the market value of Securities to be
delivered as collateral for such loan, including the name of the issuer, the
title and the number of shares or the principal amount of any particular
Securities, and (h) a statement specifying whether such loan is for investment
purposes or for temporary or emergency purposes and that such loan is in
conformance with the Investment Company Act of 1940 and the Fund's prospectus
and Statement of Additional Information. The Custodian shall deliver on the
borrowing date specified in a Certificate the specified collateral and the
executed promissory note, if any, against delivery by the lending bank of the
total amount of the loan payable, provided that the same conforms to the total
amount payable as set forth in the Certificate. The Custodian may, at the option
of the lending bank, keep such collateral in its possession, but such collateral
shall be subject to all rights therein given the lending bank by virtue of any
promissory note or loan agreement. The Custodian shall deliver such Securities
as additional collateral as may be specified in a Certificate to collateralize
further any transaction described in this paragraph. The Fund shall cause all
Securities released from collateral status to be returned directly to the
Custodian, and the Custodian shall receive from time to time such return of
collateral as may be tendered to it. In the event that the Fund fails to specify
in a Certificate the Series, the name of the issuer, the title and number of
shares or the principal amount of any particular Securities to be delivered as
collateral by the Custodian, to any such bank, the Custodian shall not be under
any obligation to deliver any Securities.
ARTICLE XV
CUSTODY OF ASSETS OUTSIDE THE U.S.
1. The Custodian is authorized and instructed to employ, as its agent, as
subcustodians for the securities and other assets of the Fund maintained outside
of the United States the Foreign Subcustodians and Foreign Depositories
designated on Schedule A hereto. Except as provided in Schedule A, the Custodian
shall employ no other Foreign Custodian or Foreign Depository. The Custodian and
the Fund may amend Schedule A hereto from time to time to agree to designate any
additional Foreign Subcustodian or Foreign Depository with which the Custodian
has an agreement for such entity to act as the Custodian's agent, as
subcustodian, and which the Custodian in its absolute discretion proposes to
utilize to hold any of the Fund's Foreign Property. Upon receipt of a
Certificate or Written Instructions from the Fund, the Custodian shall cease the
employment of any one or more of such subcustodians for maintaining custody of
the Fund's assets and such custodian shall be deemed deleted from Schedule A.
2. The Custodian shall limit the securities and other assets maintained in the
custody of the Foreign Subcustodians to: (a) "foreign securities," as defined in
paragraph (c)(1) of Rule 17f-5 under the Investment Company Act of 1940, and (b)
cash and cash equivalents in such amounts as the Fund may determine to be
reasonably necessary to effect the foreign securities transactions of the Fund.
3. The Custodian shall identify on its books as belonging to the Fund, the
Foreign Securities held by each Foreign Subcustodian.
4. Each agreement pursuant to which the Custodian employs a Foreign Subcustodian
shall be substantially in the form reviewed and approved by the Fund and will
not be amended in a way that materially affects the Fund without the Fund's
prior written consent and shall:
(a) require that such institution establish custody account(s) for the
Custodian on behalf of the Fund and physically segregate in each such account
securities and other assets of the fund, and, in the event that such institution
deposits the securities of the Fund in a Foreign Depository, that it shall
identify on its books as belonging to the Fund or the Custodian, as agent for
the Fund, the securities so deposited;
(b) provide that:
(1) the assets of the Fund will not be subject to any right,
charge, security interest, lien or claim of any kind in favor of the Foreign
Subcustodian or its creditors, except a claim of payment for their safe custody
or administration;
(2) beneficial ownership for the assets of the Fund will be
freely transferable without the payment of money or value other than for custody
or administration;
(3) adequate records will be maintained identifying the
assets as belonging to the Fund;
(4) the independent public accountants for the Fund will be
given access to the books and records of the Foreign Subcustodian relating to
its actions under its agreement with the Custodian or confirmation of the
contents of those records;
(5) the Fund will receive periodic reports with respect to the
safekeeping of the Fund's assets, including, but not necessarily limited to,
notification of any transfer to or from the custody account(s); and
(6) assets of the Fund held by the Foreign Subcustodian will
be subject only to the instructions of the Custodian or its agents.
(c) Require the institution to exercise reasonable care in the
performance of its duties and to indemnify, and hold harmless, the Custodian
from and against any loss, damage, cost, expense, liability or claim arising out
of or in connection with the institution's performance of such obligations, with
the exception of any such losses, damages, costs, expenses, liabilities or
claims arising as a result of an act of God. At the election of the Fund, it
shall be entitled to be subrogated to the rights of the Custodian with respect
to any claims against a Foreign Subcustodian as a consequence of any such loss,
damage, cost, expense, liability or claim of or to the Fund, if and to the
extent that the Fund has not been made whole for any such loss, damage, cost,
expense, liability or claim.
5. Upon receipt of a Certificate or Written Instructions, which may be
continuing instructions when deemed appropriate by the parties, the Custodian
shall on behalf of the Fund make or cause its Foreign Subcustodian to transfer,
exchange or deliver securities owned by the Fund, except to the extent
explicitly prohibited therein. Upon receipt of a Certificate or Written
Instructions, which may be continuing instructions when deemed appropriate by
the parties, the Custodian shall on behalf of the fund pay out or cause its
Foreign Subcustodians to pay out monies of the Fund. The Custodian shall use all
means reasonably available to it, including, if specifically authorized by the
Fund in a Certificate, any necessary litigation at the cost and expense of the
Fund (except as to matters for which the Custodian is responsible hereunder) to
require or compel each Foreign Subcustodian or Foreign Depository to perform the
services required of it by the agreement between it and the Custodian authorized
pursuant to this Agreement.
6. The Custodian shall maintain all books and records as shall be necessary to
enable the Custodian readily to perform the services required of it hereunder
with respect to the Fund's Foreign Properties. The Custodians shall supply to
the Fund from time to time, as mutually agreed upon, statements in respect of
the Foreign Securities and other Foreign Properties of the Fund held by Foreign
Subcustodians, directly or through Foreign Depositories, including but not
limited to an identification of entities having possession of the Fund's Foreign
Securities and other assets, an advice or other notification of any transfers of
securities to or from each custodial account maintained for the Fund or the
Custodian on behalf of the Fund indicating, as to securities acquired for the
Fund, the identity of the entity having physical possession of such securities.
The Custodian shall promptly and faithfully transmit all reports and information
received pertaining to the Foreign Property of the Fund, including, without
limitation, notices or reports of corporate action, proxies and proxy soliciting
materials.
7. Upon request of the Fund, the Custodian shall use reasonable efforts to
arrange for the independent accountants of the Fund to be afforded access to the
books and records of any Foreign Subcustodian, or confirmation of the contents
thereof, insofar as such books and records relate to the Foreign Property of the
Fund or the performance of such Foreign Subcustodian under its agreement with
the Custodian; provided that any litigation to afford such access shall be at
the sole cost and expense of the Fund.
8. The Custodian recognizes that employment of a Foreign Subcustodian or Foreign
Depository for the Fund's Foreign Securities and Foreign Property is permitted
by Section 17(f) of the Investment Company Act of 1940 only upon compliance with
Section (a) of Rule 17f-5 promulgated thereunder. With respect to the Foreign
Subcustodians and Foreign Depositories identified on Schedule A, the Custodian
represents that it has furnished the Fund with certain materials prepared by the
Custodian and with such other information in the possession of the Custodian as
the Fund advised the Custodian was reasonably necessary to assist the Board of
Trustees of the Fund in making the determinations required of the Board of
Trustees by Rule 17f-5, including, without limitation, consideration of the
matters set forth in the Notes to Rule 17f-5. If the Custodian recommends any
additional Foreign Subcustodian or Foreign Depository, the Custodian shall
supply information similar in kind and scope to that furnished pursuant to the
preceding sentence. Further, the Custodian shall furnish annually to the Fund,
at such time as the Fund and Custodian shall mutually agree, information
concerning each Foreign Subcustodian and Foreign Depository then identified on
Schedule A similar in kind and scope to that furnished pursuant to the preceding
two sentences.
9. The Custodian's employment of any Foreign Subcustodian or Foreign Depository
shall constitute a representation that the Custodian believes in good faith that
such Foreign Subcustodian or Foreign Depository provides a level of safeguards
for maintaining the Fund's assets not materially different from that provided by
the Custodian in maintaining the Fund's securities in the United States. In
addition, the Custodian shall monitor the financial condition and general
operational performance of the Foreign Subcustodians and Foreign Depositories
and shall promptly inform the Fund in the event that the Custodian has actual
knowledge of a material adverse change in the financial condition thereof or
that there appears to be a substantial likelihood that the shareholders' equity
of any Foreign Subcustodian will decline below $200 million (U.S. dollars or the
equivalent thereof) or that its shareholders' equity has declined below $200
million , or that the Foreign Subcustodian or Foreign Depository has breached
the agreement between it and the Custodian in a way that the Custodian believes
adversely affects the Fund. Further, the Custodian shall advise the Fund if it
believes that there is a material adverse change in the operating environment of
any Foreign Subcustodian or Foreign Depository.
ARTICLE XVI
CONCERNING THE CUSTODIAN
1. The Custodian shall use reasonable care in the performance of its duties
hereunder, and, except as hereinafter provided, neither the Custodian nor its
nominee shall be liable for any loss or damage, including counsel fees,
resulting from its action or omission to act or otherwise, either hereunder or
under any Margin Account Agreement, except for any such loss or damage arising
out of its own negligence, bad faith, or willful misconduct or that of the
subcustodians or co-custodians appointed by the Custodian or of the officers,
employees, or agents of any of them. The Custodian may, with respect to
questions of law arising hereunder or under any Margin Account Agreement, apply
for and obtain the advice and opinion of counsel to the Fund, at the expense of
the Fund, or of its own counsel, at its own expense, and shall be fully
protected with respect to anything done or omitted by it in good faith in
conformity with such advice or opinion. The Custodian shall be liable to the
Fund for any loss or damage resulting from the use of the Book-Entry System or
any Depository arising by reason of any negligence, bad faith or willful
misconduct on the part of the Custodian or any of its employees or agents.
2. Notwithstanding the foregoing, the Custodian shall be under no obligation to
inquire into, and shall not be liable for:
(a) The validity (but not the authenticity) of the issue of any
Securities purchased, sold, or written by or for the Fund, the legality of the
purchase, sale or writing thereof, or the propriety of the amount paid or
received therefor, as specified in a Certificate, Oral Instructions, or Written
Instructions;
(b) The legality of the sale or redemption of any Shares, or
the propriety of the amount to be received or paid therefor, as specified in
a Certificate;
(c) The legality of the declaration or payment of any dividend by the
Fund, as specified in a resolution, Certificate, Oral Instructions, or Written
Instructions;
(d) The legality of any borrowing by the Fund using Securities as
collateral;
(e) The legality of any loan of portfolio Securities, nor shall the
Custodian be under any duty or obligation to see to it that the cash collateral
delivered to it by a broker, dealer, or financial institution or held by it at
any time as a result of such loan of portfolio Securities of the Fund is
adequate collateral for the Fund against any loss it might sustain as a result
of such loan, except that this subparagraph shall not excuse any liability the
Custodian may have for failing to act in accordance with Article X hereof or any
Certificate, Oral Instructions or Written Instructions given in accordance with
this Agreement. The Custodian specifically, but not by way of limitation, shall
not be under any duty or obligation periodically to check or notify the Fund
that the amount of such cash collateral held by it for the Fund is sufficient
collateral for the Fund, but such duty or obligation shall be the sole
responsibility of the Fund. In addition, the Custodian shall be under no duty or
obligation to see that any broker, dealer or financial institution to which
portfolio Securities of the Fund are lent pursuant to Article X of this
Agreement makes payment to it of any dividends or interest which are payable to
or for the account of the Fund during the period of such loan or at the
termination of such loan, provided, however, that the Custodian shall promptly
notify the Fund in the event that such dividends or interest are not paid and
received when due; or
(f) The sufficiency or value of any amounts of money and/or Securities
held in any Margin Account, Senior Security Account or Collateral Account in
connection with transactions by the Fund, except that this subparagraph shall
not excuse any liability the Custodian may have for failing to establish,
maintain, make deposits to or withdrawals from such accounts in accordance with
this Agreement. In addition, the Custodian shall be under no duty or obligation
to see that any broker, dealer, futures commission merchant or Clearing Member
makes payment to the Fund of any variation margin payment or similar payment
which the Fund may be entitled to receive from such broker, dealer, futures
commission merchant or Clearing Member, to see that any payment received by the
Custodian from any broker, dealer, futures commission merchant or Clearing
Member is the amount the Fund is entitled to receive, or to notify the Fund of
the Custodian's receipt or non-receipt of any such payment.
3. The Custodian shall not be liable for, or considered to be the Custodian of,
any money, whether or not represented by any check, draft, or other instrument
for the payment of money, received by it on behalf of the Fund until the
Custodian actually receives such money directly or by the final crediting of the
account representing the Fund's interest at the Book-Entry System or the
Depository.
