OPPENHEIMER MANAGEMENT CORPORATION
2 World Trade Center, Suite 3400
New York, NY 10048-0203
October 28, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
RE: Oppenheimer Equity Income Fund - Reg. No. 2-33043
File No. 811-1512
Written Representation of Counsel
To the Securities and Exchange Commission:
On behalf of Oppenheimer Equity Income Fund (the "Fund") and pursuant
to Paragraph (e) of Rule 485 under the Securities Act of 1933, as amended
(the "1933 Act"), and in connection with the Amendment on Form N-1A which
is Post-Effective Amendment No. 42 to the 1933 Act Registration Statement
of the Fund and Amendment No. 28 to its Registration Statement under the
Investment Company Act of 1940, as amended, the undersigned counsel, who
prepared or reviewed such Amendment, hereby represents to the Commission,
for filing with such Amendment, that said Amendment does not contain
disclosures which would render it ineligible to become effective pursuant
to paragraph (b) of Rule 485.
Sincerely,
Robert G. Zack
Senior Vice President and
Associate General Counsel
(212) 323-0250
<PAGE>
Registration No. 2-33043
File No. 811-1512
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
PRE-EFFECTIVE AMENDMENT NO. ___ / /
POST-EFFECTIVE AMENDMENT NO. 42 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
AMENDMENT NO. 28 / X /
OPPENHEIMER EQUITY INCOME FUND
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(Exact Name of Registrant as Specified in Charter)
3410 South Galena Street
Denver, Colorado 80231
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(Address of Principal Executive Offices)
(303) 671-3200
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(Registrant's Telephone Number)
ANDREW J. DONOHUE, ESQ.
Oppenheimer Management Corporation
Two World Trade Center, New York, New York 10048-0203
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box):
/ / Immediately upon filing pursuant to paragraph (b)
/ X / On November 1, 1994, pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a) (i)
/ / 75 days after filing pursuant to paragraph (a) (i)
/ / On ________________, pursuant to paragraph (a) (ii)
of Rule (485).
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The Registrant has registered an indefinite number of shares under the
Securities Act of 1933 pursuant to Rule 24f-2 promulgated under the
Investment Company Act of 1940. A Rule 24f-2 Notice for the Registrant's
fiscal year ended June 30, 1994, was filed on August 30, 1994.
<PAGE>
FORM N-1A
OPPENHEIMER EQUITY INCOME FUND
Cross Reference Sheet
Part A of
Form N-1A
Item No. Prospectus Heading
1 Front Cover Page
2 Expenses; Overview of the Fund
3 Financial Highlights; Performance of the Fund
4 Front Cover Page; How the Fund is Managed--Organization and
History; Investment Objectives and Policies
5 How the Fund is Managed; Expenses; Back Cover
5A Performance of the Fund
6 How the Fund is Managed-Organization and History; The Transfer
Agent; Dividends, Capital Gains and Taxes; Investment Objective
and Policies-Portfolio Turnover
7 Shareholder Account Rules and Policies; How To Buy Shares; How
to Exchange Shares; Special Investor Services; Service Plan for
Class A Shares; Distribution and Service Plan for Class B
Shares; How to Sell Shares
8 How to Sell Shares; Special Investor Services
9 *
Part B of
Form N-1A
Item No. Heading In Statement of Additional Information
10 Cover Page
11 Cover Page
12 *
13 Investment Objectives and Policies; Other Investment Techniques
and Strategies; Additional Investment Restrictions
14 How the Fund is Managed - Trustees and Officers of the Fund
15 How the Fund is Managed - Major Shareholders
16 How the Fund is Managed; Distribution and Service Plans
17 Brokerage Policies of the Fund
18 Additional Information About the Fund
19 Your Investment Account - How to Buy Shares; How to Sell Shares;
How to Exchange Shares
20 Dividends, Capital Gains and Taxes
21 How the Fund is Managed; Brokerage Policies of the Fund
22 Performance of the Fund
23 *
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* Not applicable or negative answer.
