DAILY CASH ACCUMULATION FUND, INC.
6803 South Tucson Way, Englewood, Colorado 80112
1-800-525-9310
Statement of Additional Information dated April 25, 1997, as revised May 12,
1997
This Statement of Additional Information of Daily Cash Accumulation Fund,
Inc. is not a Prospectus. This document contains additional information about
the Fund and supplements information in the Prospectus dated April 25, 1997. It
should be read together with the Prospectus, which may be obtained by writing to
Shareholder Services, Inc., the Fund's Transfer Agent, P.O. Box 5143, Denver,
Colorado 80217, or by calling the toll-free number shown above.
Contents Page
About the Fund
Investment Objective and Policies...........................................2
Other Investment Restrictions...............................................5
Directors and Officers of the Fund..........................................5
The Manager and Its Affiliates..............................................9
Performance of the Fund....................................................12
Service Plan...............................................................13
About Your Account
Purchase, Redemption and Pricing of Shares.................................13
Dividends and Taxes........................................................14
Financial Information About the Fund
Independent Auditors' Report...............................................17
Financial Statements.......................................................18
Appendices
Appendix A: Description of Securities Ratings.............................A-1
Appendix B: Automatic Withdrawal Plan Provisions..........................B-1
Appendix C: Industry Classifications......................................C-1
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ABOUT THE FUND
Investment Objective and Policies
The investment objective and policies of the Fund are described in the
Prospectus. Supplemental information about those policies is set forth below.
Certain capitalized terms used in this Statement of Additional Information are
defined in the Prospectus.
The Fund will not make investments with the objective of seeking
capital growth. However, the value of the securities held by the Fund may be
affected by changes in general interest rates. Because the current value of debt
securities varies inversely with changes in prevailing interest rates, if
interest rates increase after a security is purchased that security would
normally decline in value. Conversely, should interest rates decrease after a
security is purchased, its value would rise. However, those fluctuations in
value will not generally result in realized gains or losses to the Fund since
the Fund does not usually intend to dispose of securities prior to their
maturity. A debt security held to maturity is redeemable by its issuer at full
principal value plus accrued interest. To a limited degree, the Fund may engage
in short-term trading to attempt to take advantage of short-term market
variations, or may dispose of a portfolio security prior to its maturity if, on
the basis of a revised credit evaluation of the issuer or other considerations,
the Fund believes such disposition advisable or it needs to generate cash to
satisfy redemptions. In such cases, the Fund may realize a capital gain or loss.
Ratings of Securities. The Prospectus describes "Eligible Securities" in which
the Fund may invest and indicates that if a security's rating is downgraded, the
Manager and/or the Board may have to reassess the security's credit risks. If a
security has ceased to be a First Tier Security, the Manager will promptly
reassess whether the security continues to present "minimal credit risks." If
the Manager becomes aware that any Rating Organization has downgraded its rating
of a Second Tier Security or rated an unrated security below its second highest
rating category, the Fund's Board of Directors shall promptly reassess whether
the security presents minimal credit risks and whether it is in the best
interests of the Fund to dispose of it; but if the Fund disposes of the security
within five days of the Manager's learning of the downgrade, the Manager will
provide the Board with subsequent notice of such downgrade. If a security is in
default, or ceases to be an Eligible Security, or is determined no longer to
present minimal credit risks, the Board must determine whether it would be in
the best interests of the Fund to dispose of the security. The Rating
Organizations currently designated as such by the SEC are Standard & Poor's
Corporation, Moody's Investors Service, Inc., Fitch Investors Services, Inc.,
Duff and Phelps, Inc., IBCA Limited and its affiliate, IBCA, Inc. and Thomson
BankWatch, Inc. A description of the ratings categories of those Rating
Organizations is contained in Appendix A.
Floating Rate/Variable Rate Obligations. The Fund may invest in instruments with
floating or variable interest rates. The interest rate on a floating rate
obligation is based on a stated prevailing market rate, such as a bank's prime
rate, the 90-day U.S. Treasury Bill rate, the rate of return on commercial paper
or bank certificates of deposit, or some other standard, and is adjusted
automatically each time such market rate is adjusted. The interest rate on a
variable rate obligation is also based on a stated prevailing market rate but is
adjusted automatically at a specified interval
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of no more than one year. Some variable rate or floating rate obligations in
which the Fund may invest have a demand feature entitling the holder to demand
payment at an amount approximately equal to amortized cost or the principal
amount thereof plus accrued interest at any time, or at specified intervals not
exceeding one year. These notes may or may not be backed by bank letters of
credit.
Variable rate demand notes may include master demand notes, discussed
below. The Manager, on behalf of the Fund, will consider on an ongoing basis the
creditworthiness of the issuers of the floating and variable rate obligations in
the Fund's portfolio. There is no limit on the amount of the Fund's assets that
may be invested in floating rate and variable rate obligations.
Repurchase Agreements. In a repurchase transaction, the Fund acquires a security
from, and simultaneously resells it to, an approved vendor (a U.S. commercial
bank or the U.S. branch of a foreign bank having total domestic assets of at
least $1 billion or a broker-dealer with a net capital of at least $50 million
and which has been designated a primary dealer in government securities). The
resale price exceeds the purchase price by an amount that reflects an
agreed-upon interest rate effective for the period during which the repurchase
agreement is in effect. The majority of these transactions run from day to day,
and delivery pursuant to resale typically will occur within one to five days of
the purchase. Repurchase agreements are considered "loans" under the Investment
Company Act of 1940, as amended (the "Investment Company Act") collateralized by
the underlying security. The Fund's repurchase agreements require that at all
times while the repurchase agreement is in effect, the value of the collateral
must equal or exceed the repurchase price to fully collateralize the repayment
obligation. Additionally, the Manager will impose creditworthiness requirements
to confirm that the vendor is financially sound and will continuously monitor
the collateral's value.