4. With respect to Securities held in a Depository, except as otherwise provided
in paragraph 5(b) of Article III hereof, the Custodian shall have no
responsibility and shall not be liable for ascertaining or acting upon any
calls, conversions, exchange offers, tenders, interest rate changes or similar
matters relating to such Securities, unless the Custodian shall have actually
received timely notice from the Depository in which such Securities are held. In
no event shall the Custodian have any responsibility or liability for the
failure of a Depository to collect, or for the late collection or late crediting
by a Depository of any amount payable upon Securities deposited in a Depository
which may mature or be redeemed, retired, called or otherwise become payable.
However, upon receipt of a Certificate from the Fund of an overdue amount on
Securities held in a Depository the Custodian shall make a claim against the
Depository on behalf of the Fund, except that the Custodian shall not be under
any obligation to appear in, prosecute or defend any action suit or proceeding
in respect to any Securities held by a Depository which in its opinion may
involve it in expense or liability, unless indemnity satisfactory to it against
all expense and liability be furnished as often as may be required, or
alternatively, the Fund shall be subrogated to the rights of the Custodian with
respect to such claim against the Depository should it so request in a
Certificate. This paragraph shall not, however, excuse any failure by the
Custodian to act in accordance with a Certificate, Oral Instructions, or Written
Instructions given in accordance with this Agreement.
5. The Custodian shall not be under any duty or obligation to take action to
effect collection of any amount due the Fund from the Transfer Agent of the Fund
nor to take any action to effect payment or distribution by the Transfer Agent
of the Fund of any amount paid by the Custodian to the Transfer Agent of the
Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obligation to take action to
effect collection of any amount if the Securities upon which such amount is
payable are in default, or if payment is refused after the Custodian has timely
and properly, in accordance with this Agreement, made due demand or
presentation, unless and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of reimbursement of
its costs and expenses in connection with any such action, but the Custodian
shall have such a duty if the Securities were not in default on the payable date
and the Custodian failed to timely and properly make such demand for payment and
such failure is the reason for the non-receipt of payment.
7. The Custodian may, with the prior approval of the Board of Trustees of the
Fund, appoint one or more banking institutions as subcustodian or subcustodians,
or as co-Custodian or co-Custodians, of Securities and moneys at any time owned
by the Fund, upon such terms and conditions as may be approved in a Certificate
or contained in an agreement executed by the Custodian, the Fund and the
appointed institution; provided, however, that appointment of any foreign
banking institution or depository shall be subject to the provisions of Article
XV hereof.
8. The Custodian agrees to indemnify the Fund against and save the Fund harmless
from all liability, claims, losses and demands whatsoever, including attorney's
fees, howsoever arising or incurred because of the negligence, bad faith or
willful misconduct of any subcustodian of the Securities and moneys owned by the
Fund.
9. The Custodian shall not be under any duty or obligation (a) to ascertain
whether any Securities at any time delivered to, or held by it, for the account
of the Fund and specifically allocated to a Series are such as properly may be
held by the Fund or such Series under the provisions of its then current
prospectus, or (b) to ascertain whether any transactions by the Fund, whether or
not involving the Custodian, are such transactions as may properly be engaged in
by the Fund.
10. The Custodian shall be entitled to receive and the Fund agrees to pay to the
Custodian all reasonable out-of-pocket expenses and such compensation as may be
agreed upon in writing from time to time between the Custodian and the Fund. The
Custodian may charge such compensation, and any such expenses with respect to a
Series incurred by the Custodian in the performance of its duties under this
Agreement against any money specifically allocated to such Series. The Custodian
shall also be entitled to charge against any money held by it for the account of
a Series the amount of any loss, damage, liability or expense, including counsel
fees, for which it shall be entitled to reimbursement under the provisions of
this Agreement attributable to, or arising out of, its serving as Custodian for
such Series. The expenses for which the Custodian shall be entitled to
reimbursement hereunder shall include, but are not limited to, the expenses of
subcustodians and foreign branches of the Custodian incurred in settling outside
of New York City transactions involving the purchase and sale of Securities of
the Fund. Notwithstanding the foregoing or anything else contained in this
Agreement to the contrary, the Custodian shall, prior to effecting any charge
for compensation, expenses, or any overdraft or indebtedness or interest
thereon, submit an invoice therefor to the Fund.
11. The Custodian shall be entitled to rely upon any Certificate, notice or
other instrument in writing, Oral Instructions, or Written Instructions received
by the Custodian and reasonably believed by the Custodian to be genuine. The
Fund agrees to forward to the Custodian a Certificate or facsimile thereof
confirming Oral Instructions or Written Instructions in such manner so that such
Certificate or facsimile thereof is received by the Custodian, whether by hand
delivery, telecopier or other similar device, or otherwise, by the close of
business of the same day that such Oral Instructions or Written Instructions are
given to the Custodian. The Fund agrees that the fact that such confirming
instructions are not received by the Custodian shall in no way affect the
validity of the transactions or enforceability of the transactions thereby
authorized by the Fund. The Fund agrees that the Custodian shall incur no
liability to the Fund in acting upon Oral Instructions or Written Instructions
given to the Custodian hereunder concerning such transactions provided such
instructions reasonably appear to have been received from an Authorized Person.
12. The Custodian shall be entitled to rely upon any instrument, instruction or
notice received by the Custodian and reasonably believed by the Custodian to be
given in accordance with the terms and conditions of any Margin Account
Agreement. Without limiting the generality of the foregoing, the Custodian shall
be under no duty to inquire into, and shall not be liable for, the accuracy of
any statements or representations contained in any such instrument or other
notice including, without limitation, any specification of any amount to be paid
to a broker, dealer, futures commission merchant or Clearing Member. This
paragraph shall not excuse any failure by the Custodian to have acted in
accordance with any Margin Agreement it has executed or any Certificate, Oral
Instructions, or Written Instructions given in accordance with this Agreement.
13. The books and records pertaining to the Fund, as described in Appendix E
hereto, which are in the possession of the Custodian shall be the property of
the Fund. Such books and records shall be prepared and maintained by the
Custodian as required by the Investment Company Act of 1940, as amended, and
other applicable Securities laws and rules and regulations. The Fund, or the
Fund's authorized representatives, shall have access to such books and records
during the Custodian's normal business hours. Upon the reasonable request of the
Fund, copies of any such books and records shall be provided by the Custodian to
the Fund or the Fund's authorized representative, and the Fund shall reimburse
the Custodian its expenses of providing such copies. Upon reasonable request of
the Fund, the Custodian shall provide in hard copy or on micro-film, whichever
the Custodian elects, any records included in any such delivery which are
maintained by the Custodian on a computer disc, or are similarly maintained, and
the Fund shall reimburse the Custodian for its expenses of providing such hard
copy or micro-film.
14. The Custodian shall provide the Fund with any report obtained by the
Custodian on the system of internal accounting control of the Book-Entry system,
each Depository or O.C.C., and with such reports on its own systems of internal
accounting control as the Fund may reasonably request from time to time.
15. The Custodian shall furnish upon request annually to the Fund a letter
prepared by the Custodian's accountants with respect to the Custodian's internal
systems and controls in the form generally provided by the Custodian to other
investment companies for which the Custodian acts as custodian.
16. The Fund agrees to indemnify the Custodian against and save the Custodian
harmless from all liability, claims, losses and demands whatsoever, including
attorney's fees, howsoever arising out of, or related to, the Custodian's
performance of its obligations under this Agreement, except for any such
liability, claim, loss and demand arising out of the negligence, bad faith, or
willful misconduct of the Custodian, any co-Custodian or subcustodian appointed
by the Custodian, or that of the officers, employees, or agents of any of them.
17. Subject to the foregoing provisions of this Agreement, the Custodian shall
deliver and receive Securities, and receipts with respect to such Securities,
and shall make and receive payments only in accordance with the customs
prevailing from time to time among brokers or dealers in such Securities and,
except as may otherwise be provided by this Agreement or as may be in accordance
with such customs, shall make payment for Securities only against delivery
thereof and deliveries of Securities only against payment therefor.
18. The Custodian will comply with the procedures, guidelines or restrictions
("Procedures") adopted by the Fund from time to time for particular types of
investments or transactions, e.g., Repurchase Agreements and Reverse Repurchase
Agreements, provided that the Custodian has received from the Fund a copy of
such Procedures. If within ten days after receipt of any such Procedures, the
Custodian determines in good faith that it is unreasonable for it to comply with
any new procedures, guidelines or restrictions set forth therein, it may within
such ten day period send notice to the Fund that it does not intend to comply
with those new procedures, guidelines or restrictions which it identifies with
particularity in such notice, in which event the Custodian shall not be required
to comply with such identified procedures, guidelines or restrictions; provided,
however, that, anything to the contrary set forth herein or in any other
agreement with the Fund, if the Custodian identifies procedures, guidelines or
restrictions with which it does not intend to comply, the Fund shall be entitled
to terminate this Agreement without cost or penalty to the Fund upon thirty
days' written notice.
19. Whenever the Custodian has the authority to deduct monies from the account
for a series without a Certificate, it shall notify the Fund within one business
day of such deduction and the reason for it. Whenever the Custodian has the
authority to sell Securities or any other property of the Fund on behalf of any
Series without a Certificate, the Custodian will notify the Fund of its
intention to do so and afford the Fund the reasonable opportunity to select
which Securities or other property it wishes to sell on behalf of such Series.
If the Fund does not promptly sell sufficient Securities or Deposited Property
on behalf of the Series, then, after notice, the Custodian may proceed with the
intended sale.
20. The Custodian shall have no duties or responsibilities whatsoever except
such duties and responsibilities as are specifically set forth or referred to in
this Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
ARTICLE XVII
TERMINATION
1. Except as provided in paragraph 3 of this Article, this Agreement shall
continue until terminated by either the Custodian giving to the Fund, or the
Fund giving to the Custodian, a notice in writing specifying the date of such
termination, which date shall be not less than 60 days after the date of the
giving of such notice. In the event such notice or a notice pursuant to
paragraph 3 of this Article is given by the Fund, it shall be accompanied by a
copy of a resolution of the Board of Trustees of the Fund, certified by an
Officer and the Secretary or an Assistant Secretary of the Fund, electing to
terminate this Agreement and designating a successor custodian or custodians,
each of which shall be eligible to serve as a custodian for the Securities of a
management investment company under the Investment Company Act of 1940. In the
event such notice is given by the Custodian, the Fund shall, on or before the
termination date, deliver to the Custodian a copy of a resolution of the Board
of Trustees of the Fund, certified by the Secretary or any Assistant Secretary,
designating a successor custodian or custodians. In the absence of such
designation by the Fund, the Custodian may designate a successor custodian which
shall be a bank or trust company eligible to serve as a custodian for Securities
of a management investment company under the Investment Company Act of 1940 and
which is acceptable to the Fund. Upon the date set forth in such notice this
Agreement shall terminate, and the Custodian shall upon receipt of a notice of
acceptance by the successor custodian on that date deliver directly to the
successor custodian all Securities and moneys then owned by the Fund and held by
it as Custodian, after deducting all fees, expenses and other amounts for the
payment or reimbursement of which it shall then be entitled.
2. If a successor custodian is not designated by the Fund or the Custodian in
accordance with the preceding paragraph, the Fund shall upon the date specified
in the notice of termination of this Agreement and upon the delivery by the
Custodian of all Securities (other than Securities held in the Book-Entry System
which cannot be delivered to the Fund) and moneys then owned by the Fund be
deemed to be its own custodian and the Custodian shall thereby be relieved of
all duties and responsibilities pursuant to this Agreement arising thereafter,
other than the duty with respect to Securities held in the Book Entry System
which cannot be delivered to the Fund to hold such Securities hereunder in
accordance with this Agreement.
3. Notwithstanding the foregoing, the Fund may terminate this Agreement upon the
date specified in a written notice in the event of the "Bankruptcy" of The Bank
of New York. As used in this sub-paragraph, the term "Bankruptcy" shall mean The
Bank of New York's making a general assignment, arrangement or composition with
or for the benefit of its creditors, or instituting or having instituted against
it a proceeding seeking a judgment of insolvency or bankruptcy or the entry of a
order for relief under any applicable bankruptcy law or any other relief under
any bankruptcy or insolvency law or other similar law affecting creditors
rights, or if a petition is presented for the winding up or liquidation of the
party or a resolution is passed for its winding up or liquidation, or it seeks,
or becomes subject to, the appointment of an administrator, receiver, trustee,
custodian or other similar official for it or for all or substantially all of
its assets or its taking any action in furtherance of, or indicating its consent
to approval of, or acquiescence in, any of the foregoing.
ARTICLE XVIII
TERMINAL LINK
1. At no time and under no circumstances shall the Fund be obligated to have or
utilize the Terminal Link, and the provisions of this Article shall apply if,
but only if, the Fund in its sole and absolute discretion elects to utilize the
Terminal Link to transmit Certificates to the Custodian.
2. The Terminal Link shall be utilized only for the purpose of the Fund
providing Certificates to the Custodian and the Custodian providing notices to
the Fund and only after the Fund shall have established access codes and
internal safekeeping procedures to safeguard and protect the confidentiality and
availability of such access codes. Each use of the Terminal Link by the Fund
shall constitute a representation and warranty that at least two officers have
each utilized an access code that such internal safekeeping procedures have been
established by the Fund, and that such use does not contravene the Investment
Company Act of 1940 and the rules and regulations thereunder.