<PAGE>
Oppenheimer Equity Income Fund
Prospectus dated November 1, 1994
Oppenheimer Equity Income Fund (the "Fund") is a mutual fund with the
primary investment objective of seeking as much current income as is
compatible with prudent investment. Its secondary objective is to
conserve principal while providing an opportunity for capital
appreciation. To seek current income, the Fund invests primarily in
common stocks that pay dividends, but the Fund also invests in bonds,
preferred stocks (including convertible stocks), debentures, zero-coupon
securities issued by the U.S. Government or corporations, and other debt
securities. The Fund also uses hedging instruments to try to reduce the
risks of market fluctuations that affect the value of the securities the
Fund holds. To seek its secondary objective, the Fund primarily invests
in stocks that the portfolio manager believes have growth possibilities.
The securities the Fund invests in are described more completely in "The
Fund and Its Investment Policies." That section of the Prospectus also
explains some of the risks of those investments.
The Fund offers two classes of shares: (1) Class A shares, which are
sold at a public offering price that includes a front-end sales charge,
and (2) Class B shares, which are sold without a front-end sales charge,
although you may pay a sales charge when you redeem your shares, depending
on how long you hold them. Class B shares are also subject to an annual
"asset-based sales charge." Each class of shares bears different
expenses. In deciding which class of shares to buy, you should consider
how much you plan to purchase, how long you plan to keep your shares, and
other factors discussed in "How to Buy Shares" starting on page __.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and keep it
for future reference. You can find more detailed information about the
Fund in the November 1, 1994 Statement of Additional Information. For a
free copy, call Oppenheimer Shareholder Services, the Fund's Transfer
Agent, at 1-800-525-7048, or write to the Transfer Agent at the address
on the back cover. The Statement of Additional Information has been filed
with the Securities and Exchange Commission and is incorporated into this
Prospectus by reference (which means that it is legally part of this
Prospectus).
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, and are not insured by the F.D.I.C. or any other
agency, and involve investment risks, including the possible loss of the
principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Contents
Page
About the Fund
Expenses
Overview of the Fund
Financial Highlights
Objectives and Policies
How the Fund is Managed
Performance of the Fund
About Your Account
How to Buy Shares
Class A Shares
Class B Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
How to Sell Shares
By Mail
By Telephone
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
<PAGE>
ABOUT THE FUND
Expenses
The Fund pays a variety of expenses directly for management of its
assets, administration, distribution of its shares and other services, and
those expenses are subtracted from the Fund's assets to calculate the
Fund's net asset value per share. All shareholders therefore pay those
expenses indirectly. Shareholders pay other expenses directly, such as
sales charges and account transaction charges. The following tables are
provided to help you understand your direct expenses of investing in the
Fund and your share of the Fund's business operating expenses that you
will bear indirectly. The numbers below are based on the Fund's expenses
during its last fiscal year ended June 30, 1994.
Shareholder Transaction Expenses are charges you pay when you buy or
sell shares of the Fund. Please refer to "About Your Account," from pages
____ through ____, for an explanation of how and when these charges apply.
Class A Shares Class B Shares
-------------- --------------
Maximum Sales Charge on Purchases
(as a % of offering price) 5.75% None
Sales Charge on Reinvested
Dividends None None
Deferred Sales Charge
(as a % of the lower of the
original purchase price or
redemption proceeds) None(1) 5% in the first
year, declining to
1% in the sixth
year and eliminated
thereafter
Exchange Fee $5.00(2) $5.00(2)
(1) If you invest more than $1 million in Class A shares, you may have
to pay a sales charge of up to 1% if you sell your shares within 18
calendar months from the end of the calendar month during which you
purchased those shares. See "How to Buy Shares - Class A Shares,"
below.
(2) The fee is waived for automated exchanges, described in "How to
Exchange Shares."
- Annual Fund Operating Expenses are paid out of the Fund's assets
and represent the Fund's expenses in operating its business. For example,
the Fund pays management fees to its investment adviser, Oppenheimer
Management Corporation (which is referred to in this Prospectus as the
"Manager"). The rates of the Manager's fees are set forth in "How the
Fund is Managed," below. The Fund has other regular expenses for
services, such as transfer agent fees, custodial fees paid to the bank
that holds its portfolio securities, audit fees and legal expenses. Those
expenses are detailed in the Fund's Financial Statements in the Statement
of Additional Information.