Master Demand Notes. A master demand note is a corporate obligation that permits
the investment of fluctuating amounts by the Fund at varying rates of interest
pursuant to direct arrangements between the Fund, as lender, and the corporate
borrower that issues the note. These notes permit daily changes in the amounts
borrowed. The Fund has the right to increase the amount under the note at any
time up to the full amount provided by the note agreement, or to decrease the
amount, and the borrower may repay up to the full amount of the note at any time
without penalty. Because variable amount master demand notes are direct lending
arrangements between the lender and the borrower, it is not generally
contemplated that such instruments will be traded. There is no secondary market
for these notes, although they are redeemable and thus immediately repayable by
the borrower at face value, plus accrued interest, at any time. Accordingly, the
Fund's right to redeem is dependent on the ability of the borrower to pay
principal and interest on demand. In evaluating the master demand note
arrangements, the Manager considers the earning power, cash flow, and other
liquidity ratios of the issuer. Master demand notes are not typically rated by
credit rating agencies. If they are not rated, the Fund may invest in them only
if, at the time of an investment, they are Eligible Securities. The Manager will
continuously monitor the borrower's financial ability to meet all of its
obligations because the Fund's liquidity might be impaired if the borrower were
unable to pay principal and interest on demand.
Loans of Portfolio Securities. The Fund may lend its portfolio securities to
qualified borrowers
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(other than in repurchase transactions) to attempt to raise the Fund's income
for liquidity purposes. Under applicable regulatory requirements (which are
subject to change), the loan collateral must, on each business day, at least
equal the market value of the loaned securities and must consist of cash, bank
letters of credit or U.S. Government securities, or other cash equivalents which
the Fund is permitted to purchase. 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 Fund receives an amount equal to the
dividends or interest on loaned securities and also receives one or more of (a)
negotiated loan fees, (b) interest on securities used as collateral, or (c)
interest on short-term debt securities purchased with such loan collateral;
either type of interest may be shared with the borrower. The Fund may also pay
reasonable finder's, custodian and administrative fees and will not lend its
portfolio securities to any officer, trustee, employee or affiliate of the Fund
or the Manager. The terms of the Fund's loans must meet applicable tests under
the Internal Revenue Code and permit the Fund to reacquire loaned securities on
five business days' notice or in time to vote on any important matter. After any
loan, the value of the securities loaned can not exceed 25% of the value of the
Fund's total assets. The Fund will not enter into any securities lending
agreements having a duration of greater than one year. Any securities received
as collateral for a loan must mature in 12 months or less. The Fund presently
does not intend to lend its portfolio securities, but if it does, the value of
securities loaned will not exceed 5% of the value of the Fund's net assets in
the coming year.
Illiquid and Restricted Securities. Illiquid securities in which the Fund may
invest include issues which only may be redeemed by the issuer upon more than
seven days notice or at maturity, repurchase agreements maturing in more than
seven days, fixed time deposits subject to withdrawal penalties which mature in
more than seven days, and other securities which cannot be sold freely due to
legal or contractual restrictions on resale. Contractual restrictions on the
resale of illiquid securities might prevent or delay their sale by the Fund at a
time when such sale would be desirable. Restricted securities that are not
illiquid, in which the Fund may invest, include certain master demand notes
redeemable on demand, and short-term corporate debt instruments which are not
related to current transactions of the issuer and therefore are not exempt from
registration as commercial paper, as described in the Prospectus.
Bank Loan Participation Agreements. The Fund may invest in bank loan
participation agreements, subject to the investment limitation set forth in "The
Fund and Its Investment Policies - Illiquid and Restricted Securities" in the
Prospectus. These participation agreements give the Fund an undivided interest
in U.S. dollar-denominated loans made by the bank selling the participation
interests, in the proportion that the Fund's participation interest bears to the
total principal amount of the loan. The selling bank may not have any obligation
to the purchaser of the interest other than to pay to it principal and interest
on the loan if and when received by the selling bank. The Manager has set
certain creditworthiness standards for issuers of loan participations, and
monitors their creditworthiness. Participation interests are considered
investments in illiquid securities (see "Illiquid and Restricted Securities,"
above). Their value primarily depends upon the creditworthiness of the borrower,
and its ability to pay interest and principal. Borrowers may have difficulty
making payments. If a borrower fails to make scheduled interest or principal
payments, the Fund could experience a reduction in its income and a decline in
the net asset value of its shares. Therefore, the loan must be an obligation of
a corporation whose commercial paper or corporate debt
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obligations the Fund may purchase. The Fund will only purchase participation
interests from a bank in whose obligations the Fund may invest, and subject to
the restriction described above on investments in illiquid securities. Only
loans which mature in one year or less may be the subject of participation
interests.
Other Investment Restrictions
The Fund's most significant investment restrictions are described in the
Prospectus. The following investment restrictions are also fundamental policies
and, together with the fundamental investment policies and restrictions
described in the Prospectus, cannot be changed without the vote of a "majority"
of the Fund's outstanding shares. Under the Investment Company Act, such a
"majority" vote is defined as the vote of the holders of the lesser of:(i) 67%
or more of the shares present or represented by proxy at a shareholder's
meeting, if the holders of more than 50% of the outstanding shares are present
or represented by proxy, or (ii) more than 50% of the outstanding shares. Under
these additional restrictions, the Fund cannot do any of the following:
o The Fund cannot invest in commodities or commodity contracts, or
invest in interests in oil, gas, or other mineral exploration or development
programs;
o The Fund cannot invest in real estate; however, the Fund may purchase
debt securities issued by companies which invest in real estate or interests
therein;
o The Fund cannot purchase securities on margin or make short sales of
securities; o The Fund cannot invest in or hold securities of any
issuer if those officers and directors
of the Fund or its adviser who beneficially own individually more than 0.5% of
the securities of such issuer together own more than 5% of the securities of
such issuer;
o The Fund cannot underwrite securities of other companies;
o The Fund cannot invest more than 5% of the value of its total assets
in securities of companies that have operated less than three years, including
the operations of predecessors; and
o The Fund cannot invest in securities of other investment companies.
Unless the Prospectus or this Statement of Additional Information
states that a percentage restriction applies on an ongoing basis, it applies
only at the time the Fund makes an investment, and the Fund need not sell
securities to meet the percentage limits if the value of the investment
increases in proportion to the size of the Fund. For purposes of the Fund's
policy not to concentrate described in "Investment Restrictions" in the
Prospectus, the Fund has adopted, as a matter of non-fundamental policy, the
industry classifications set forth in Appendix C to this Statement of Additional
Information.