3. Each party shall obtain and maintain at its own cost and expense all
equipment and services, including, but not limited to communications services,
necessary for it to utilize the Terminal Link, and the other party shall not be
responsible for the reliability or availability of any such equipment or
services, except that the Custodian shall not pay any communications costs of
any line leased by the Fund, even if such line is also used by the Custodian.
4. The Fund acknowledges that any data bases made available as part of, or
through the Terminal Link and any proprietary data, software, processes,
information and documentation (other than any such which are or become part of
the public domain or are legally required to be made available to the public)
(collectively, the "Information"), are the exclusive and confidential property
of the Custodian. The Fund shall, and shall cause others to which it discloses
the Information, to keep the Information confidential by using the same care and
discretion it uses with respect to its own confidential property and trade
secrets, and shall neither make nor permit any disclosure without the express
prior written consent of the Custodian.
5. Upon termination of this Agreement for any reason, each Fund shall return to
the Custodian any and all copies of the Information which are in the Fund's
possession or under its control, or which the Fund distributed to third parties.
The provisions of this Article shall not affect the copyright status of any of
the Information which may be copyrighted and shall apply to all Information
whether or not copyrighted.
6. The Custodian reserves the right to modify the Terminal Link from time to
time without notice to the Fund, except that the Custodian shall give the Fund
notice not less than 75 days in advance of any modification which would
materially adversely affect the Fund's operation, and the Fund agrees not to
modify or attempt to modify the Terminal Link without the Custodian's prior
written consent. The Fund acknowledges that any software provided by the
Custodian as part of the Terminal Link is the property of the Custodian and,
accordingly, the Fund agrees that any modifications to the same, whether by the
Fund or the Custodian and whether with or without the Custodian's consent, shall
become the property of the Custodian.
7. Neither the Custodian nor any manufacturers and suppliers it utilizes or the
Fund utilizes in connection with the Terminal Link makes any warranties or
representations, express or implied, in fact or in law, including but not
limited to warranties of merchantability and fitness for a particular purpose.
8. Each party will cause its officers and employees to treat the authorization
codes and the access codes applicable to Terminal Link with extreme care, and
irrevocably authorizes the other to act in accordance with and rely on
Certificates and notices received by it through the Terminal Link. Each party
acknowledges that it is its responsibility to assure that only its authorized
persons use the Terminal Link on its behalf, and that a party shall not be
responsible nor liable for use of the Terminal Link on behalf of the other party
by unauthorized persons of such other party.
9. Notwithstanding anything else in this Agreement to the contrary, neither
party shall have any liability to the other for any losses, damages, injuries,
claims, costs or expenses arising as a result of a delay, omission or error in
the transmission of a Certificate or notice by use of the Terminal Link except
for money damages for those suffered as the result of the negligence, bad faith
or willful misconduct of such party or its officers, employees or agents in an
amount not exceeding for any incident $100,000; provided, however, that a party
shall have no liability under this Section 9 if the other party fails to comply
with the provisions of Section 11.
10. Without limiting the generality of the foregoing, in no event shall either
party or any manufacturer or supplier of its computer equipment, software or
services relating to the Terminal Link be responsible for any special, indirect,
incidental or consequential damages which the other party may incur or
experience by reason of its use of the Terminal Link even if such party,
manufacturer or supplier has been advised of the possibility of such damages,
nor with respect to the use of the Terminal Link shall either party or any such
manufacturer or supplier be liable for acts of God, or with respect to the
following to the extent beyond such person's reasonable control: machine or
computer breakdown or malfunction, interruption or malfunction of communication
facilities, labor difficulties or any other similar or dissimilar cause.
11. The Fund shall notify the Custodian of any errors, omissions or
interruptions in, or delay or unavailability of, the Terminal Link as promptly
as practicable, and in any event within 24 hours after the earliest of (i)
discovery thereof, and (ii) in the case of any error, the date of actual receipt
of the earliest notice which reflects such error, it being agreed that discovery
and receipt of notice may only occur on a business day. The Custodian shall
promptly advise the Fund whenever the Custodian learns of any errors, omissions
or interruption in, or delay or unavailability of, the Terminal Link.
12. Each party shall, as soon as practicable after its receipt of a Certificate
or a notice transmitted by the Terminal Link, verify to the other party by use
of the Terminal Link its receipt of such Certificate or notice, and in the
absence of such verification the party to which the Certificate or notice is
sent shall not be liable for any failure to act in accordance with such
Certificate or notice and the sending party may not claim that such Certificate
or notice was received by the other party.
ARTICLE XIX
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of the present
Officers of the Fund under its seal, setting forth the names and the signatures
of the present Authorized Persons. The Fund agrees to furnish to the Custodian a
new Certificate in similar form in the event that any such present Authorized
Person ceases to be an Authorized Person or in the event that other or
additional Authorized Persons are elected or appointed. Until such new
Certificate shall be received, the Custodian shall be entitled to rely and to
act upon Oral Instructions, Written Instructions, or signatures of the present
Authorized Persons as set forth in the last delivered Certificate to the extent
provided by this Agreement.
2. Annexed hereto as Appendix B is a Certificate signed by two of the present
Officers of the Fund under its seal, setting forth the names and the signatures
of the present Officers of the Fund. The Fund agrees to furnish to the Custodian
a new Certificate in similar form in the event any such present officer ceases
to be an officer of the Fund, or in the event that other or additional officers
are elected or appointed. Until such new Certificate shall be received, the
Custodian shall be entitled to rely and to act upon the signatures of the
officers as set forth in the last delivered Certificate to the extent provided
by this Agreement.
3. Any notice or other instrument in writing, authorized or required by this
Agreement to be given to the Custodian, other than any Certificate or Written
Instructions, shall be sufficiently given if addressed to the Custodian and
mailed or delivered to it at its offices at 90 Washington Street, New York, New
York 10286, or at such other place as the Custodian may from time to time
designate in writing.
4. Any notice or other instrument in writing, authorized or rehired by this
Agreement to be given to the Fund shall be sufficiently given if addressed to
the Fund and mailed or delivered to it at its office at the address for the Fund
first above written, or at such other place as the Fund may from time to time
designate in writing.
5. This Agreement constitutes the entire agreement between the parties, replaces
all prior agreements and may not be amended or modified in any manner except by
a written agreement executed by both parties with the same formality as this
Agreement and approved by a resolution of the Board of Trustees of the Fund,
except that Appendices A and B may be amended unilaterally by the Fund without
such an approving resolution.
6. This Agreement shall extend to and shall be binding upon the parties hereto,
and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable by the Fund without the written consent of the
Custodian, or by the Custodian or The Bank of New York without the written
consent of the Fund, authorized or approved by a resolution of the Fund's Board
of Trustees. For purposes of this paragraph, no merger, consolidation, or
amalgamation of the Custodian, The Bank of New York, or the Fund shall be deemed
to constitute an assignment of this Agreement.
7. This Agreement shall be construed in accordance with the laws of the State of
New York without giving effect to conflict of laws principles thereof. Each
party hereby consents to the jurisdiction of a state or federal court situated
in New York City, New York in connection with any dispute arising hereunder and
hereby waives its right to trial by jury.
8. This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
9. A copy of the Declaration of Trust of the Fund is on file with the Secretary
of The Commonwealth of Massachusetts, and notice is hereby given that this
instrument is executed on behalf of the Board of Trustees of the Fund as
Trustees and not individually and that the obligations of the instrument are not
binding upon any of the Trustees or shareholders individually but are binding
upon the assets and property of the Fund; provided, however, that the
Declaration of Trust of the Fund provides that the assets of a particular series
of the Fund shall under no circumstances be charges with liabilities
attributable to any other series of the Fund and that all persons extending
credit to, or contracting with or having any claim against a particular series
of the Fund shall look only to the assets of that particular series for payment
of such credit, contract or claim.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective Officers, thereunto duly authorized and their respective
seals to be hereunto affixed, as of the day and year first above written.
Oppenheimer Senior Floating Rate Fund
By: /s/ Andrew J. Donohue
Andrew J. Donohue, Secretary
[SEAL]
/s/ Robert G. Zack
Attest: Robert G. Zack, Assistant Secretary
The Bank of New York
[SEAL] By: /s/ Jorge Ramos
Jorge Ramos, Vice President
Attest:
- -----------------------------------
<PAGE>
APPENDIX A
I, Andrew J. Donohue, Secretary, and I, Robert G. Zack, Assistant Secretary of
Oppenheimer Senior Floating Rate Fund, a Massachusetts business trust (the
"Fund") do hereby certify that:
The following individuals have been duly authorized by the Board of Trustees of
the Fund in conformity with the Fund's Declaration of Trust and By-Laws to give
Oral Instructions and Written Instructions on behalf of the Fund and further
that the signatures set forth opposite their respective names are their true and
correct signatures:
<TABLE>
<CAPTION>
Name Position Signature
<S> <C> <C>
Brian W. Wixted Treasurer __________________________
Andrew J. Donohue Secretary, EVP, OFI __________________________
Robert G. Zack Assistant Secretary __________________________
Scott Farrar Assistant Treasurer __________________________
Mitchell J. Lindauer Vice President, OFI __________________________
Katherine P. Feld Vice President, OFI __________________________
David Mabry Vice President/OFI __________________________
Robert Bishop Assistant Treasurer __________________________
Erin Gardiner Assistant Vice President/OFI __________________________
David Foxhoven Assistant Vice President/OFI __________________________
Connie Bechtolt Assistant Vice President/OFI __________________________
</TABLE>
The following persons have been duly authorized by the Board of Trustees of the
Fund to provide Written Instructions on behalf of the Fund provided that the
signature of any one of such persons is accompanied by the signature of any one
of the foregoing persons:
Janette Aprilante ___________________________
Tracey Beauchamp ___________________________
Jack Brown ___________________________
Thomas A. Liddy ___________________________
Cindy Miyake ___________________________
Brian Petersen ___________________________
Dale W. Campbell ___________________________
Vincent Toner ___________________________
Matthew O'Donnell ___________________________
David Foxhoven ___________________________
Lisa Chaffee ___________________________
IN WITNESS WHEREOF, I hereunto set my hand in the seal of Oppenheimer Senior
Floating Rate Fund as of the 24th day of August, 1999.
/s/ Andrew J. Donohue
Andrew J. Donohue, Secretary
/s/ Robert G. Zack
Robert G. Zack, Assistant Secretary
<PAGE>
APPENDIX B
I, Andrew J. Donohue, Secretary, and I, Robert G. Zack, Assistant Secretary of
Oppenheimer Senior Floating Rate Fund, a Massachusetts business trust (the
"Fund") do hereby certify that:
The following individuals serve in the following positions with the Fund, each
has been duly elected or appointed by the Board of Trustees of the Fund to each
such position and qualified therefor in conformity with the Fund's Declaration
of Trust and By-Laws and further that the signatures of each individual below
set forth opposite their respective names are their true and correct signatures:
<TABLE>
<CAPTION>
Name Position Signature
<S> <C> <C>
Robert Bishop Assistant Treasurer __________________________
Brian W. Wixted Treasurer __________________________
Andrew J. Donohue Secretary, EVP and General __________________________
Counsel of OFI
Scott Farrar Assistant Treasurer __________________________
Robert G. Zack Assistant Secretary __________________________
</TABLE>
IN WITNESS WHEREOF, I hereunto set my hand in the seal of Oppenheimer Senior
Floating Rate Fund as of the 24th day of August, 1999.
/s/ Andrew J. Donohue
Andrew J. Donohue, Secretary
/s/ Robert G. Zack
Robert G. Zack, Assistant Secretary
<PAGE>
APPENDIX C
The undersigned, Andrew J. Donohue, hereby certifies that he or she is the duly
elected and acting secretary of Oppenheimer Senior Floating Rate Fund (the
"Fund"), further certifies that the following resolutions were adopted by the
Board of Trustees of the Fund at a meeting duly held on August 24, 1999, at
which a quorum at all times present and that such resolutions have not been
modified or rescinded and are in full force an effect as of the date hereof.
RESOLVED, that The Bank New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund in
substantially the form of such agreement presented to this
meeting (the "Custody Agreement") is authorized and instructed
on a continuous and ongoing basis to act in accordance with,
and to rely on instructions by the Fund to the Custodian
communicated by a Terminal Link as defined in the Custody
Agreement.
RESOLVED, that the Fund shall establish access codes and grant
use of such access codes only to officers of the Fund as
defined in the Custody Agreement, and shall establish internal
safekeeping procedures to safeguard and protect the
confidentiality and availability of such access codes.
RESOLVED, that Officers of the Fund as defined in the Custody
Agreement shall, following the establishment of such access
codes and such internal safekeeping procedures, advise the
Custodian that the same have been established by delivering a
Certificate, as defined in the Custody Agreement, and the
Custodian shall be entitled to rely upon such advice.
IN WITNESS WHEREOF, I hereunto set my hand in the seal of Oppenheimer
Senior Floating Rate Fund, as of the 24th day of August, 1999.