The numbers in the chart below are projections of the Fund's business
expenses based on the Fund's expenses in its last fiscal year. These
amounts are shown as a percentage of the average net assets of each class
of the Fund's shares for that year. The 12b-1 Distribution Plan Fees for
Class A shares are Service Plan Fees. On October 1, 1993, the Class A
Service Plan was changed (with shareholder approval) so that fees of up
to 0.25% of average annual net assets of that class under the Plan became
applicable to all Class A shares. Prior to that date, the fees applied
only to shares sold after March 31, 1991. The Board of Trustees has set
the maximum fee at 0.15% for assets representing shares sold before
4/1/91, and 0.25% for assets representing shares sold on or after that
date. Therefore, the expenses have been restated in the chart as if the
fees set by the Board applied during the entire fiscal year. For Class
B shares the 12b-1 Fees are the Distribution and Service Plan Fees. The
service fee is a maximum of 0.25% of average annual net assets of the
class and the asset-based sales charge is 0.75%. These plans are
described in greater detail in "How to Buy Shares."
The actual expenses for each class of shares in future years may be
more or less than the numbers in the chart, depending on a number of
factors, including the actual value of the Fund's assets represented by
each class of shares. Class B shares were not publicly sold before August
17, 1993. Therefore the Annual Fund Operating Expenses shown for Class
B shares are based only on expenses for the period from August 17, 1993
through June 30, 1994.
Class A Shares Class B Shares
-------------- --------------
Management Fees .54% .54%
12b-1 Distribution Plan Fees
(Restated as to Class A) .18% 1.00%
Other Expenses .20% .28%
Total Fund Operating Expenses .92% 1.82%
- Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples shown
below. Assume that you make a $1,000 investment in each class of shares
of the Fund, and the Fund's annual return is 5%, and that its operating
expenses for each class are the ones shown in the Annual Fund Operating
Expenses chart above. If you were to redeem your shares at the end of
each period shown below, your investment would incur the following
expenses by the end of 1, 3, 5 and 10 years:
1 year 3 years 5 years 10 years*
Class A Shares $66 $85 $106 $164
Class B Shares $68 $87 $119 $168
If you did not redeem your investment, it would incur the following
expenses:
Class A Shares $66 $85 $106 $164
Class B Shares $18 $57 $99 $168
*The Class B expenses in years 7 through 10 are based on the Class A
expenses shown above, because the Fund automatically converts your Class
B shares into Class A shares after 6 years. Long term Class B
shareholders could pay the economic equivalent of more than the maximum
front-end sales charge allowed under applicable regulations, because of
the effect of the asset-based sales charge and contingent deferred sales
charge. The automatic conversion of Class B shares to Class A Shares is
designed to minimize the likelihood that this will occur. Please refer
to "How to Buy Shares - Class B Shares" for more information.
These examples show the effect of expenses on an investment, but are
not meant to state or predict actual or expected costs or investment
returns of the Fund, all of which will vary.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below, with
references to the section of this Prospectus where more complete
information can be found. You should carefully read the entire Prospectus
before making a decision about investing. Keep the Prospectus for
reference after you invest, particularly for information about your
account, such as how to sell or exchange shares.
- What Are The Fund's Investment Objectives? The Fund's primary
investment objective is to seek as much current income as is compatible
with prudent investment. It has a secondary objective to conserve
principal while making investments that may provide the opportunity to
increase the value of its shares.
- What Does the Fund Invest In? To seek current income, the Fund
primarily invests in dividend-paying common and preferred stocks (these
are called "equity" securities). The Fund can also invest in debt
securities, such as corporate bonds and U.S. Government securities. To
seek its secondary objective, the Fund's manager may choose common stocks
that have growth potential. The Fund may also use hedging instruments and
some derivative investments to try to manage investment risks. These
investments are more fully explained in "Investment Objectives and
Policies," starting on page ___.