Directors and Officers of the Fund
The Fund's Directors and officers and their principal business affiliations and
occupations during the past five years are listed below. Sam Freedman became a
Director of the Fund on June 27, 1996. All of the directors are also trustees or
directors of Centennial America Fund L.P., Centennial Money Market Trust,
Centennial Tax Exempt Trust, Centennial Government Trust, Centennial New York
Tax Exempt Trust, Centennial California Tax Exempt Trust (the "Centennial
Funds"), Oppenheimer Cash Reserves, Oppenheimer Champion Income Fund,
Oppenheimer Equity Income Fund,
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Oppenheimer Limited-Term Government Fund, Oppenheimer Integrity Funds,
Oppenheimer International Bond Fund, Oppenheimer High Yield Fund, Oppenheimer
Main Street Funds, Inc., Oppenheimer Real Asset Fund, Oppenheimer Strategic
Income Fund, Oppenheimer Strategic Income & Growth Fund, Oppenheimer Municipal
Fund, Oppenheimer Total Return Fund, Inc., Oppenheimer Variable Account Funds,
Panorama Series Funds, Inc., and The New York Tax- Exempt Income Fund, Inc.
(together with the Centennial Funds, the "Denver Oppenheimer funds") except for
Ms. Macaskill and Mr. Fossel. Ms. Macaskill and Mr. Fossel are Trustees,
Directors or Managing General Partners of all the Denver-based Oppenheimer funds
except Oppenheimer Integrity Funds, Oppenheimer Strategic Income Fund, Panorama
Series Funds, Inc. and Oppenheimer Variable Account Funds. Also, Mr. Fossel is
not a trustee of Centennial New York Tax-Exempt Trust nor a managing general
partner of Centennial America Fund L.P. Ms. Macaskill is President and Mr. Swain
is Chairman and CEO of the Denver Oppenheimer funds. All of the officers except
Ms. Warmack, Ms. Wolf and Mr. Zimmer hold similar positions as officers of all
the Denver Oppenheimer funds. As of April 7, 1997, the directors and officers of
the Fund as a group owned of record or beneficially less than 1% of its
outstanding shares. The foregoing statement does not reflect ownership of shares
held of record by an employee benefit plan for employees of the Manager (for
which plan two of the officers listed below, Ms. Macaskill and Mr. Donohue, are
trustees) other than the shares beneficially owned under that plan by the
officers of the Fund listed above.
ROBERT G. AVIS, Director; Age 65*
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, Director; Age 82
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
CHARLES CONRAD, JR., Director; Age 67*
1501 Quail Street, Newport Beach, CA 92660
Chairman and CEO of Universal Space Lines, Inc. (a space services management
company); formerly Vice President of McDonnell Douglas Space Systems Co. and
associated with the National Aeronautics and Space Administration.
JON S. FOSSEL, Directors, Age 55*
P.O. Box 44, Mead Street, Waccabuc, New York 10597
Member of the Board of Governors of the Investment Company Institute (a national
trade association of investment companies), Chairman of the Investment Company
Institute Education Foundation; formerly Chairman and a director of
OppenheimerFunds, Inc. ("OFI"), President and a director of Oppenheimer
Acquisition Corp.("OAC"), OFI's parent holding company, and Shareholder
Services, Inc .("SSI") and Shareholder Financial Services, Inc. ("SFSI"),
transfer agent subsidiaries of OFI.
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SAM FREEDMAN, Director; Age 56
4975 Lakeshore Drive, Littleton, Colorado 80123
Formerly Chairman and Chief Executive Officer of OppenheimerFunds Services,
Chairman, Chief Executive Officer and a director of SSI, Chairman, Chief
Executive and Officer and director of SFSI, Vice President and director of OAC
and a director of OFI.
RAYMOND J. KALINOWSKI, Director; Age 67
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc. (a computer products training
company); formerly Vice Chairman and a director of A.G. Edwards, Inc., parent
holding company of A.G. Edwards & Sons, Inc. (a broker-dealer), of which he was
a Senior Vice President.
C. HOWARD KAST, Director; Age 75
2552 East Alameda, Denver, Colorado 80209
Formerly Managing Partner of Deloitte, Haskins & Sells (an accounting firm).
ROBERT M. KIRCHNER, Director; Age 75
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
BRIDGET A. MACASKILL, President and Director; Age 48*
President, Chief Executive Officer and a Director of OFI and HarbourView Asset
Management Corporation ("HarbourView"), a subsidiary of OFI; Chairman and a
director of SSI and SFSI.; President and a director of OAC and Oppenheimer
Partnership Holdings, Inc., a holding company subsidiary of OFI; a director of
Oppenheimer Real Asset Management, Inc.; formerly an Executive Vice President of
OFI.
NED M. STEEL, Director; Age 81
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; a director of Visiting Nurse
Corporation of Colorado; formerly Senior Vice President and a Director of Van
Gilder Insurance Corp. (insurance brokers).
JAMES C. SWAIN, Chairman, Chief Executive Officer and Director; Age 63* 6803
South Tucson Way, Englewood, Colorado 80112 Vice Chairman of the OFI; formerly
President and a director of Centennial Asset Management Corporation (the
"Manager"), and Chairman of the Board of SSI.
DOROTHY G. WARMACK, Vice President and Portfolio Manager; Age 60
Vice President of OFI and the Manager; an officer of other Oppenheimer funds.
CAROL E. WOLF, Vice President and Portfolio Manager; Age 45
Vice President of OFI and the Manager; an officer of other Oppenheimer funds.
ARTHUR J. ZIMMER, Vice President and Portfolio Manger; Age 50
Vice President of the OFI and the Manager; an officer of other Oppenheimer
funds.
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ANDREW J. DONOHUE, Vice President and Secretary; Age 46
Executive Vice President, General Counsel and a Director of OFI,
OppenheimerFunds Distributor, Inc. , HarbourView, SSI, SFSI, Oppenheimer
Partnership Holdings, Inc. and MultiSource Services, Inc. (a broker-dealer);
President and a director of the Manager; President and a director of Oppenheimer
Real Asset Management, Inc.; General Counsel of OAC; an officer of other
Oppenheimer funds.
GEORGE C. BOWEN, Vice President, Treasurer and Assistant Secretary; Age 60
6803 Tucson Way, Englewood, Colorado 80112
Senior Vice President and Treasurer of OFI; Vice President and Treasurer of
OppenheimerFunds Distributor, Inc. and HarbourView; Senior Vice President,
Treasurer, Assistant Secretary and a director of the Manager; President,
Treasurer and a director of Centennial Capital Corporation; Senior Vice
President, Treasurer and Secretary of SSI; Vice President, Treasurer and
Secretary of SFSI; Treasurer of OAC; Treasurer of Oppenheimer Partnership
Holdings, Inc.; Vice President and Treasurer of Oppenheimer Real Asset
Management, Inc.; Chief Executive Officer, Treasurer and a director of
MultiSource Services, Inc. (a broker-dealer); an officer of other Oppenheimer
funds.