/s/ Andrew J. Donohue
Andrew J. Donohue, Secretary
<PAGE>
APPENDIX D
Pursuant to Article III, Section 5(b) of the Custody Agreement by and between
Oppenheimer Senior Floating Rate Fund and The Bank of New York, the following
publications are hereby designated:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
IN WITNESS WHEREOF, I hereunto set my hand in the seal of The Bank of
New York, as of the 24th day of August, 1999.
/s/ Jorge Ramos
Jorge Ramos, Vice President
<PAGE>
APPENDIX E
The following books and records pertaining to Fund shall be prepared and
maintained by the Custodian and shall be the property of the Fund:
None.
<PAGE>
EXHIBIT A
CERTIFICATION
The undersigned, Andrew J. Donohue, hereby certifies that he is the duly elected
and acting secretary of Oppenheimer Senior Floating Rate Fund, a Massachusetts
business trust (the "Fund"), and further certifies that the following resolution
was adopted by the Board of Trustees of the Fund at a meeting duly held on
August 24, 1999, at which a quorum was at all times present and that such
resolution has not been modified or rescinded and is in full force and effect as
of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody
Agreement to be entered between The Bank of New York and the Fund
substantially the form of such agreement presented to this meeting,
(the "Custody Agreement") is authorized and instructed on a continuous
and ongoing basis to deposit in the Book-Entry System, as defined in
the Custody Agreement, all Securities eligible for deposit therein,
regardless of the Series to which the same are specifically allocated,
and to utilize the Book-Entry System to the extent possible in
connection with its performance thereunder, including, without
limitation, in connection with settlements of purchases and sales of
Securities, loans of Securities, and deliveries and returns of
Securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of Oppenheimer
Senior Floating Rate Fund, as of the 24th day of August, 1999.
/s/ Andrew J. Donohue
Andrew J. Donohue, Secretary
[SEAL]
<PAGE>
EXHIBIT B
CERTIFICATION
The undersigned, Andrew J. Donohue, hereby certifies that he is the duly elected
and acting secretary of Oppenheimer Senior Floating Rate Fund, a Massachusetts
business trust (the "Fund"), and further certifies that the following resolution
was adopted by the Board of Trustees of the Fund at a meeting duly held on
August 24, 1999, at which a quorum was at all times present and that such
resolution has not been modified or rescinded and is in full force and effect as
of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody
Agreement to be entered between The Bank of New York and the Fund in
substantially the form of such agreement presented to this meeting (the
"Custody Agreement") is authorized and instructed on a continuous and
ongoing basis until such time as it receives a Certificate, as defined
in the Custody Agreement, to the contrary to deposit in The Depository
Trust Company ("DTC") as a "Depository" as defined in the Custody
Agreement, all Securities eligible for deposit therein, regardless of
the Series to which the same are specifically allocated, and to utilize
DTC to the extent possible in connection with its performance
thereunder, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of Securities,
and deliveries and returns of Securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of Oppenheimer
Senior Floating Rate Fund as of the 24th day of August, 1999.
/s/ Andrew J. Donohue
Andrew J. Donohue, Secretary
[SEAL]
<PAGE>
EXHIBIT B-1
CERTIFICATION
The undersigned, Andrew J. Donohue hereby certifies that he is the duly elected
and acting secretary of Oppenheimer Senior Floating Rate Fund, a Massachusetts
business trust (the "Fund"), and further certifies that the following resolution
was adopted by the Board of Trustees of the Fund at a meeting duly held on
August 24, 1999, at which a quorum was at all times present and that such
resolution has not been modified or rescinded and is in full force and effect as
of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Fund in substantially
the form of such agreement presented to this meeting (the "Custody
Agreement") is authorized and instructed on a continuous and ongoing
basis until such time as it receives a Certificate, as defined in the
Custody Agreement, to the contrary to deposit in the Participants Trust
Company as a Depository, as defined in the Custody Agreement, all
Securities eligible for deposit therein, regardless of the Series to
which the same are specifically allocated, and to utilize the
Participants Trust Company to the extent possible in connection with
its performance thereunder, including, without limitation, in
connection with settlements of purchases and sales of Securities, loans
of Securities, and deliveries and returns of Securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of Oppenheimer
Senior Floating Rate Fund as of the 24th day of August, 1999.
/s/ Andrew J. Donohue
Andrew J. Donohue, Secretary
[SEAL]
<PAGE>
EXHIBIT C
CERTIFICATION
The undersigned, Andrew J. Donohue hereby certifies that he is the duly elected
and acting secretary of Oppenheimer Senior Floating Rate Fund, a Massachusetts
business trust (the "Fund"), and further certifies that the following resolution
was adopted by the Board of Trustees of the Fund at a meeting duly held on
August 24, 1999, at which a quorum was at all times present and that such
resolution has not been modified or rescinded and is in full force and effect as
of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York in substantially the form of
such agreement presented to this meeting (the "Custody Agreement") is
authorized and instructed on a continuous and ongoing basis until such
time as it receives a Certificate, as defined in the Custody Agreement,
to the contrary, to accept, utilize and act with respect to Clearing
Member confirmations for Options and transaction in Options, regardless
of the Series to which the same are specifically allocated, as such
terms are defined in the Custody Agreement, as provided in the Custody
Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of Oppenheimer
Senior Floating Rate Fund as of the 24th day of August, 1999.
/s/ Andrew J. Donohue
Andrew J. Donohue, Secretary
[SEAL]
<PAGE>
EXHIBIT D
[THE FORM OF FOREIGN SUBCUSTODIAN AGREEMENT VARIES DEPENDING ON THE COUNTRY.]
SERVICE PLAN AND AGREEMENT
Between
Oppenheimer Senior Floating Rate Fund and
OppenheimerFunds Distributor, Inc.
For Class A Shares
Service Plan and Agreement dated the 24th day of August, 1999, by and between
Oppenheimer Senior Floating Rate Fund (the "Fund") and OppenheimerFunds
Distributor, Inc. (the "Distributor").
1. The Plan. This Plan is the Fund's written service plan for its Class A Shares
described in the Fund's registration statement as of the date this Plan takes
effect, contemplated by and to comply with Rule 2830 of the Conduct Rules of the
National Association of Securities Dealers, Inc., with which the Fund has agreed
to comply. Pursuant to this Plan the Fund will reimburse the Distributor for a
portion of its costs incurred in connection with the personal service and the
maintenance of shareholder accounts ("Accounts") that hold Class A Shares (the
"Shares") of the Fund. The Fund may be deemed to be acting as distributor of
securities of which it is the issuer, according to the terms of this Plan. The
Distributor is authorized under the Plan to pay "Recipients," as hereinafter
defined, for rendering services and for the maintenance of Accounts. Such
Recipients are intended to have certain rights as third-party beneficiaries
under this Plan.
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other
financial institution which: (i) has rendered services in connection
with the personal service and maintenance of Accounts; (ii) shall
furnish the Distributor (on behalf of the Fund) with such information
as the Distributor shall reasonably request to answer such questions
as may arise concerning such service; and (iii) has been selected by
the Distributor to receive payments under the Plan. Notwithstanding
the foregoing, a majority of the Fund's Board of Trustees (the
"Board") who are not "interested persons" (as defined in the
Investment Company Act of 1940, referred to in this plan as the "1940
Act") and who have no direct or indirect financial interest in the
operation of this Plan or in any agreements relating to this Plan (the
"Independent Trustees") may remove any broker, dealer, bank or other
institution as a Recipient, whereupon such entity's rights as a third
party beneficiary hereof shall terminate.
(b) "Qualified Holdings" shall mean, as to any Recipient, all
Shares owned beneficially or of record by: (i) such Recipient, or (ii)
such customers, clients and/or accounts as to which such Recipient is
a fiduciary or custodian or co-fiduciary or co-custodian
(collectively, the "Customers"), but in no event shall any such Shares
be deemed owned by more than one Recipient for purposes of this Plan.
In the event that two entities would otherwise qualify as Recipients
as to the same Shares, the Recipient which is the dealer of record on
the Fund's books shall be deemed the Recipient as to such Shares for
purposes of this Plan.
3. Payments.
(a) Under the Plan, the Fund will make payments to the
Distributor, within forty-five (45) days of the end of each calendar
quarter, in the amount of the lesser of: (i) .0625% (.25% on an annual
basis) of the average during the calendar quarter of the aggregate net
asset value of the Shares computed as of the close of each business
day, or (ii) the Distributor's actual expenses under the Plan for that
quarter of the type approved by the Board. The Distributor will use
such fee received from the Fund in its entirety to reimburse itself
for payments to Recipients and for its other expenditures and costs of
the type approved by the Board incurred in connection with the
personal service and maintenance of Accounts including, but not
limited to, the services described in the following paragraph. The
Distributor may make Plan payments to any "affiliated person" (as
defined in the 1940 Act) of the Distributor if such affiliated person
qualifies as a Recipient.
The services to be rendered by the Distributor and Recipients in
connection with the personal service and the maintenance of
Accounts may include, but shall not be limited to, the following:
answering routine inquiries from the Recipient's customers
concerning the Fund, providing such customers with information on
their investment in shares, assisting in the establishment and
maintenance of accounts or sub-accounts in the Fund, making the
Fund's investment plans and dividend payment options available,
and providing such other information and customer liaison services
and the maintenance of Accounts as the Distributor or the Fund may
reasonably request. It may be presumed that a Recipient has
provided services qualifying for compensation under the Plan if it
has Qualified Holdings of Shares to entitle it to payments under
the Plan. In the event that either the Distributor or the Board
should have reason to believe that, notwithstanding the level of
Qualified Holdings, a Recipient may not be rendering appropriate
services, then the Distributor, at the request of the Board, shall
require the Recipient to provide a written report or other
information to verify that said Recipient is providing appropriate
services in this regard. If the Distributor still is not
satisfied, it may take appropriate steps to terminate the
Recipient's status as such under the Plan, whereupon such entity's
rights as a third-party beneficiary hereunder shall terminate.
Payments received by the Distributor from the Fund under the Plan
will not be used to pay any interest expense, carrying charge or
other financial costs, or allocation of overhead of the
Distributor, or for any other purpose other than for the payments
described in this Section 3. The amount payable to the Distributor
each quarter will be reduced to the extent that reimbursement
payments otherwise permissible under the Plan have not been
authorized by the Board of Trustees for that quarter. Any
unreimbursed expenses incurred for any quarter by the Distributor
may not be recovered in later periods.
(b) The Distributor shall make payments to any Recipient
quarterly, within forty-five (45) days of the end of each calendar
quarter, at a rate not to exceed .0625% (.25% on an annual basis) of
the average during the calendar quarter of the aggregate net asset
value of the Shares computed as of the close of each business day of
Qualified Holdings (excluding Shares acquired in reorganizations with
investment companies for which OppenheimerFunds, Inc. or an affiliate
acts as investment adviser and which have not adopted a distribution
plan at the time of reorganization with the Fund). However, no such
payments shall be made to any Recipient for any such quarter in which
its Qualified Holdings do not equal or exceed, at the end of such
quarter, the minimum amount ("Minimum Qualified Holdings"), if any, to
be set from time to time by a majority of the Independent Trustees. A
majority of the Independent Trustees may at any time or from time to
time increase or decrease and thereafter adjust the rate of fees to be
paid to the Distributor or to any Recipient, but not to exceed the
rate set forth above, and/or increase or decrease the number of shares
constituting Minimum Qualified Holdings. The Distributor shall notify
all Recipients of the Minimum Qualified Holdings and the rate of
payments hereunder applicable to Recipients, and shall provide each
such Recipient with written notice within thirty (30) days after any
change in these provisions. Inclusion of such provisions or a change
in such provisions in a revised current prospectus shall be sufficient
notice.
(c) Under the Plan, payments may be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may
include profits derived from the advisory fee it receives from the
Fund), or (ii) by the Distributor (a subsidiary of OFI), from its
own resources.
4. Selection and Nomination of Trustees. While this Plan is in effect, the
selection or replacement of Independent Trustees and the nomination of those
persons to be Trustees of the Fund who are not "interested persons" of the Fund
shall be committed to the discretion of the Independent Trustees. Nothing herein
shall prevent the Independent Trustees from soliciting the views or the
involvement of others in such selection or nomination if the final decision on
any such selection and nomination is approved by a majority of the incumbent
Independent Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Fund shall
provide at least quarterly a written report to the Fund's Board for its review,
detailing the amount of all payments made pursuant to this Plan, the identity of
the Recipient of each such payment, and the purposes for which the payments were
made. The report shall state whether all provisions of Section 3 of this Plan
have been complied with. The Distributor shall annually certify to the Board the
amount of its total expenses incurred that year with respect to the personal
service and maintenance of Accounts in conjunction with the Board's annual
review of the continuation of the Plan.