- Who Manages the Fund? The Fund's investment advisor is
Oppenheimer Management Corporation, which (including a subsidiary) advises
investment company portfolios having over $28 billion in assets. The
Fund's portfolio manager, who is primarily responsible for the selection
of the Fund's securities, is John Doney. The Manager is paid an advisory
fee by the Fund, based on its assets. The Fund's Board of Trustees,
elected by shareholders, oversees the investment advisor and the portfolio
manager. Please refer to "How the Fund is Managed," starting on page ___
for more information about the Manager and its fees.
- How Risky is the Fund? All investments carry risks to some
degree. The Fund's investments in stocks and bonds are subject to changes
in their value from a number of factors such as changes in general bond
and stock market movements, the change in value of particular stocks or
bonds because of an event affecting the issuer, or changes in interest
rates that can affect bond prices. These changes affect the value of the
Fund's investments and its price per share. In the OppenheimerFunds
spectrum, the Fund is generally more conservative than aggressive growth
funds, but more aggressive than money market or investment grade bond
funds. While the Manager tries to reduce risks by diversifying
investments, by carefully researching securities before they are purchased
for the portfolio, and in some cases by using hedging techniques, there
is no guarantee of success in achieving the Fund's objectives and your
shares may be worth more or less than their original cost when you redeem
them. Please refer to "Investment Objectives and Policies" starting on
page ___ for a more complete discussion.
- How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic
Investment Plan under AccountLink. Please refer to "How To Buy Shares"
on page ___ for more details.
- Will I Pay a Sales Charge to Buy Shares? The Fund has two
classes of shares. Class A shares are offered with a front-end sales
charge, starting at 5.75%, and reduced for larger purchases. Class B
shares are offered without a front-end sales charge, but may be subject
to a contingent deferred sales charge (starting at 5% and declining as
shares are held longer) if redeemed within 6 years of purchase. There is
also an annual asset-based sales charge on Class B shares. Please review
"How To Buy Shares" starting on page ___ for more details, including a
discussion about which class may be appropriate for you.
- How Can I Sell My Shares? Shares can be redeemed by mail or by
telephone call to the Transfer Agent on any business day, or through your
dealer. Please refer to "How To Sell Shares" on page ___.
- How Has the Fund Performed? The Fund measures its performance
by quoting its average annual total return and cumulative total return,
which measure historical performance. Those returns can be compared to
the returns (over similar periods) of other funds. Of course, other funds
may have different objectives, investments, and levels of risk. The
Fund's performance can also be compared to broad market indices, which we
have done on page ___. Please remember that past performance does not
guarantee future results.
<PAGE>
Financial Highlights
The table on this page presents selected financial information about
the Fund, including per share data and expense ratios and other data based
on the Fund's average net assets. This information has been audited by
Deloitte & Touche, LLP, the Fund's independent auditors, whose report on
the Fund's financial statements for the fiscal year ended June 30, 1994,
is included in the Statement of Additional Information. Class B shares
were publicly offered only during a portion of that period, commencing
August 17, 1993.