ROBERT G. ZACK, Assistant Secretary; Age 48
Senior Vice President and Associate General Counsel of OFI, Assistant Secretary
of SSI and SFSI; an officer of other Oppenheimer funds.
ROBERT J. BISHOP, Assistant Treasurer; Age 38
6803 Tucson Way, Englewood, Colorado 80112
Vice President of the OFI /Mutual Fund Accounting; an officer of other
Oppenheimer funds; formerly a Fund Controller for OFI.
SCOTT T. FARRAR, Assistant Treasurer; Age 31
6803 Tucson Way, Englewood, Colorado 80112
Vice President of OFI/Mutual Fund Accounting; an officer of other Oppenheimer
funds; formerly a Fund Controller for OFI.
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* A director who is an "interested person" of the Fund as defined in the
Investment Company Act .
Remuneration of Directors. The officers of the Fund and certain directors of the
Fund (Ms. Macaskill and Mr. Swain) who are affiliated with the Manager receive
no salary or fees from the Fund. Mr. Fossel did not receive any salary or fees
from the Fund prior to January 1, 1997. The remaining directors of the Fund
received the total amounts shown below. Mr. Freedman received no compensation
from the Fund before June 27, 1996, the date he became a director. The
compensation from the Fund was paid during fiscal year ended December 31, 1996.
The compensation from the Denver-based Oppenheimer funds includes compensation
received as a director, trustee, managing partner or member of a committee of
the Board of those funds during calendar year 1996.
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<TABLE>
<CAPTION>
Total
Compensation
Aggregate From All
Compensation Denver-based
Name Position from Fund Oppenheimer funds
<S> <C> <C> <C>
Robert G. Avis Director $3,409 $58,003
William A. Baker Audit and Review $4,685 $79,715
Committee, Chairman and
Director
Charles Conrad, Jr. Audit and Review $4,391 $74,717
Committee Member and
Director
Sam Freedman Director $1,734 $29,502
Raymond J. Kalinowski Risk Oversight Committee
Member, Director $4,359 $74,173
C. Howard Kast Risk Oversight Committee
Member, Director $4,359 $74,173
Robert M. Kirchner Audit and Review $4,391 $74,717
Committee and
Director
Ned M. Steel Director $3,409 $58,003
</TABLE>
Major Shareholders. As of April 7, 1997, the only person known by the management
of the Fund to be the record or beneficial owner of 5% or more of the
outstanding shares of the Fund was A.G. Edwards & Sons, Inc. ("Edwards"), One
North Jefferson Street, St. Louis, MO 63103, which was the record owner of
3,475,220,498.760 shares (approximately 98.91% of the shares outstanding). The
Fund has been informed that the shares held of record by Edwards were owned for
the benefit of its brokerage clients.
The Manager and Its Affiliates
The Manager is a wholly-owned subsidiary of OppenheimerFunds, Inc. ("OFI"),
which is wholly-owned by Oppenheimer Acquisition Corporation ("OAC"), a holding
company controlled by Massachusetts Mutual Life Insurance Company. OAC is also
owned by certain of OFI's directors and officers, some of whom may also serve as
officers of the Fund, and two of whom (Ms. Macaskill and Mr. Swain) serve as
Directors of the Fund.
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Investment Advisory Agreement. The Manager supervises the investment operations
of the Fund and the composition of its portfolio and furnishes the Fund advice
and recommendations with respect to investments, investment policies, and the
purchase and sale of securities pursuant to an investment advisory agreement
(the "Agreement") with the Fund, described in "Management of the Fund" in the
Prospectus. During the Fund's fiscal years ended December 31, 1996, 1995 and
1994, the Fund paid the Manager management fees of $12,933,033, $12,746,352 and
$11,918,801 respectively, pursuant to the Agreement. The management fees for the
fiscal year ended December 31, 1996 are net of a voluntary expense assumption by
the Manager which reduced the management fees for that year in an amount of
$441,801. In the absence of such voluntary expense assumption, the management
fees payable by the Fund would have been $13,374,834.
The Agreement requires the Manager, at its expense, to provide the Fund
with adequate office space, facilities and equipment and to provide and
supervise the activities of all administrative and clerical personnel required
to provide effective administration for the Fund, including the compilation and
maintenance of records with respect to its operations, the preparation and
filing of specified reports, and the composition of proxy materials and
registration statements for continuous public sale of shares of the Fund.
Expenses not expressly assumed by the Manager under the Agreement or as
Distributor of the shares of the Fund are paid by the Fund. The Agreement lists
examples of expenses paid by the Fund, the major categories of which relate to
interest, taxes, fees to unaffiliated directors, legal, bookkeeping and audit
expenses, brokerage, custodian and transfer agent expenses, stock issuance
costs, certain printing costs (excluding the cost of printing prospectuses for
sales materials), registration fees, and non-recurring expenses, including
litigation.
The Agreement provides that the Manager will reimburse the Fund for
annual expenses of the Fund (excluding brokerage commission, taxes, interest and
extraordinary expenses such as litigation) which exceed the most stringent
limits prescribed by any state in which the Fund's shares are offered for sale.
Due to changes in federal securities laws, such state regulations no longer
apply. During the Fund's last fiscal year, the Fund's expenses did not exceed
the most stringent state regulatory limit and the voluntary undertaking was not
invoked.
Independently of the Agreement with the Fund, effective December 1,
1994, the Manager has voluntarily agreed to assume the Fund's expenses to the
level needed to enable the Fund's 7-day yield (computed in accordance with
procedures specified pursuant to regulations adopted under the Investment
Company Act) to at least equal the 7-day yield of Centennial Money Market Trust.
The Manager reserves the right to modify or terminate this voluntary undertaking
at any time without prior notice to investors or shareholders. Prior to December
1, 1994, the Manager voluntarily agreed to waive a portion of the management fee
otherwise payable to it by the Fund to the extent necessary to ensure that the
annual management fee of the Fund did not exceed 0.35% of the Fund's average net
assets.