6. Related Agreements. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by vote of a majority of the Independent
Trustees or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding Shares of the Class, on not more than sixty days
written notice to any other party to the agreement; (ii) such agreement shall
automatically terminate in the event of its "assignment" (as defined in the 1940
Act); (iii) it shall go into effect when approved by a vote of the Board and its
Independent Trustees cast in person at a meeting called for the purpose of
voting on such agreement; and (iv) it shall, unless terminated as herein
provided, continue in effect from year to year only so long as such continuance
is specifically approved at least annually by the Board and its Independent
Trustees cast in person at a meeting called for the purpose of voting on such
continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan has been
approved by a vote of the Independent Trustees cast in person at a meeting
called on August 24, 1999 for the purpose of voting on this Plan. Unless
terminated as hereinafter provided, it shall continue in effect until renewed by
the Board in accordance with the Rule and thereafter from year to year or as the
Board may otherwise determine but only so long as such continuance is
specifically approved at least annually by a vote of the Board and its
Independent Trustees cast in person at a meeting called for the purpose of
voting on such continuance. This Plan may be terminated at any time by vote of a
majority of the Independent Trustees or by the vote of the holders of a
"majority" (as defined in the 1940 Act) of the Fund's outstanding Class A voting
securities. This Plan may not be amended to increase materially the amount of
payments to be made without approval of the Class A Shareholders, in the manner
described above, and all material amendments must be approved by a vote of the
Board and of the Independent Trustees.
8. Shareholder and Trustee Liability Disclaimer. The Distributor understands and
agrees that the obligations of the Fund under this Plan are not binding upon any
shareholder or Trustee of the Fund personally, but only the Fund and the Fund's
property. The Distributor represents that it has notice of the provisions of the
Declaration of Trust of the Fund disclaiming Trustee and shareholder and Trustee
liability for acts or obligations of the Fund.
Oppenheimer Senior Floating Rate Fund
/s/ Andrew J. Donohue
By: ________________________________________
Andrew J. Donohue
Vice President and Secretary
OppenheimerFunds Distributor, Inc.
/s/ Katherine P. Feld
By: ________________________________________
Katherine P. Feld
Vice President and Secretary
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
With
OppenheimerFunds Distributor, Inc.
For Class B Shares of
Oppenheimer Senior Floating Rate Fund
This Distribution and Service Plan and Agreement (the "Plan") is dated as of the
24th day of August, 1999, by and between Oppenheimer Senior Floating Rate Fund
(the "Fund") and OppenheimerFunds Distributor, Inc. (the "Distributor").
1. The Plan. This Plan is the Fund's written distribution and service plan for
Class B shares of the Fund (the "Shares"), designed to comply with the
provisions of Rule 12b-1, as it may be amended from time to time (the "Rule"),
under the Investment Company Act of 1940 (the "1940 Act"). Pursuant to this Plan
the Fund will compensate the Distributor for its services in connection with the
distribution of Shares, and the personal service and maintenance of shareholder
accounts that hold Shares ("Accounts"). The Fund may act as distributor of
securities of which it is the issuer, pursuant to the Rule, according to the
terms of this Plan. The terms and provisions of this Plan shall be interpreted
and defined in a manner consistent with the provisions and definitions contained
in (i) the Fund's Registration Statement, (ii) the 1940 Act, (iii) the Rule,
(iv) Rule 2830 of the Conduct Rules of the National Association of Securities
Dealers, Inc., or any amendment or successor to such rule (the "NASD Conduct
Rules") and (v) any conditions pertaining either to distribution-related
expenses or to a plan of distribution to which the Fund is subject under any
order on which the Fund relies, issued at any time by the U.S. Securities and
Exchange Commission ("SEC").
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other person or
entity which: (i) has rendered assistance (whether direct, administrative or
both) in the distribution of Shares or has provided administrative support
services with respect to Shares held by Customers (defined below) of the
Recipient; (ii) shall furnish the Distributor (on behalf of the Fund) with such
information as the Distributor shall reasonably request to answer such questions
as may arise concerning the sale of Shares; and (iii) has been selected by the
Distributor to receive payments under the Plan.
(b) "Independent Trustees" shall mean the members of the Fund's Board
of Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Fund and who have no direct or indirect financial interest in the operation of
this Plan or in any agreement relating to this Plan.
(c) "Customers" shall mean such brokerage or other customers or
investment advisory or other clients of a Recipient, and/or accounts as to which
such Recipient provides administrative support services or is a custodian or
other fiduciary.
<PAGE>
5
(d) "Qualified Holdings" shall mean, as to any Recipient, all Shares
owned beneficially or of record by: (i) such Recipient, or (ii) such Recipient's
Customers, but in no event shall any such Shares be deemed owned by more than
one Recipient for purposes of this Plan. In the event that more than one person
or entity would otherwise qualify as Recipients as to the same Shares, the
Recipient which is the dealer of record on the Fund's books as determined by the
Distributor shall be deemed the Recipient as to such Shares for purposes of this
Plan.
3. Payments for Distribution Assistance and Administrative Support Services.
(a) Payments to the Distributor. In consideration of the payments made
by the Fund to the Distributor under this Plan, the Distributor shall provide
administrative support services and distribution assistance services to the
Fund. Such services include distribution assistance and administrative support
services rendered in connection with Shares (1) sold in purchase transactions,
(2) issued in exchange for shares of another investment company for which the
Distributor serves as distributor or sub-distributor, or (3) issued pursuant to
a plan of reorganization to which the Fund is a party. If the Board believes
that the Distributor may not be rendering appropriate distribution assistance or
administrative support services in connection with the sale of Shares, then the
Distributor, at the request of the Board, shall provide the Board with a written
report or other information to verify that the Distributor is providing
appropriate services in this regard. For such services, the Fund will make the
following payments to the Distributor:
(i) Administrative Support Services Fees. Within forty-five
(45) days of the end of each calendar quarter, the Fund will make payments in
the aggregate amount of 0.0625% (0.25% on an annual basis) of the average during
that calendar quarter of the aggregate net asset value of the Shares computed as
of the close of each business day (the "Service Fee"). Such Service Fee payments
received from the Fund will compensate the Distributor for providing
administrative support services with respect to Accounts. The administrative
support services in connection with Accounts may include, but shall not be
limited to, the administrative support services that a Recipient may render as
described in Section 3(b)(i) below.
(ii) Distribution Assistance Fees (Asset-Based Sales Charge).
Within ten (10) days of the end of each month, the Fund will make payments in
the aggregate amount of 0.0625% (0.75% on an annual basis) of the average during
the month of the aggregate net asset value of Shares computed as of the close of
each business day (the "Asset-Based Sales Charge") outstanding until such Shares
are repurchased or converted to another class of shares of the Fund, provided,
however, that a majority of the Independent Trustees may, but are not obligated
to, set a time period (the "Fund Maximum Holding Period") from time to time for
such payments. Such Asset-Based Sales Charge payments received from the Fund
will compensate the Distributor for providing distribution assistance in
connection with the sale of Shares.
The distribution assistance to be rendered by the Distributor
in connection with the Shares may include, but shall not be limited to, the
following: (i) paying sales commissions to any broker, dealer, bank or other
person or entity that sells Shares, and/or paying such persons "Advance Service
Fee Payments" (as defined below) in advance of, and/or in amounts greater than,
the amount provided for in Section 3(b) of this Agreement; (ii) paying
compensation to and expenses of personnel of the Distributor who support
distribution of Shares by Recipients; (iii) obtaining financing or providing
such financing from its own resources, or from an affiliate, for the interest
and other borrowing costs of the Distributor's unreimbursed expenses incurred in
rendering distribution assistance and administrative support services to the
Fund; and (iv) paying other direct distribution costs, including without
limitation the costs of sales literature, advertising and prospectuses (other
than those prospectuses furnished to current holders of the Fund's shares
("Shareholders")) and state "blue sky" registration expenses.
<PAGE>
(b) Payments to Recipients. The Distributor is authorized under the
Plan to pay Recipients (1) distribution assistance fees for rendering
distribution assistance in connection with the sale of Shares and/or (2) service
fees for rendering administrative support services with respect to Accounts.
However, no such payments shall be made to any Recipient for any such quarter in
which its Qualified Holdings do not equal or exceed, at the end of such quarter,
the minimum amount ("Minimum Qualified Holdings"), if any, that may be set from
time to time by a majority of the Independent Trustees. All fee payments made by
the Distributor hereunder are subject to reduction or chargeback so that the
aggregate service fee payments and Advance Service Fee Payments do not exceed
the limits on payments to Recipients that are, or may be, imposed by the NASD
Conduct Rules. The Distributor may make Plan payments to any "affiliated person"
(as defined in the 1940 Act) of the Distributor if such affiliated person
qualifies as a Recipient or retain such payments if the Distributor qualifies as
a Recipient.
(i) Service Fee. In consideration of the administrative
support services provided by a Recipient during a calendar quarter, the
Distributor shall make service fee payments to that Recipient quarterly, within
forty-five (45) days of the end of each calendar quarter, at a rate not to
exceed 0.0625% (0.25% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of Shares, computed as of the close of
each business day, constituting Qualified Holdings owned beneficially or of
record by the Recipient or by its Customers for a period of more than the
minimum period (the "Minimum Holding Period"), if any, that may be set from time
to time by a majority of the Independent Trustees.
Alternatively, the Distributor may, at its sole option, make
the following service fee payments to any Recipient quarterly, within forty-five
(45) days of the end of each calendar quarter: (i) "Advance Service Fee
Payments" at a rate not to exceed 0.25% of the average during the calendar
quarter of the aggregate net asset value of Shares, computed as of the close of
business on the day such Shares are sold, constituting Qualified Holdings, sold
by the Recipient during that quarter and owned beneficially or of record by the
Recipient or by its Customers, plus (ii) service fee payments at a rate not to
exceed 0.0625% (0.25% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of Shares, computed as of the close of
each business day, constituting Qualified Holdings owned beneficially or of
record by the Recipient or by its Customers for a period of more than one (1)
year. At the Distributor's sole option, the Advance Service Fee Payments may be
made more often than quarterly, and sooner than the end of the calendar quarter.
In the event Shares are redeemed less than one year after the date such Shares
were sold, the Recipient is obligated to and will repay the Distributor on
demand a pro rata portion of such Advance Service Fee Payments, based on the
ratio of the time such Shares were held to one (1) year.
The administrative support services to be rendered by
Recipients in connection with the Accounts may include, but shall not be limited
to, the following: answering routine inquiries concerning the Fund, assisting in
the establishment and maintenance of accounts or sub-accounts in the Fund and
processing Share repurchase transactions, making the Fund's investment plans and
dividend payment options available, and providing such other information and
services in connection with the rendering of personal services and/or the
maintenance of Accounts, as the Distributor or the Fund may reasonably request.
(ii) Distribution Assistance Fees (Asset-Based Sales Charge)
Payments. In its sole discretion and irrespective of whichever alternative
method of making service fee payments to Recipients is selected by the
Distributor, in addition the Distributor may make distribution assistance fee
payments to a Recipient quarterly, within forty-five (45) days after the end of
each calendar quarter, at a rate not to exceed 0.1875% (0.75% on an annual
basis) of the average during the calendar quarter of the aggregate net asset
value of Shares computed as of the close of each business day constituting
Qualified Holdings owned beneficially or of record by the Recipient or its
Customers until such Shares are repurchased or converted to another class of
shares of the Fund, provided, however, that a majority of the Independent
Trustees may, but are not obligated to, set a time period (the "Recipient
Maximum Holding Period") for making such payments. Distribution assistance fee
payments shall be made only to Recipients that are registered with the SEC as a
broker-dealer or are exempt from registration.
The distribution assistance to be rendered by the Recipients
in connection with the sale of Shares may include, but shall not be limited to,
the following: distributing sales literature and prospectuses other than those
furnished to current Shareholders, providing compensation to and paying expenses
of personnel of the Recipient who support the distribution of Shares by the
Recipient, and providing such other information and services in connection with
the distribution of Shares as the Distributor or the Fund may reasonably
request.
<PAGE>
(c) A majority of the Independent Trustees may at any time or from time
to time increase or decrease the rate of fees to be paid to the Distributor or
to any Recipient, but not to exceed the rates set forth above, and/or direct the
Distributor to set, eliminate or modify the Fund Maximum Holding Period, any
Minimum Holding Period, the Recipient Maximum Holding Period and/or any Minimum
Qualified Holdings and/or to split requirements so that different time periods
apply to shares that are afforded different shareholder privileges and features.
The Distributor shall notify all Recipients of any Minimum Qualified Holdings,
Maximum Holding Period and Minimum Holding Period that are established and the
rate of payments hereunder applicable to Recipients, and shall provide each
Recipient with written notice within thirty (30) days after any change in these
provisions. Inclusion of such provisions or a change in such provisions in a
revised current prospectus, Statement of Additional Information or supplement to
either shall constitute sufficient notice.
(d) The Service Fee and the Asset-Based Sales Charge on Shares are
subject to reduction or elimination under the limits that apply to such fees and
charges under the NASD Conduct Rules relating to sales of shares of open-end
funds.
(e) Under the Plan, payments may also be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include profits
derived from the advisory fee it receives from the Fund), or (ii) by the
Distributor (a subsidiary of OFI), from its own resources, from Asset-Based
Sales Charge payments or from the proceeds of its borrowings, in either case, in
the discretion of OFI or the Distributor, respectively.