Class A Class B
- ------ ------
Period
Ended
Year Ended June 30, June 30,
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1994(1)
- ------
Per Share Operating Data:
Net asset value, beginning of period
$10.01 $9.15 $8.86 $9.18 $9.11 $8.51 $9.85 $9.26 $7.78 $6.83 $10.22
- ------
Income from investment operations:
Net investment income
.47 .50 .50 .48 .48 .52 .48 .46 .50 .47 .36
Net realized and unrealized gain
(loss) on investments, options
written and foreign currency transactions
(.39) .99 .39 (.17) .33 .58 (.35) 1.22 1.59 1.48 (.58)
- ------ ------ ------ ------ ------ ------ ------
- ------ ------ ------ ------
Total income from investment operations
.08 1.49 .89 .31 .81 1.10 .13 1.68 2.09 1.95 (.22)
- ------
Dividends and distributions
to shareholders:
Dividends from net investment income
(.47) (.48) (.48) (.48) (.50) (.48) (.60) (.48) (.46) (.45) (.42)
Dividends in excess of net investment income
(.01) -- -- -- -- -- -- -- -- -- (.01)
Distributions from net realized gain on investments, options written and foreign
currency transactions
(.12) (.15) (.12) (.15) (.24) (.02) (.87) (.61) (.15) (.55) (.12)
Distributions in excess of capital gains
(.05) -- -- -- -- -- -- -- -- -- (.05)
- ------ ------ ------ ------ ------ ------ ------
- ------ ------ ------ ------
Total dividends and distributions to shareholders
(.65) (.63) (.60) (.63) (.74) (.50) (1.47) (1.09) (.61) (1.00) (.60)
- ------
Net asset value, end of period
$9.44 $10.01 $9.15 $8.86 $9.18 $9.11 $8.51 $9.85 $9.26 $7.78 $9.40
- ------ ------ ------ ------ ------ ------ ------
- ------ ------ ------ ------
- ------ ------ ------ ------ ------ ------ ------
- ------ ------ ------ ------
- ------
<TABLE>
<S> <C>
Total Return, at Net Asset Value(2)
.65% 16.76% 10.26% 3.68% 9.07% 13.30% 2.04% 20.45% 28.42% 32.40%
(2.35)%
- ------
Ratios/Supplemental Data:
Net assets, end of period (in thousands)
$1,772,944 $1,790,346 $1,555,924 $1,393,303 $1,329,830 $1,017,074
$806,892 $730,655 $381,122 $134,828 $87,850
- ------
Average net assets (in thousands)
$1,831,606 $1,657,692 $1,525,599 $1,323,858 $1,179,704 $885,179
$743,232 $526,897 $228,642 $98,324 $47,414
- ------
Number of shares outstanding at end of period (in thousands)
187,841 178,819 170,117 157,239 144,921 111,613 94,824
74,169 41,166 17,321 9,341
- ------
Ratios to average net assets:
Net investment income 4.72% 5.12% 5.33% 5.31% 5.10%
5.89% 5.48% 5.08% 6.00% 7.01% 3.99%(3)
Expenses .90% .79% .82% .79% .79% .85% .83%
.91% 1.03% 1.11% 1.82%(3)
- ------
Portfolio turnover rate(4) 30.4% 59.0% 37.0% 64.0% 122.0%
91.4% 124.1% 94.7% 105.3% 122.5% 30.4%
1. For the period from August 17, 1993 (inception of offering) to June 30, 1994.
2. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions reinvested
in additional shares on the reinvestment date, and redemption at the net asset
value calculated on the last business day of the fiscal period. Sales charges
are not reflected in the total returns.
3. Annualized.
4. The lesser of purchases or sales of portfolio securities for a year, divided
by the monthly average of the market value of portfolio securities owned during
the year. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the year
ended June 30, 1994 were $543,750,868 and $575,903,141, respectively.
</TABLE>
<PAGE>
Investment Objectives and Policies
Objectives. The Fund has primary and secondary objectives. First, the
Fund invests its assets to try to provide as much current income as the
Manager believes is compatible with prudent investing. As a secondary
objective, the Fund seeks to conserve principal while providing an
opportunity for its shares to increase in value.
Investment Policies and Strategies. The Fund seeks current income
principally by investing in common stocks that pay dividend income. The
Fund may also seek income by investing in bonds, preferred stocks
(including convertible stocks), debentures, zero-coupon securities issued
by the U.S. Government or companies, and other debt securities, such as
notes. In its stock investments the Fund primarily focuses on stocks of
larger, more established companies with an established history of
operations. To seek its secondary objective the Fund may invest in stocks
of companies that the Manager believes offer growth potential without
excessive volatility.
Under normal conditions (when the Manager believes that the
securities markets are not in a volatile or unstable period), the Fund
will invest at least 65% of its total assets in income-producing equity
securities (common stocks, preferred stocks, and securities convertible
into common stocks). When market conditions are unstable, the Fund may
invest substantial amounts of its assets in debt securities, such as money
market instruments or government securities, as described in "Temporary
Defensive Investments," below.