The Manager assumes no responsibility under the Agreement other than
that which is imposed by law, and shall not be responsible for any action of the
Board of Directors of the Fund in following or declining to follow any advice or
recommendations of the Manager. The Manager shall not be liable for any error of
judgment or mistake of law, or for any loss suffered by the Fund in connection
with matters to which the Agreement relates, except a loss resulting by reason
of the
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Manager's willful misfeasance, bad faith or gross negligence in the performance
of its duties, or its reckless disregard of its obligations and duties, under
the Agreement. The Agreement permits the Manager to act as investment adviser
for any other person, firm or corporation.
Custodian. The Custodian's responsibilities include safeguarding and controlling
the Fund's portfolio securities and handling the delivery of portfolio
securities to and from the Fund. The Manager has represented to the Fund that
its banking relationships between the Manager and the Custodian have been and
will continue to be unrelated to and unaffected by the relationship between the
Fund and the Custodian. It will be the practice of the Fund to deal with the
Custodian in a manner uninfluenced by any banking relationship the Custodian may
have with the Manager or its affiliates.
Transfer Agent. Shareholder Services, Inc. as the Transfer Agent, is responsible
for maintaining the Fund's shareholder registry and shareholder accounting
records, and for shareholder servicing and administrative functions.
Distributor. Under the General Distributor's Agreement between the Fund and the
Distributor, the Distributor is the Fund's principal underwriter in the
continuous public offering of the Fund's shares but is not obligated to sell a
specific number of shares. Expenses normally attributable to sales (other than
those paid under the Service Plan), including advertising and the cost of
printing and mailing prospectuses (other than those furnished to existing
shareholders), are borne by the Distributor.
Independent Auditors. The independent auditors of the Fund audit the Fund's
financial statements and perform other related audit services. They also act as
auditors for the Manager, OppenheimerFunds, Inc., the Manager's immediate
parent, as well as for certain other funds advised by the Manager and
OppenheimerFunds, Inc.
Portfolio Transactions. Portfolio decisions are based upon the recommendations
and judgment of the Manager subject to the overall authority of the Board of
Directors. As most purchases made by the Fund are principal transactions at net
prices, the Fund incurs little or no brokerage costs. Purchases of portfolio
securities from underwriters include a commission or concession paid by the
issuer to the underwriter, and purchases from dealers include a spread between
the bid and asked price. The Fund's policy of investing in short-term debt
securities with maturities of less than one year results in high portfolio
turnover. However, since brokerage commissions, if any, are small and securities
are usually held to maturity, high turnover does not have an appreciable adverse
effect upon the net asset value or income of the Fund.
The Fund seeks to obtain prompt and reliable execution of orders at the
most favorable net price. If brokers are used for portfolio transactions,
transactions may be directed to brokers furnishing execution and research
services deemed by the Manager to be useful or valuable to the performance of
its investment advisory functions for the Fund. Research information may be in
written form or through direct contact with individuals and includes information
on particular companies and industries as well as market, economic or
institutional activity areas. It serves to broaden the scope and supplement the
research activities of the Manager, to make available
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additional views for consideration and comparisons, and to enable the Manager to
obtain market information for the valuation of securities held in the Fund's
portfolio. The Fund does not direct the handling of purchases or sales of
portfolio securities, whether on a principal or agency basis, to brokers for
selling shares of the Fund. No portfolio transactions are handled by brokers
which are affiliated with the Fund or the Manager.
Performance of the Fund
Yield Information. The Fund's current yield is calculated for a seven-day period
of time, determined in accordance with regulations adopted under the Investment
Company Act as follows. First, a base period return is calculated for the
seven-day period by determining the net change in the value of a hypothetical
pre-existing account having one share at the beginning of the seven day period.
The change includes dividends declared on the original share and dividends
declared on any shares purchased with dividends on that share, but such
dividends are adjusted to exclude any realized or unrealized capital gains or
losses affecting the dividends declared. Next, the base period return is
multiplied by 365/7 to obtain the current yield to the nearest hundredth of one
percent. The compounded effective yield for a seven-day period is calculated by
(a) adding 1 to the base period return (obtained as described above), (b)
raising the sum to a power equal to 365 divided by 7, and (c) subtracting 1 from
the result. For the seven days ended December 31, 1996, the Fund's yield was
4.86% and its compounded effective yield was 4.98%.
The yield as calculated above may vary for accounts less than
approximately $100 in value due to the effect of rounding off each daily
dividend to the nearest full cent. Since the calculation of yield under either
procedure described above does not take into consideration any realized or
unrealized gains or losses on the Fund's portfolio securities which may affect
dividends, the return on dividends declared during a period may not be the same
on an annualized basis as the yield for that period.
Yield information may be useful to investors in reviewing the Fund's
performance. The Fund may make comparisons between its yield and that of other
investments, by citing various indices such as The Bank Rate Monitor National
Index (provided by Bank Rate Monitor TM), which measures the average rate paid
on bank money market accounts, NOW accounts and certificates of deposit by the
100 largest banks and thrift institutions in the top ten metropolitan areas.
However, a number of factors should be considered before using yield information
as a basis for comparison with other investments. An investment in the Fund is
not insured. Its yield is not guaranteed and normally will fluctuate on a daily
basis. The yield for any given past period is not an indication or
representation by the Fund of future yields or rates of return on its shares.
The Fund's yield is affected by portfolio quality, portfolio maturity, type of
instruments held and operating expenses. When comparing the Fund's yield with
that of other investments, investors should understand that certain other
investment alternatives such as certificates of deposit, U.S. government
securities, money market instruments or bank accounts may provide fixed yields
or yields that may vary above a stated minimum, and also that bank accounts may
be insured. Certain types of bank accounts may not pay interest when the balance
falls below a specified level and may limit the number of withdrawals by check
per month.
-12-
<PAGE>
Service Plan
The Fund has adopted a service plan (the "Plan") under Rule 12b-1 of the
Investment Company Act pursuant to which the Fund is permitted to reimburse the
Distributor for a portion of its costs incurred in connection with personal
service and maintenance of shareholder accounts as described in the Prospectus.