(f) Recipients are intended to have certain rights as third-party
beneficiaries under this Plan, subject to the limitations set forth below. It
may be presumed that a Recipient has provided distribution assistance or
administrative support services qualifying for payment under the Plan if it has
Qualified Holdings of Shares that entitle it to payments under the Plan. In the
event that either the Distributor or the Board should have reason to believe
that, notwithstanding the level of Qualified Holdings, a Recipient may not be
rendering appropriate distribution assistance in connection with the sale of
Shares or administrative support services for Accounts, then the Distributor, at
the request of the Board, shall require the Recipient to provide a written
report or other information to verify that said Recipient is providing
appropriate distribution assistance and/or services in this regard. If the
Distributor or the Board of Trustees still is not satisfied after the receipt of
such report, either may take appropriate steps to terminate the Recipient's
status as such under the Plan, whereupon such Recipient's rights as a
third-party beneficiary hereunder shall terminate. Additionally, in their
discretion, a majority of the Fund's Independent Trustees at any time may remove
any broker, dealer, bank or other person or entity as a Recipient, where upon
such person's or entity's rights as a third-party beneficiary hereof shall
terminate. Notwithstanding any other provision of this Plan, this Plan does not
obligate or in any way make the Fund liable to make any payment whatsoever to
any person or entity other than directly to the Distributor. The Distributor has
no obligation to pay any Service Fees or Distribution Assistance Fees to any
Recipient if the Distributor has not received payment of Service Fees or
Distribution Assistance Fees from the Fund.
4. Selection and Nomination of Trustees. While this Plan is in effect, the
selection and nomination of persons to be Trustees of the Fund who are not
"interested persons" of the Fund ("Disinterested Trustees") shall be committed
to the discretion of the incumbent Disinterested Trustees. Nothing herein shall
prevent the incumbent Disinterested Trustees from soliciting the views or the
involvement of others in such selection or nominations as long as the final
decision on any such selection and nomination is approved by a majority of the
incumbent Disinterested Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Fund shall
provide written reports to the Fund's Board for its review, detailing the amount
of all payments made under this Plan and the purpose for which the payments were
made. The reports shall be provided quarterly, and shall state whether all
provisions of Section 3 of this Plan have been complied with.
<PAGE>
6. Related Agreements. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by a vote of a majority of the Independent
Trustees or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding Class B voting shares; (ii) such termination
shall be on not more than sixty days' written notice to any other party to the
agreement; (iii) such agreement shall automatically terminate in the event of
its "assignment" (as defined in the 1940 Act); (iv) such agreement shall go into
effect when approved by a vote of the Board and its Independent Trustees cast in
person at a meeting called for the purpose of voting on such agreement; and (v)
such agreement shall, unless terminated as herein provided, continue in effect
from year to year only so long as such continuance is specifically approved at
least annually by a vote of the Board and its Independent Trustees cast in
person at a meeting called for the purpose of voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan has been
approved by a vote of the Board and its Independent Trustees cast in person at a
meeting called on August 24, 1999, for the purpose of voting on this Plan.
Unless terminated as hereinafter provided, it shall continue in effect until
renewed by the Board in accordance with the Rule and thereafter from year to
year or as the Board may otherwise determine but only so long as such
continuance is specifically approved at least annually by a vote of the Board
and its Independent Trustees cast in person at a meeting called for the purpose
of voting on such continuance.
This Plan may not be amended to increase materially the amount of
payments to be made under this Plan, without approval of the Class B
Shareholders at a meeting called for that purpose, and all material amendments
must be approved by a vote of the Board and of the Independent Trustees.
This Plan may be terminated at any time by vote of a majority of the
Independent Trustees or by the vote of the holders of a "majority" (as defined
in the 1940 Act) of the Fund's outstanding Class B voting shares. In the event
of such termination, the Board and its Independent Trustees shall determine
whether the Distributor shall be entitled to payment from the Fund of all or a
portion of the Service Fee and/or the Asset-Based Sales Charge in respect of
Shares sold prior to the effective date of such termination.
8. Disclaimer of Shareholder and Trustee Liability. The Distributor understands
that the obligations of the Fund under this Plan are not binding upon any
Trustee or shareholder of the Fund personally, but bind only the Fund and the
Fund's property. The Distributor represents that it has notice of the provisions
of the Declaration of Trust of the Fund disclaiming Trustee and shareholder
liability for acts or obligations of the Fund.
Oppenheimer Senior Floating Rate Fund
By: /s/ Andrew J. Donohue
Andrew J. Donohue, Vice President &
Secretary
OppenheimerFunds Distributor, Inc.
By: /s/ Katherine P. Feld
Katherine P. Feld, Vice President & Secretary
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
with
OppenheimerFunds Distributor, Inc.
For Class C Shares of
Oppenheimer Senior Floating Rate Fund
This Distribution and Service Plan and Agreement (the "Plan") is dated as of the
24th day of August, 1999, by and between Oppenheimer Senior Floating Rate Fund
(the "Fund") and OppenheimerFunds Distributor, Inc. (the "Distributor").
1. The Plan. This Plan is the Fund's written distribution and service plan for
Class C shares of the Fund (the "Shares"), designed to comply with the
provisions of Rule 12b-1 as it may be amended from time to time (the "Rule")
under the Investment Company Act of 1940 (the "1940 Act"). Pursuant to this Plan
the Fund will compensate the Distributor for its services in connection with the
distribution of Shares, and the personal service and maintenance of shareholder
accounts that hold Shares ("Accounts"). The Fund may act as distributor of
securities of which it is the issuer, pursuant to the Rule, according to the
terms of this Plan. The terms and provisions of this Plan shall be interpreted
and defined in a manner consistent with the provisions and definitions contained
in (i) the Fund's Registration Statement, (ii) the 1940 Act, (iii) the Rule,
(iv) Rule 2830 of the Conduct Rules of the National Association of Securities
Dealers, Inc., or any applicable amendment or successor to such rule (the "NASD
Conduct Rules") and (v) any conditions pertaining either to distribution-related
expenses or to a plan of distribution to which the Fund is subject under any
order on which the Fund relies, issued at any time by the U.S. Securities and
Exchange Commission ("SEC").
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other person or
entity which: (i) has rendered assistance (whether direct, administrative or
both) in the distribution of Shares or has provided administrative support
services with respect to Shares held by Customers (defined below) of the
Recipient; (ii) shall furnish the Distributor (on behalf of the Fund) with such
information as the Distributor shall reasonably request to answer such questions
as may arise concerning the sale of Shares; and (iii) has been selected by the
Distributor to receive payments under the Plan.
(b) "Independent Trustees" shall mean the members of the Fund's Board
of Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Fund and who have no direct or indirect financial interest in the operation of
this Plan or in any agreement relating to this Plan.
(c) "Customers" shall mean such brokerage or other customers or
investment advisory or other clients of a Recipient, and/or accounts as to which
such Recipient provides administrative support services or is a custodian or
other fiduciary.
(d) "Qualified Holdings" shall mean, as to any Recipient, all Shares
owned beneficially or of record by: (i) such Recipient, or (ii) such Recipient's
Customers, but in no event shall any such Shares be deemed owned by more than
one Recipient for purposes of this Plan. In the event that more than one person
or entity would otherwise qualify as Recipients as to the same Shares, the
Recipient which is the dealer of record on the Fund's books as determined by the
Distributor shall be deemed the Recipient as to such Shares for purposes of this
Plan.
3. Payments for Distribution Assistance and Administrative Support Services.
(a) Payments to the Distributor. In consideration of the payments made
by the Fund to the Distributor under this Plan, the Distributor shall provide
administrative support services and distribution services to the Fund. Such
services include distribution assistance and administrative support services
rendered in connection with Shares (1) sold in purchase transactions, (2) issued
in exchange for shares of another investment company for which the Distributor
serves as distributor or sub-distributor, or (3) issued pursuant to a plan of
reorganization to which the Fund is a party. If the Board believes that the
Distributor may not be rendering appropriate distribution assistance or
administrative support services in connection with the sale of Shares, then the
Distributor, at the request of the Board, shall provide the Board with a written
report or other information to verify that the Distributor is providing
appropriate services in this regard. For such services, the Fund will make the
following payments to the Distributor:
(i) Administrative Support Service Fees. Within forty-five
(45) days of the end of each calendar quarter, the Fund will make payments in
the aggregate amount of 0.0625% (0.25% on an annual basis) of the average during
that calendar quarter of the aggregate net asset value of the Shares computed as
of the close of each business day (the "Service Fee"). Such Service Fee payments
received from the Fund will compensate the Distributor for providing
administrative support services with respect to Accounts. The administrative
support services in connection with Accounts may include, but shall not be
limited to, the administrative support services that a Recipient may render as
described in Section 3(b)(i) below.
(ii) Distribution Assistance Fees (Asset-Based Sales Charge).
The Fund may make payments of an "Asset-Based Sales Charge" of up to 0.0625% per
month (0.75% on an annual basis) but the Board has initially set the Asset-Based
Sales Charge at a rate of 0.50% annually. The Board may increase that amount to
up to 0.75% annually without the further approval of shareholders of Class C
shares of the Fund. Within ten (10) days of the end of each month, the Fund will
make payments in the aggregate amount of 0.04666% (0.50% on an annual basis) of
the average during the month of the aggregate net asset value of Shares computed
as of the close of each business day. Such Asset-Based Sales Charge payments
received from the Fund will compensate the Distributor for providing
distribution assistance in connection with the sale of Shares.
The distribution assistance services to be rendered by the Distributor
in connection with the Shares may include, but shall not be limited to, the
following: (i) paying sales commissions to any broker, dealer, bank or other
person or entity that sells Shares, and/or paying such persons "Advance Service
Fee Payments" (as defined below) in advance of, and/or in amounts greater than,
the amount provided for in Section 3(b) of this Agreement; (ii) paying
compensation to and expenses of personnel of the Distributor who support
distribution of Shares by Recipients; (iii) obtaining financing or providing
such financing from its own resources, or from an affiliate, for the interest
and other borrowing costs of the Distributor's unreimbursed expenses incurred in
rendering distribution assistance and administrative support services to the
Fund; and (iv) paying other direct distribution costs, including without
limitation the costs of sales literature, advertising and prospectuses (other
than those prospectuses furnished to current holders of the Fund's shares
("Shareholders")) and state "blue sky" registration expenses.
(b) Payments to Recipients. The Distributor is authorized under the
Plan to pay Recipients (1) distribution assistance fees for rendering
distribution assistance in connection with the sale of Shares and/or (2) service
fees for rendering administrative support services with respect to Accounts.
However, no such payments shall be made to any Recipient for any quarter in
which its Qualified Holdings do not equal or exceed, at the end of such quarter,
the minimum amount ("Minimum Qualified Holdings"), if any, that may be set from
time to time by a majority of the Independent Trustees. All fee payments made by
the Distributor hereunder are subject to reduction or chargeback so that the
aggregate service fee payments and Advance Service Fee Payments do not exceed
the limits on payments to Recipients that are, or may be, imposed by the NASD
Conduct Rules. The Distributor may make Plan payments to any "affiliated person"
(as defined in the 1940 Act) of the Distributor if such affiliated person
qualifies as a Recipient or retain such payments if the Distributor qualifies as
a Recipient.
In consideration of the services provided by Recipients, the
Distributor shall make the following payments to Recipients:
(i) Service Fee. In consideration of administrative support
services provided by a Recipient during a calendar quarter, the Distributor
shall make service fee payments to that Recipient quarterly, within forty-five
(45) days of the end of each calendar quarter, at a rate not to exceed 0.0625%
(0.25% on an annual basis) of the average during the calendar quarter of the
aggregate net asset value of Shares, computed as of the close of each business
day, constituting Qualified Holdings owned beneficially or of record by the
Recipient or by its Customers for a period of more than the minimum period (the
"Minimum Holding Period"), if any, that may be set from time to time by a
majority of the Independent Trustees.
Alternatively, the Distributor may, at its sole option, make the
following service fee payments to any Recipient quarterly, within forty-five
(45) days of the end of each calendar quarter: (A) "Advance Service Fee
Payments" at a rate not to exceed 0.25% of the average during the calendar
quarter of the aggregate net asset value of Shares, computed as of the close of
business on the day such Shares are sold, constituting Qualified Holdings, sold
by the Recipient during that quarter and owned beneficially or of record by the
Recipient or by its Customers, plus (B) service fee payments at a rate not to
exceed 0.0625% (0.25% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of Shares, computed as of the close of
each business day, constituting Qualified Holdings owned beneficially or of
record by the Recipient or by its Customers for a period of more than one (1)
year. At the Distributor's sole option, Advance Service Fee Payments may be made
more often than quarterly, and sooner than the end of the calendar quarter. In
the event Shares are redeemed less than one year after the date such Shares were
sold, the Recipient is obligated to and will repay the Distributor on demand a
pro rata portion of such Advance Service Fee Payments, based on the ratio of the
time such Shares were held to one (1) year.