When investing the Fund's assets, the Manager considers many factors,
including the financial condition of particular companies to invest in as
well as general economic conditions in the U.S. relative to foreign
economies, and the trends in domestic and foreign stock markets. In
evaluating the potential for income from particular securities, the
Manager examines many factors, such as the consistency of the company's
earnings, the industry group the company is in (and the prospects for that
industry in the overall economy), how well the company is managed, and the
size of the company's capitalization. While the Fund focuses on large or
mid-size companies which tend to be more stable investments, the Fund may
invest in smaller issuers as well.
The Fund may try to hedge against losses in the value of its portfolio
of securities by using hedging strategies and derivative investments
described below. The Fund's portfolio manager may employ special
investment techniques in selecting securities for the Fund. These are
also described below. Additional information may be found about them under
the same headings in the Statement of Additional Information.
Can the Fund's Investment Objective and Policies Change? The Fund has
investment objectives, described above, as well as investment policies it
follows to try to achieve its objectives. Additionally, the Fund uses
certain investment techniques and strategies in carrying out those
investment policies. The Fund's investment policies and techniques are not
"fundamental" unless this Prospectus or the Statement of Additional
Information says that a particular policy is "fundamental." The Fund's
investment objectives are fundamental policies.
The Fund's Board of Trustees may change non-fundamental policies
without shareholder approval, although significant changes will be
described in amendments to this Prospectus. Fundamental policies are those
that cannot be changed without the approval of a "majority" of the Fund's
outstanding voting shares. The term "majority" is defined in the
Investment Company Act to be a particular percentage of outstanding voting
shares (and this term is explained in the Statement of Additional
Information).
Stock Investment Risks. Because the Fund invests a substantial portion
of its assets in stocks, the value of the Fund's portfolio will be
affected by changes in the stock markets. At times, the stock markets can
be volatile and stock prices can change substantially. This market risk
will affect the Fund's net asset value per share, which will fluctuate as
the values of the Fund's portfolio securities change. Not all stock
prices change uniformly or at the same time, and other factors can affect
a particular stock's prices (for example, poor earnings reports by an
issuer, loss of major customers, major litigation against an issuer,
changes in government regulations affecting an industry). Not all of
these factors can be predicted.
As discussed below, the Fund attempts to limit market risks by
diversifying its investments, that is, by not holding a substantial amount
of the stock of any one company and by not investing too great a
percentage of the Fund's assets in any one company. Also, the Fund does
not concentrate its investments in any one industry or group of
industries. Because changes in overall market prices can occur at any
time, and because the income earned on securities is subject to change,
there is no assurance that the Fund will achieve its investment
objectives, and when you redeem your shares, they may be worth more or
less than what you paid for them.
Investments in Bonds and Convertible Securities. The Fund also invests
in bonds, debentures and other fixed-income securities to help seek its
primary objective of income. While the Fund will normally limit its
investments in fixed-income securities to no more than 35% of its total
assets (during normal market conditions), the Fund may invest in a variety
of different types of income-producing securities. The Fund is not
required to limit those investments to securities having particular
ratings by nationally-recognized rating agencies. The Manager does not
rely solely on ratings of securities in making investment decisions, but
evaluates other business and economic factors affecting the issues as
well.
When investing in convertible securities, the Manager looks to the
conversion feature and treats the securities as "equity securities." The
Fund may not invest more than 25% of its total assets in "lower-grade"
debt securities (described in the next section), and no more than 10% of
its total assets may be invested in lower-grade debt securities that are
not convertible. The Fund may not invest more than 10% of its total
assets in lower-grade non-convertible securities. The Fund can buy
unrated securities, and when determining whether a security is subject to
these percentage limitations, the Manager will determine in its judgement
whether unrated securities are of comparable quality to securities rated
by rating organizations.
Interest Rate Risks. In addition to credit risks, described below,
debt securities are subject to changes in their value due to changes in
prevailing interest rates. When prevailing interest rates fall, the value
of already-issued debt securities generally rise. When interest rates
rise, the values of already-issued debt securities generally decline. The
magnitude of these fluctuations will often be greater for longer-term debt
securities than shorter-term debt securities. Changes in the value of
securities held by the Fund mean that the Fund's share prices can go up
or down when interest rates change because of the effect of the change on
the value of the Fund's portfolio of debt securities.