Under the Plan, the Fund's Distributor is authorized to reimburse certain
securities dealers and other financial institutions and organizations
("Recipients") in connection with the personal service and the maintenance of
shareholder accounts that hold Fund shares. Payment is made monthly or quarterly
(i) at the annual rate of 0.20 of 1.0% (or such lesser amount as the
disinterested Directors may determine) of the average net asset value of the
Fund's shares owned beneficially or of record during the month or quarter by the
Recipient or its customers, or (ii) in an amount equal to the Recipient's total
cost during the month of rendering personal service (including reasonable
allocations of overhead), whichever is less. No payment will be made to a
Recipient for any month during which the average net asset value of Fund shares
held by the Recipient and its customers was less than $3 million. Although no
payments are retained by the Distributor or the Manager, Recipients which are
affiliates of the Manager may receive payments. Payments by the Fund under the
Plan for the fiscal year ended December 31, 1996 totaled $7,123,026, all of
which was paid to Edwards.
Under the Plan, a Recipient must certify monthly or quarterly that its
expenses for providing such services do not exceed its administrative and
sales-related costs. A Recipient is required to reimburse the Fund if the
aggregate payments it receives during the year exceed its costs as so certified.
The Plan may continue in effect for a period of more than one year from
the date of its execution only so long as continuance is approved at least
annually by the Board of Directors of the Fund, including a majority of the
disinterested Directors, by a vote cast in person at a meeting called for the
purpose of voting on that Agreement. The Plan automatically terminates if (i)
the Fund terminates the Plan, or (ii) a majority of the disinterested Directors
or the holders of a majority of the outstanding voting securities of the Fund
vote to terminate the Agreement.
The Plan provides that, as long as the Plan remains in effect, the
selection and nomination of Directors of the Fund who are not "interested
persons" of the Fund shall be committed to the discretion of the Directors then
in office who are not "interested persons" of the Fund. However, others may
participate in such selection and nomination provided that the final decision is
approved by a majority of the incumbent Independent Directors. Finally, the Plan
cannot be amended without shareholder approval as set forth above to increase
materially the amount of payments to be made and all material amendments are
required to be approved by the vote of the Board of Directors of the Fund,
including a majority of the disinterested Directors, cast in person at a meeting
called for that purpose.
ABOUT YOUR ACCOUNT
Purchase, Redemption and Pricing of Shares
-13-
<PAGE>
Determination of Net Asset Value Per Share. The net asset value per share of the
Fund's shares is determined twice each day as of 12:00 Noon and as of the close
of The New York Stock Exchange (the "Exchange") which is normally 4:00 P.M., but
may be earlier on some days, each day the Exchange is open (a "regular business
day"), (all references to time mean New York time) by dividing the Fund's net
assets (the total value of the Fund's portfolio securities, cash and other
assets less all liabilities) by the total number of shares outstanding. The
Exchange's most recent annual holiday schedule states that it will close New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. The Exchange may also close on other
days.
The Fund will seek to maintain a net asset value of $1.00 per share for
purchases and redemptions. There can be no assurance that it will do so. The
Fund operates under Rule 2a-7 under which the Fund may use the amortized cost
method of valuing its shares. The amortized cost method values a security
initially at its cost and thereafter assumes a constant amortization of any
market discount or premium, regardless of the impact of fluctuating interest
rates on the market value of the security. The method does not take into account
unrealized capital gains or losses.
The Board of Directors has established procedures for the valuation of
the Fund's securities, which provide that money market debt securities that had
a maturity of less than 397 days when issued that have a remaining maturity of
60 days or less are valued at cost, adjusted for amortization of premiums and
accretion of discounts.
Redemptions. The Fund's Board of Directors has the right, in conformity with
applicable law, to cause the involuntary redemption of the shares held in any
account if the aggregate net asset value of such shares is less than $500 or
such lesser amount as the Board may decide. Should the Board elect to exercise
this right, it will establish the terms of any notice of such redemption
required to be provided to the shareholder under the Investment Company Act or
Maryland law, including any provision the Board may establish to enable the
shareholder to increase the amount of the investment to avoid involuntary
redemption.
Expedited Redemption Procedures. Under the Expedited Redemption Procedure
available to direct shareholders of the Fund, as discussed in the Prospectus,
the wiring of redemption proceeds may be delayed if the Fund's Custodian bank is
not open for business on a day that the Fund would normally authorize the wire
to be made, which is usually the same day for redemptions prior to 12:00 Noon,
and the Fund's next regular business day for redemptions between 12:00 Noon and
the close of the Exchange, which is normally 4:00 P.M., but may be earlier on
some days. In those circumstances, the wire will not be transmitted until the
next bank business day on which the Fund is open for business and no dividends
will be paid on the proceeds of redeemed shares waiting transfer by wire.
Dividends and Taxes
Tax Status of the Fund's Dividends and Distributions. The Federal tax treatment
of the Fund's dividends and distributions to shareholders is explained in the
Prospectus under the caption "Dividends, Distributions and Taxes." Under the
Internal Revenue Code, the Fund must distribute
-14-
<PAGE>
by December 31 each year 98% of its taxable investment income earned from
January 1 through December 31 of that year, and 98% of its capital gains
realized from the prior November 1 through October 31 of the current year, or
else the Fund must pay an excise tax on the amounts not distributed. While it is
presently anticipated that the Fund's distributions will meet those
requirements, the Fund's Board and Manager might determine in a particular year
that it might be in the best interest of the Fund's shareholders not to
distribute income or capital gains at the mandated levels and to pay the excise
tax on the undistributed amounts, which would reduce the amount available for
distribution to shareholders.
Dividend Reinvestment in Another Fund. Direct shareholders of the Fund may elect
to reinvest all dividends and/or distributions in Class A shares of any of the
other "Eligible Funds" listed below at net asset value without sales charge. To
elect this option, a shareholder must notify the Transfer Agent in writing, and
either must have an existing account in the fund selected for reinvestment or
must obtain a prospectus for that fund and an application from the Transfer
Agent to establish an account. The investment will be made at the net asset
value per share next determined on the payable date of the dividend or
distribution.
Eligible Funds:
Limited Term New York Municipal Fund*
Oppenheimer Bond Fund
Oppenheimer Bond Fund for Growth
Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Champion Income Fund
Oppenheimer Developing Markets Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer Disciplined Value Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Equity Income Fund
Oppenheimer Florida Municipal Fund
Oppenheimer Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Insured Municipal Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer International Bond Fund
Oppenheimer International Growth Fund
Oppenheimer LifeSpan Balanced Fund
Oppenheimer LifeSpan Growth Fund
-15-
<PAGE>
Oppenheimer LifeSpan Income Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Main Street California Municipal Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer Municipal Bond Fund
Oppenheimer New Jersey Municipal Fund
Oppenheimer New York Municipal Fund
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Growth & Income Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Real Asset Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer U.S. Government Trust
Oppenheimer Value Stock Fund
Oppenheimer World Bond Fund
Rochester Fund Municipals
The New York Tax Exempt Income Fund, Inc.
the following "Money Market Funds":
Centennial America Fund L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Oppenheimer Cash Reserves
Oppenheimer Money Market Fund, Inc.