The administrative support services to be rendered by Recipients in
connection with the Accounts may include, but shall not be limited to, the
following: answering routine inquiries concerning the Fund, assisting in the
establishment and maintenance of accounts or sub-accounts in the Fund and
processing Share redemption transactions, making the Fund's investment plans and
dividend payment options available, and providing such other information and
services in connection with the rendering of personal services and/or the
maintenance of Accounts, as the Distributor or the Fund may reasonably request.
(ii) Distribution Assistance Fee (Asset-Based Sales Charge)
Payments. Irrespective of whichever alternative method of making service fee
payments to Recipients is selected by the Distributor, in addition the
Distributor shall make distribution assistance fee payments to each Recipient
quarterly, within forty-five (45) days after the end of each calendar quarter,
at a rate not to exceed 0.1875% (0.75% on an annual basis) of the average during
the calendar quarter of the aggregate net asset value of Shares computed as of
the close of each business day constituting Qualified Holdings owned
beneficially or of record by the Recipient or its Customers for a period of more
than one (1) year. Alternatively, at its sole option, the Distributor may make
distribution assistance fee payments to a Recipient quarterly, at the rate
described above, on Shares constituting Qualified Holdings owned beneficially or
of record by the Recipient or its Customers without regard to the 1-year holding
period described above. Distribution assistance fee payments shall be made only
to Recipients that are registered with the SEC as a broker-dealer or are exempt
from registration. The Distributor has initially set such fees at a rate of
0.125% per quarter (0.50% on an annual basis).
The distribution assistance to be rendered by the Recipients in
connection with the sale of Shares may include, but shall not be limited to, the
following: distributing sales literature and prospectuses other than those
furnished to current Shareholders, providing compensation to and paying expenses
of personnel of the Recipient who support the distribution of Shares by the
Recipient, and providing such other information and services in connection with
the distribution of Shares as the Distributor or the Fund may reasonably
request.
(c) A majority of the Independent Trustees may at any time or from time
to time (i) increase or decrease the rate of fees to be paid to the Distributor
or to any Recipient, but not to exceed the maximum rates set forth above, and/or
(ii) direct the Distributor to increase or decrease any Minimum Holding Period,
any maximum period set by a majority of the Independent Trustees during which
fees will be paid on Shares constituting Qualified Holdings owned beneficially
or of record by a Recipient or by its Customers (the "Maximum Holding Period"),
or Minimum Qualified Holdings. The Distributor shall notify all Recipients of
any Minimum Qualified Holdings, Maximum Holding Period and Minimum Holding
Period that are established and the rate of payments hereunder applicable to
Recipients, and shall provide each Recipient with written notice within thirty
(30) days after any change in these provisions. Inclusion of such provisions or
a change in such provisions in a supplement or Statement of Additional
Information or amendment to or revision of the prospectus or Statement of
Additional Information of the Fund shall constitute sufficient notice.
(d) The Service Fee and the Asset-Based Sales Charge on Shares are
subject to reduction or elimination under the limits that apply to such fees
under the NASD Conduct Rules relating to sales of shares of open-end funds
(e) Under the Plan, payments may also be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include profits
derived from the advisory fee it receives from the Fund), or (ii) by the
Distributor (a subsidiary of OFI), from its own resources, from Asset-Based
Sales Charge payments or from the proceeds of its borrowings, in either case, in
the discretion of OFI or the Distributor, respectively.
(f) Recipients are intended to have certain rights as third-party
beneficiaries under this Plan, subject to the limitations set forth below. It
may be presumed that a Recipient has provided distribution assistance or
administrative support services qualifying for payment under the Plan if it has
Qualified Holdings of Shares that entitle it to payments under the Plan. If
either the Distributor or the Board believe that, notwithstanding the level of
Qualified Holdings, a Recipient may not be rendering appropriate distribution
assistance in connection with the sale of Shares or administrative support
services for Accounts, then the Distributor, at the request of the Board, shall
require the Recipient to provide a written report or other information to verify
that said Recipient is providing appropriate distribution assistance and/or
services in this regard. If the Distributor or the Board of Trustees still is
not satisfied after the receipt of such report, either may take appropriate
steps to terminate the Recipient's status as a Recipient under the Plan,
whereupon such Recipient's rights as a third-party beneficiary hereunder shall
terminate. Additionally, in their discretion a majority of the Fund's
Independent Trustees at any time may remove any broker, dealer, bank or other
person or entity as a Recipient, whereupon such person's or entity's rights as a
third-party beneficiary hereof shall terminate. Notwithstanding any other
provision of this Plan, this Plan does not obligate or in any way make the Fund
liable to make any payment whatsoever to any person or entity other than
directly to the Distributor. The Distributor has no obligation to pay any
Service Fees or Distribution Assistance Fees to any Recipient if the Distributor
has not received payment of Service Fees or Distribution Assistance Fees from
the Fund.
4. Selection and Nomination of Trustees. While this Plan is in effect, the
selection and nomination of persons to be Trustees of the Fund who are not
"interested persons" of the Fund ("Disinterested Trustees") shall be committed
to the discretion of the incumbent Disinterested Trustees. Nothing herein shall
prevent the incumbent Disinterested Trustees from soliciting the views or the
involvement of others in such selection or nomination as long as the final
decision on any such selection and nomination is approved by a majority of the
incumbent Disinterested Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Fund shall
provide written reports to the Fund's Board for its review, detailing the amount
of all payments made under this Plan and the purpose for which the payments were
made. The reports shall be provided quarterly, and shall state whether all
provisions of Section 3 of this Plan have been complied with.
6. Related Agreements. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by a vote of a majority of the Independent
Trustees or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding voting Class C shares; (ii) such termination
shall be on not more than sixty days' written notice to any other party to the
agreement; (iii) such agreement shall automatically terminate in the event of
its "assignment" (as defined in the 1940 Act); (iv) such agreement shall go into
effect when approved by a vote of the Board and its Independent Trustees cast in
person at a meeting called for the purpose of voting on such agreement; and (v)
such agreement shall, unless terminated as herein provided, continue in effect
from year to year only so long as such continuance is specifically approved at
least annually by a vote of the Board and its Independent Trustees cast in
person at a meeting called for the purpose of voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan has been
approved by a vote of the Board and its Independent Trustees cast in person at a
meeting called on August 24, 1999, for the purpose of voting on this Plan.
Unless terminated as hereinafter provided, it shall continue in effect until
renewed by the Board in accordance with the Rule and thereafter from year to
year or as the Board may otherwise determine but only so long as such
continuance is specifically approved at least annually by a vote of the Board
and its Independent Trustees cast in person at a meeting called for the purpose
of voting on such continuance.
This Plan may not be amended to increase materially the amount of
payments to be made under this Plan, without approval of the Class C
Shareholders at a meeting called for that purpose and all material amendments
must be approved by a vote of the Board and of the Independent Trustees.
This Plan may be terminated at any time by a vote of a majority of the
Independent Trustees or by the vote of the holders of a "majority" (as defined
in the 1940 Act) of the Fund's outstanding Class C voting shares. In the event
of such termination, the Board and its Independent Trustees shall determine
whether the Distributor shall be entitled to payment from the Fund of all or a
portion of the Service Fee and/or the Asset-Based Sales Charge in respect of
Shares sold prior to the effective date of such termination.
8. Disclaimer of Shareholder and Trustee Liability. The Distributor understands
that the obligations of the Fund under this Plan are not binding upon any
Trustee or shareholder of the Fund personally, but bind only the Fund and the
Fund's property. The Distributor represents that it has notice of the provisions
of the Declaration of Trust of the Fund disclaiming Trustee and shareholder
liability for acts or obligations of the Fund.
Oppenheimer Senior Floating Rate Fund
/s/ Andrew J. Donohue
By: ________________________________________
Andrew J. Donohue, Vice President & Secretary
OppenheimerFunds Distributor, Inc.
/s/ Katherine P. Feld
By: ________________________________________
Katherine P. Feld, Vice President & Secretary
OPPENHEIMER FUNDS MULTIPLE CLASS PLAN
March 18, 1996 (as updated through 8/24/99)
1. The Plan. This Plan is the written multiple class plan for
each of (i) the open-end management investment companies and (ii) the
closed-end management investment company or companies permitted by
exemptive order to offer multiple classes of shares on the proviso
that they comply with the Rule (as defined below) (individually a
"Fund" and collectively the "Funds"), named on Exhibit A hereto, which
exhibit may be revised from time to time, for OppenheimerFunds
Distributor, Inc. (the "Distributor"), the general distributor of
shares of the Funds and for OppenheimerFunds, Inc. (the "Advisor"),
the investment advisor of the Funds. In instances where such
investment companies issue shares representing interests in different
portfolios ("Series"), the term "Fund" and "Funds" shall separately
refer to each Series. It is the written plan contemplated by Rule
18f-3 (the "Rule") under the Investment Company Act of 1940 (the "1940
Act"), pursuant to which the Funds may issue multiple classes of
shares. The terms and provisions of this Plan shall be interpreted and
defined in a manner consistent with the provisions and definitions
contained in the Rule. 2. Similarities and Differences Among Classes.
Each Fund offering shares of more than one class agrees that each
class of that Fund:
<PAGE>
-4-
(1)(i) shall have a separate service plan or distribution and
service plan ("12b-1 Plan"), and shall pay all of the expenses
incurred pursuant to that arrangement; and (ii) may pay a different
share of expenses ("Class Expenses") if such expenses are actually
incurred in a different amount by that class, or if the class receives
services of a different kind or to a different degree than that of
other classes. Class Expenses are those expenses specifically
attributable to the particular class of shares, namely (a) 12b-1 Plan
fees, (b) transfer and shareholder servicing agent fees and
administrative service fees, (c) shareholder meeting expenses, (d) SEC
registration fees for Funds organized as corporations and (e) any
other incremental expenses subsequently identified that should be
allocated to one class which shall be approved by a vote of that
Fund's Board of Directors, Trustees or Managing General Partners (the
"Directors"). Expenses identified in Items (c) through (e) may involve
issues relating either to a specific class or to the entire Fund; such
expenses constitute Class Expenses only when they are attributable to
a specific class. Because Class Expenses may be accrued at different
rates for each class of a single Fund, dividends distributable to
shareholders and net asset values per share may differ for shares of
different classes of the same Fund. (2) shall have exclusive voting
rights on any matters that relate solely to that class's arrangements,
including without limitation voting with respect to a 12b-1 Plan for
that class; (3) shall have separate voting rights on any matter
submitted to shareholders in which the interests of one class differ
from the interests of any other class; (4) may have a different
arrangement for shareholder services, including different sales
charges, sales charge waivers, purchase and redemption features,
exchange privileges, loan privileges, the availability of certificated
shares and/or conversion features; and (5) shall have in all other
respects the same rights and obligations as each other class. 3.
Allocations of Income, Capital Gains and Losses and Expenses. The
methodologies and procedures for allocating expenses, as set forth in
"Methodology for Net Asset Value (NAV) and Dividend and Distribution
Determinations for Oppenheimer Funds with Multiple Classes of Shares"
are re-approved. Income, realized and unrealized capital gains and
losses, and expenses of each Fund other than Class Expenses allocated
to a particular class shall be allocated to each class on the basis of
the net asset value of that class in relation to the net asset value
of that Fund, except as follows: For Funds operating under 1940 Act
Rule 2a-7, and for other Funds that declare dividends from net
investment income on a daily basis, such allocations shall be made on
the basis of relative net assets (settled shares) [net assets valued
in accordance with generally accepted accounting principles but
excluding the value of subscriptions receivable] in relation to the
net assets of that Fund.
<PAGE>
4. Expense Waivers and Reimbursements. From time to time the
Advisor may voluntarily undertake to (i) waive any portion
of the management fee charged to a Fund, and/or (ii)
reimburse any portion of the expenses of a Fund or of one or
more of its classes, but is not required to do so or to
continue to do so for any period of time. The quarterly
report by the Advisor to the Directors of Fund expense
reimbursements shall disclose any reimbursements that are
not equal for all classes of the same Fund.
<PAGE>
5. Conversions of Shares. Any Fund may offer a conversion feature whereby shares
of one class ("Purchase Class Shares") will convert automatically to shares of
another class ("Target Class Shares") of that Fund, after being held for a
requisite period ("Matured Purchase Class Shares"), pursuant to the terms and
conditions of that Fund's Prospectus and/or Statement of Additional Information.
Such terms and conditions may provide for that time period to vary for Purchase
Class Shares afforded different shareholder privileges or other features. Upon
conversion of Matured Purchase Class Shares, all Purchase Class Shares of that
Fund acquired by reinvestment of dividends or distributions of such Matured
Purchase Class Shares shall also be converted at that time. Purchase Class
Shares will convert into Target Class Shares of that Fund on the basis of the
relative net asset values of the two classes, without the imposition of any
sales load, fee or other charge. The conversion feature shall be offered for so
long as (i) the expenses to which Target Class Shares of a Fund are subject,
including payments authorized under that Fund's Target Class 12b-1 plan, are not
higher than the expenses of Purchase Class Shares of that Fund, including
payments authorized under that Fund's Purchase Class 12b-1 plan; (ii) there
continues to be available a ruling from the Internal Revenue Service, or of an
opinion of counsel or of an opinion of an auditing firm serving as tax adviser,
to the effect that the conversion of Purchase Class Shares to Target Class
Shares does not constitute a taxable event for the holder; and (iii) if the
amount of expenses to which Target Class Shares of a Fund are subject, including
payments authorized under that Fund's Target Class 12b-1 plan, is increased
materially without approval of the shareholders of Purchase Class Shares of that
Fund, that Fund will establish a new class of shares ("New Target Class Shares")
and shall take such other action as is necessary to provide that existing
Purchase Class Shares are exchanged or converted into New Target Class Shares,
identical in all material respects to Target Class Shares as they existed prior
to implementation of the proposal to increase expenses, no later than the date
such shares previously were scheduled to convert into Target Class Shares.