There is an initial sales charge on the purchase of Class A shares of each
Eligible Fund except the Money Market Funds (under certain circumstances,
described in the Prospectus, redemption proceeds of Money Market Fund shares may
be subject to a CDSC).
*Shares of the Fund are not exchangeable for shares of Limited Term New York
Municipal Fund prior to May 1, 1997.
-16-
<PAGE>
APPENDIX A
DESCRIPTION OF SECURITIES RATINGS
Below is a description of the two highest rating categories for Short Term Debt
and Long Term Debt by the "Nationally-Recognized Statistical Rating
Organizations" which the Manager evaluates in purchasing securities on behalf of
the Fund. The ratings descriptions are based on information supplied by the
ratings organizations to subscribers.
Short Term Debt Ratings.
Moody's Investors Service, Inc. ("Moody's"): The following rating designations
for commercial paper (defined by Moody's as promissory obligations not having
original maturity in excess of nine months), are judged by Moody's to be
investment grade, and indicate the relative repayment capacity of rated issuers:
Prime-1: Superior capacity for repayment. Capacity will normally be
evidenced by the following characteristics: (a) leveling market
positions in well- established industries; (b) high rates of return on
funds employed; (c) conservative capitalization structures with
moderate reliance on debt and ample asset protection; (d) broad
margins in earning coverage of fixed financial charges and high
internal cash generation; and (e) well established access to a range
of financial markets and assured sources of alternate liquidity.
Prime-2: Strong capacity for repayment. This will normally be evidenced by
many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity
is maintained.
Moody's ratings for state and municipal short-term obligations are designated
"Moody's Investment Grade" ("MIG"). Short-term notes which have demand features
may also be designated as "VMIG". These rating categories are as follows:
MIG1/VMIG1: Best quality. There is present strong protection by
established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG2/VMIG2: High quality. Margins of protection are ample although not
so large as in the preceding group.
Standard & Poor's Corporation ("S&P"): The following ratings by S&P for
commercial paper (defined by S&P as debt having an original maturity of no more
than 365 days) assess the likelihood of payment:
A-1
<PAGE>
A-1: Strong capacity for timely payment. Those issues
determined to possess extremely strong safety
characteristics are denoted with a plus sign (+)
designation.
A-2: Satisfactory capacity for timely payment. However,
the relative degree of
safety is not as high as for issues designated "A-1".
S&P's ratings for Municipal Notes due in three years or less are:
SP-1: Very strong or strong capacity to pay principal and
interest. Those issues determined to possess
overwhelming safety characteristics will be given a
plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest.
S&P assigns "dual ratings" to all municipal debt issues that have a demand or
double feature as part of their provisions. The first rating addresses the
likelihood of repayment of principal and interest as due, and the second rating
addresses only the demand feature. With short-term demand debt, S&P's note
rating symbols are used with the commercial paper symbols (for example, "SP-
1+/A-1+").
Fitch Investors Service, Inc. ("Fitch"): Fitch assigns the following short-term
ratings to debt obligations that are payable on demand or have original
maturities of generally up to three years, including commercial paper,
certificates of deposit, medium-term notes, and municipal and investment notes:
F-1+: Exceptionally strong credit quality; the strongest
degree of assurance for
timely payment.
F-1: Very strong credit quality; assurance of timely
payment is only slightly less in degree than issues
rated "F-1+".
F-2: Good credit quality; satisfactory degree of assurance
for timely payment, but the margin of safety is not
as great as for issues assigned "F-1+" or "F-1"
ratings.
Duff & Phelps, Inc. ("Duff & Phelps"): The following ratings are for commercial
paper (defined by Duff & Phelps as obligations with maturities, when issued, of
under one year), asset-backed commercial paper, and certificates of deposit (the
ratings cover all obligations of the institution with maturities, when issued,
of under one year, including bankers' acceptance and letters of credit):
Duff 1+: Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below
risk-free U.S. Treasury short-term
A-2
<PAGE>
obligations.
Duff 1: Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors.
Risk factors are minor.
Duff 1-: High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection factors. Risk
factors are very small.
Duff 2: Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs
may enlarge total financing requirements, access to capital
markets is good. Risk factors are small.
IBCA Limited or its affiliate IBCA Inc. ("IBCA"): Short-term ratings, including
commercial paper (with maturities up to 12 months), are as follows:
A1+: Obligations supported by the highest capacity for
timely repayment.
A1: Obligations supported by a very strong capacity for
timely repayment.
A2: Obligations supported by a strong capacity for timely
repayment, although such capacity may be susceptible
to adverse changes in business, economic, or
financial conditions.
Thomson BankWatch, Inc. ("TBW"): The following short-term ratings apply to
commercial paper, certificates of deposit, unsecured notes, and other securities
having a maturity of one year or less.
TBW-1: The highest category; indicates the degree of safety
regarding timely repayment of principal and interest
is very strong.
TBW-2: The second highest rating category; while the degree
of safety regarding timely repayment of principal and
interest is strong, the relative degree of safety is
not as high as for issues rated "TBW-1".
Long Term Debt Ratings. These ratings are relevant for securities purchased by
the Fund with a remaining maturity of 397 days or less, or for rating issuers of
short-term obligations.
Moody's: Bonds (including municipal bonds) are rated as follows:
Aaa: Judged to be the best quality. They carry the smallest degree of
investment risk and are generally referred to as "gilt edge." 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, such
A-3
<PAGE>
changes as can be visualized are most unlikely to impair the
fundamentally strong positions of such issues.
Aa: 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 in "Aaa" securities or fluctuations 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 in
"Aaa" securities.
Moody's applies numerical modifiers "1", "2" and "3" in its "Aa" rating
classification. The modifier "1" indicates that the security ranks in the higher
end of its generic rating category; the modifier "2" indicates a mid-range
ranking; and the modifier "3" indicates that the issue ranks in the lower end of
its generic rating category.
Standard & Poor's: Bonds (including municipal bonds) are rated as follows:
AAA: The highest rating assigned by S&P. Capacity to pay interest and
repay principal is extremely strong.