6. Disclosure. The classes of shares to be offered by each Fund,
and the initial, asset-based or contingent deferred sales charges and
other material distribution arrangements with respect to such classes,
shall be disclosed in the prospectus and/or statement of additional
information used to offer that class of shares. Such prospectus or
statement of additional information shall be supplemented or amended
to reflect any change(s) in classes of shares to be offered or in the
material distribution arrangements with respect to such classes.
7. Independent Audit. The methodology and procedures for
calculating the net asset value, dividends and distributions of each
class shall be reviewed by an independent auditing firm (the
"Expert"). At least annually, the Expert, or an appropriate substitute
expert, will render a report to the Funds on policies and procedures
placed in operation and tests of operating effectiveness as defined
and described in SAS 70 of the AICPA.
8. Offers and Sales of Shares. The Distributor will maintain
compliance standards as to when each class of shares may appropriately
be sold to particular investors, and will require all persons selling
shares of the Funds to agree to conform to such standards.
<PAGE>
9. Rule 12b-1 Payments. The Treasurer of each Fund shall provide
to the Directors of that Fund, and the Directors shall review, at
least quarterly, the written report required by that Fund's 12b-1
Plan, if any. The report shall include information on (i) the amounts
expended pursuant to the 12b-1 Plan, (ii) the purposes for which such
expenditures were made and (iii) the amount of the Distributor's
unreimbursed distribution costs (if recovery of such costs in future
periods is permitted by that 12b-1 Plan), taking into account 12b-1
Plan payments and contingent deferred sales charges paid to the
Distributor.
10. Conflicts. On an ongoing basis, the Directors of the Funds,
pursuant to their fiduciary responsibilities under the 1940 Act and
otherwise, will monitor the Funds for the existence of any material
conflicts among the interests of the classes. The Advisor and the
Distributor will be responsible for reporting any potential or
existing conflicts to the Directors. In the event a conflict arises,
the Directors shall take such action as they deem appropriate. 11.
Effectiveness and Amendment. This Plan takes effect for each Fund as
of the date of adoption shown below for that Fund, whereupon the
open-end Funds are released from the terms and conditions contained in
their respective exemptive applications pursuant to which orders were
issued exempting the respective Funds from the provisions of Sections
2(a)(32), 2(a)(35), 18(f), 18(g), 18(i), 22(c) and 22(d) of the 1940
Act and Rule 22c-1 thereunder, or from their respective previous
multiple class plan.1 This Plan has been approved by a majority vote
of the Board of each Fund and of each Fund's Board members who are not
"interested persons" (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of the Plan or
any agreements relating to the Plan (the "Independent Trustees") of
each Fund at meetings called for (i) the Denver Oppenheimer Funds
listed on Exhibit A on October 24, 1995, (ii) the New York Oppenheimer
Funds listed on Exhibit A on October 5, 1995, (iii) the Quest
Oppenheimer Funds listed on Exhibit A on November 28, 1995, (iv) the
Rochester Oppenheimer Funds listed on Exhibit A on January 10, 1996,
and (v) the Connecticut Mutual Oppenheimer Funds listed in Exhibit A
on February 26, 1996, to take effect March 18, 1996, in each case for
the purpose of voting on this Plan. Prior to that vote, (i) each Board
was furnished by the methodology used for net asset value and dividend
and distribution determinations for the Funds, and (ii) majority of
each Board and its Independent Trustees determined that the Plan as
proposed to be adopted, including the expense allocation, is in the
best interests of each Fund as a whole and to each class of each Fund
individually. Prior to any material amendment to the Plan, each Board
shall request and evaluate, and the Distributor shall furnish, such
information as may be reasonably necessary to evaluate such
--------------------------------
1 Oppenheimer Management Corp. et
al., Release IC-19821, 10/28/93 (notice) and Release IC-19894,
11/23/93 (order), and Quest for Value Fund, Inc. et al., Release
IC-19605, 7/30/93 (notice) and Release IC-19656, 8/25/93 (order);
Rochester Funds Multiple Class Plan; Connecticut Mutual Funds Multiple
Class Plan.
amendment, and a majority of each Board and its Independent Trustees shall find
that the Plan as proposed to be amended, including the expense allocation, is in
the best interest of each class, each Fund as a whole and each class of each
Fund individually. No material amendment to the Plan shall be made by any Fund's
Prospectus or Statement of Additional Information or an supplement to either of
the foregoing, unless such amendment has first been approved by a majority of
the Fund's Board and its Independent Trustees. 12. Disclaimer of Shareholder and
Trustee Liability. The Distributor understands that the obligations under this
Plan of each Fund that is organized as a Massachusetts business trust are not
binding upon any Trustee or shareholder of such Fund personally, but bind only
that Fund and the Fund's property. The Distributor represents that it has notice
of the provisions of the Declarations of Trust of such Funds disclaiming
shareholder and Trustee liability for acts or obligations of the Funds.
<PAGE>
Initially adopted by the Boards of the Denver Oppenheimer Funds on December 15,
1998.
/s/ Andrew J. Donohue
Andrew J. Donohue, Vice President
& Secretary
Denver Oppenheimer Funds
Initially adopted by the Boards of the New York Oppenheimer Funds on
October 8, 1998.
/s/ Andrew J. Donohue
Andrew J. Donohue, Secretary
New York Oppenheimer Funds
Initially adopted by the Boards of the Oppenheimer Quest/MidCap Funds on October
20, 1998.
/s/ Andrew J. Donohue
Andrew J. Donohue, Secretary
Oppenheimer Quest/MidCap Funds
Initially adopted by the Boards of the Oppenheimer Rochester Funds on October
20, 1998.
/s/ Andrew J. Donohue
Andrew J. Donohue, Secretary
Oppenheimer Rochester Funds
<PAGE>
Exhibit A
1. Denver Oppenheimer Funds
Oppenheimer Cash Reserves
Oppenheimer Champion Income Fund
Oppenheimer Capital Income Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Integrity Funds (consisting of the following series):
Oppenheimer Bond Fund
Oppenheimer International Bond Fund
Oppenheimer High Yield Fund
Oppenheimer Main Street Funds, Inc.
(consisting of the following 2 series):
Oppenheimer Main Street Growth & Income Fund
Oppenheimer Main Street California Municipal Fund
Oppenheimer Main Street Small Cap Fund (7/2/99)
Oppenheimer Strategic Income Fund
Oppenheimer Municipal Fund
(consisting of the following 2 series):
Oppenheimer Insured Municipal Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer Real Asset Fund (3/31/97)
Oppenheimer Senior Floating Rate Fund (8/24/99)
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds (2/24/98)
Centennial Money Market Trust (4/27/99)
2. New York Oppenheimer Funds Oppenheimer California Municipal Fund Oppenheimer
Capital Appreciation Fund Oppenheimer Developing Markets Fund (11/18/96)
Oppenheimer Discovery Fund Oppenheimer Enterprise Fund (11/7/95) Oppenheimer
Europe Fund (3/1/99) Oppenheimer Global Fund Oppenheimer Global Growth & Income
Fund Oppenheimer Gold & Special Minerals Fund Oppenheimer Growth Fund
Oppenheimer International Growth Fund (3/25/96)
Oppenheimer International Small Company Fund (11/17/97)
Oppenheimer Large Cap Growth Fund (12/17/98)
Oppenheimer Money Market Fund, Inc. (4/2/98)
Oppenheimer Multiple Strategies Fund
Oppenheimer Multi-State Municipal Trust
(consisting of the following 3 series):
Oppenheimer Florida Municipal Fund
Oppenheimer New Jersey Municipal Fund
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
<PAGE>
Oppenheimer Series Fund, Inc.
(consisting of the following 2 series:)
Oppenheimer Disciplined Allocation Fund
Oppenheimer Disciplined Growth Fund
Oppenheimer U.S. Government Trust
Oppenheimer World Bond Fund (4/24/98)
3. Oppenheimer Quest/MidCap Funds
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest for Value Funds
(consisting of the following 3 series:)
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Balanced Value Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer MidCap Fund (12/1/97)
4. Oppenheimer Rochester Funds
Bond Fund Series - Oppenheimer Convertible Securities Fund
Rochester Fund Municipals
Rochester Portfolio Series - Limited Term New York Municipal Fund
August 26, 1999
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway, Suite 1480
Denver, CO 80202-4915
Gentlemen:
As special Massachusetts counsel for Oppenheimer Senior Floating
Rate Fund (the Trust ), a Massachusetts business trust, we have been
asked to render this opinion to you with respect to the issuance of an
indefinite number of shares of beneficial interest, $.001 par value
per share, of the Trust (the Shares ), as more fully described in
pre-effective amendment no. 1 (the Amendment ) to the Trust s
registration statement (the Registration Statement ) on Form N-2 (File
No. 333-82579).
We have examined the Amended and Restated Declaration of Trust of
Oppenheimer Senior Floating Rate Fund dated August 13, 1999, the
By-Laws of the Trust and resolutions adopted by the Board of Trustees
of the Trust relating to the issuance of the Shares, each certified by
the Assistant Secretary of the Trust, and such other documents,
records and certificates as we have deemed necessary for the purposes
of this opinion.
Based upon the foregoing, we are of the opinion that the Shares,
when issued and sold in accordance with the terms of the Declaration
of Trust, By-laws and the Registration Statement, as in effect at the
time of such issuance and sale, will be legally issued, fully paid and
non-assessable by the Trust.
We hereby consent to your reliance on this opinion in connection
with the issuance of your opinion regarding the legal issuance of the
Shares, which opinion will be filed with the Amendment as an exhibit
to the Registration Statement. We also hereby consent to the filing of
this opinion with the Amendment as an exhibit to the Registration
Statement.
Very truly yours,
/s/ GOODWIN, PROCTER & HOAR LLP
----------------------------
GOODWIN, PROCTER & HOAR LLP
August 25, 1999
Oppenheimer Senior Floating Rate Fund
6803 S. Tucson Way
Englewood, CO 80112
Dear Ladies and Gentlemen:
This opinion is being furnished to Oppenheimer Senior Floating Rate
Fund, a Massachusetts business trust (the "Fund"), in connection with the
Registration Statement on Form N-2 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "1933 Act"), and the Investment Company
Act of 1940, as amended, filed by the Fund. As counsel for the Fund, we have
examined such statutes, regulations, corporate records and other documents and
reviewed such questions of law that we deemed necessary or appropriate for the
purposes of this opinion. As to matters arising under the laws of the
Commonwealth of Massachusetts, we have relied on the opinion of Goodwin, Procter
& Hoar, LLP attached hereto.
Based upon the foregoing, we are of the opinion that the Class A, Class
B and Class C shares to be issued as described in the Registration Statement
have been duly authorized and, assuming receipt of the consideration to be paid
therefor, upon delivery as provided in the Registration Statement, will be
legally and validly issued, fully paid and non-assessable (except for the
potential liability of shareholders described in the Fund's Statement of
Additional Information under the caption "Shareholder and Trustee Liability"
under "How the Fund is Managed Organization and History").
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us in the Registration Statement.
We do not thereby admit that we are within the category of persons whose consent
is required under Section 7 of the 1933 Act or the rules and regulations of the
Securities and Exchange Commission thereunder.
Sincerely,
/s/ Allan B. Adams
------------------------------
Allan B. Adams
Myer, Swanson, Adams & Wolf, P.C.
23
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Pre-Effective Amendment No. 1 to Registration
Statement 333-82579 of Oppenheimer Senior Floating Rate Fund of our report dated
August 26, 1999 appearing in the Statement of Additional Information, which is
part of such Registration Statement, and to the reference to us under the
heading "Independent Auditors" in such Statement of Additional Information.
DELOITTE & TOUCHE LLP
Denver, Colorado
August 26, 1999
August 24, 1999
The Board of Trustees
Oppenheimer Senior Floating Rate Fund
6803 South Tuscon Way
Englewood, Colorado 80112
To the Board of Trustees:
OppenheimerFunds, Inc. ("OFI") hereby offers to purchase 10,000 Class A
shares, 100 Class B shares and 100 Class C shares of Oppenheimer Senior Floating
Rate Fund (the "Fund") at a net asset value per share of $10.00 for each such
class, for an aggregate purchase price of $102,000.
In connection with such purchase, OFI represents that such purchase is
made for investment purposes by OFI without any present intention of selling
such shares or tendering them for repurchase by the Fund.
Very truly yours,
/s/ Andrew J. Donohue
----------------------
Andrew J. Donohue
Executive Vice President &
General Counsel