AA: A strong capacity to pay interest and repay principal and differ
from "AAA" rated issues only in small degree.
Fitch:
AAA: Considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA: Considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds
rated "AAA". Plus (+) and minus (-) signs are used in the "AA"
category to indicate the relative position of a credit within
that category.
Because bonds rated in the "AAA" and "AA" categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these issuers
is generally rated "F-1+".
Duff & Phelps:
AAA: The highest credit quality. The risk factors are negligible,
being only slightly more than for risk-free U.S. Treasury debt.
AA: High credit quality. Protection factors are strong. Risk is
modest but may vary slightly from time to time because of
economic conditions. Plus (+)
A-4
<PAGE>
and minus (-) signs are used in the "AA" category to indicate the
relative position of a credit within that category.
IBCA: Long-term obligations (with maturities of more than 12 months) are rated
as follows:
AAA: The lowest expectation of investment risk. Capacity for timely
repayment of principal and interest is substantial such that
adverse changes in business, economic, or financial conditions
are unlikely to increase investment risk significantly.
AA: A very low expectation for investment risk. Capacity for timely
repayment of principal and interest is substantial. Adverse
changes in business, economic, or financial conditions may
increase investment risk albeit not very significantly.
A plus (+) or minus (-) sign may be appended to a long term rating to denote
relative status within a rating category.
TBW: TBW issues the following ratings for companies. These ratings assess the
likelihood of receiving payment of principal and interest on a timely basis and
incorporate TBW's opinion as to the vulnerability of the company to adverse
developments, which may impact the market's perception of the company, thereby
affecting the marketability of its securities.
A: Possesses an exceptionally strong balance sheet and
earnings record, translating into an excellent
reputation and unquestioned access to its natural
money markets. If weakness or vulnerability exists in
any aspect of the company's business, it is entirely
mitigated by the strengths of the organization.
A/B: The company is financially very solid with a
favorable track record and no readily apparent
weakness. Its overall risk profile, while low, is not
quite as favorable as for companies in the highest
rating category.
A-5
<PAGE>
APPENDIX B
AUTOMATIC WITHDRAWAL PLAN PROVISIONS
By requesting an Automatic Withdrawal Plan, the shareholder agrees to
the terms and conditions applicable to such plans, as stated below and elsewhere
in the Application for such Plans, and the Prospectus and this Statement of
Additional Information as they may be amended from time to time by the Fund
and/or the Distributor. When adopted, such amendments will automatically apply
to existing Plans.
Fund shares will be redeemed as necessary to meet withdrawal payments.
Depending on the amount withdrawn, the investor's principal may be depleted.
Payments made to shareholders under such plans may not be considered as a yield
or income on investment. Purchases of additional shares concurrently with
withdrawals are undesirable because of sales charges on purchases. Accordingly,
a shareholder may not maintain an Automatic Withdrawal Plan while simultaneously
making regular purchases.
1. Shareholder Services, Inc. (the "Transfer Agent") will administer the
Automatic Withdrawal Plan (the "Plan") as agent for the person (the
"Planholder") who executed the Plan authorization and application submitted to
the Transfer Agent.
2. Certificates will not be issued for shares of the Funds purchased for
and held under the Plan, but the Transfer Agent will credit all such shares to
the account of the Planholder on the records of the Fund. Any share certificates
now held by the Planholder may be surrendered unendorsed to the Transfer Agent
with the Plan application so that the shares represented by the certificate may
be held under the Plan. Those shares will be carried on the Planholder's Plan
Statement.
3. Distributions of capital gains must be reinvested in shares of the Fund,
which will be done at net asset value without a sales charge. Dividends may be
paid in cash or reinvested.
4. Redemptions of shares in connection with disbursement payments will be
made at the net asset value per share determined on the redemption date.
5. Checks or ACH payments will be transmitted three business days prior to
the date selected for receipt of the monthly or quarterly payment (the date of
receipt is approximate), according to the choice specified in writing by the
Planholder.
6. The amount and the interval of disbursement payments and the address to
which checks are to be mailed may be changed at any time by the Planholder on
written notification to the Transfer Agent. The Planholder should allow at least
two weeks' time in mailing such notification before the requested change can be
put into effect.
7. The Planholder may, at any time, instruct the Transfer Agent by written
notice (in proper form in accordance with the requirements of the then-current
Prospectus of the Fund) to
B-1
<PAGE>
redeem all, or any part of, the shares held under the Plan. In such case, the
Transfer Agent will redeem the number of shares requested at the net asset value
per share in effect in accordance with the Fund's usual redemption procedures
and will mail a check for the proceeds of such redemption to the Planholder.
8. The Plan may, at any time, be terminated by the Planholder on written
notice to the Transfer Agent, or by the Transfer Agent upon receiving directions
to that effect from the Fund. the Transfer Agent will also terminate the Plan
upon receipt of evidence satisfactory to it of the death or legal incapacity of
the Planholder. Upon termination of the Plan by the Transfer Agent or the Fund,
shares remaining unredeemed will be held in an uncertificated account in the
name of the Planholder, and the account will continue as a
dividend-reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder, his executor or guardian, or as
otherwise appropriate.
9. For purposes of using shares held under the Plan as collateral, the
Planholder may request issuance of a portion of his shares in certificated form.
Upon written request from the Planholder, the Transfer Agent will determine the
number of shares as to which a certificate may be issued, so as not to cause the
withdrawal checks to stop because of exhaustion of uncertificated shares needed
to continue payments. Should such uncertificated shares become exhausted, Plan
withdrawals will terminate.
10. The Transfer Agent shall incur no liability to the Planholder for any
action taken or omitted by the Transfer Agent in good faith.
11. In the event that the Transfer Agent shall cease to act as transfer
agent for the Fund, the Planholder will be deemed to have appointed any
successor transfer agent to act as his agent in administering the Plan.
B-2
<PAGE>
APPENDIX C
Industry Classifications
Corporate Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
<PAGE>
Food
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking
C-1
<PAGE>
Investment Advisor and Distributor
Centennial Asset Management Corporation
6803 South Tucson Way
Englewood, Colorado 80112
Transfer and Shareholder Servicing Agent
Shareholder Services, Inc.
P.O. Box 5143
Denver, Colorado 80217
1-800 525-9310
Custodian
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
PX0140.001.0597