Special Risks of Lower-Rated Securities. The Manager may select high-
yield, "lower-grade" debt securities (or high-yielding unrated securities)
for investment, subject to the limits described above, because they
generally offer higher income potential than investment grade securities.
"Lower-grade" securities are those rated below "investment grade," which
means they have a rating below "BBB" by Standard & Poor's Corporation or
"Baa" by Moody's Investors Service, Inc. or similar ratings by other
rating organizations. "Lower-grade" debt securities the Fund may invest
in also include securities that are not rated by a nationally-recognized
rating organization like Standard & Poor's or Moody's, but which the
Manager judges to be comparable to lower-rated securities. The Fund may
invest in securities rated as low as "CC" by Standard & Poor's or "Ca" by
Moody's. For a description of these securities ratings, please refer to
the Appendix in the Statement of Additional Information.
High yield, lower-grade securities, whether rated or unrated, often
have speculative characteristics. Lower-grade securities have special
risks that make them riskier investments than investment grade securities.
They may be subject to greater market fluctuations and risk of loss of
income and principal than lower yielding, investment grade 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 due on the bonds. The issuer's low creditworthiness may increase
the potential for its insolvency.
These risks mean that the Fund may not achieve the expected income from
lower-grade securities, and that the Fund's net asset value per share may
be affected by declines in value of these securities. However, the Fund's
limitations on investments in these types of securities may reduce some
of the risk, as will the Fund's policy of diversifying its investments.
Also, convertible securities may be less subject to some of these risks
than other debt securities, to the extent they can be converted into
stock, which may be more liquid and less affected by these other risk
factors.
Warrants and Rights. Warrants basically are options to purchase stock
at set prices that are valid for a limited period of time. Rights are
options to purchase securities, normally granted to current holders by the
issuer. The Fund may invest up to 5% of its total assets in warrants or
rights. That 5% does not apply to warrants and rights the Fund acquired
as part of units with other securities or that were attached to other
securities. No more than 2% of the Fund's assets may be invested in
warrants that are not listed on the New York or American Stock Exchanges.
These percentage limits are fundamental policies. For further details
about these investments, please refer to "Warrants and Rights" in the
Statement of Additional Information.
Zero Coupon Securities. The Fund may invest in zero coupon securities
issued by the U.S. Treasury or by private issuers. In general, zero
coupon U.S. Treasury securities include (1) U.S. Treasury notes or bonds
that have been "stripped" of their interest coupons, (2) U.S. Treasury
bills issued without interest coupons, or (3) certificates representing
an interest in stripped securities. A zero coupon Treasury security pays
no current interest and trades at a deep discount from its face value.
It will be subject to greater market fluctuations from changes in interest
rates than interest-paying securities. The Fund accrues interest on zero
coupon securities without receiving the actual cash. As a result of
holding these securities, the Fund could possibly be forced to sell
portfolio securities to pay cash dividends or meet redemptions. Zero
coupon securities issued by non-government issuers are similar to U.S.
Government zero coupon securities. They have an additional risk that the
issuing company may fail to pay interest or repay the principal on the
obligation.
Portfolio Turnover. A change in the securities held by the Fund is
known as "portfolio turnover." The Fund ordinarily does not engage in
short-term trading to try to achieve its objectives. As a result, the
Fund's portfolio turnover is not expected to be more than 100% each year.
The "Financial Highlights," above, show the Fund's portfolio turnover rate
during past fiscal years. Portfolio turnover affects brokerage costs as
well as a fund's ability to qualify as a "regulated investment company"
under the Internal Revenue Code for tax deductions for dividends and
capital gains distributions the Fund pays to shareholders. The Fund
qualified in its last fiscal year and intends to do so in the coming year,
although it reserves the right not to qualify.
Other Investment Techniques and Strategies. The Fund may also use the
investment techniques and strategies described below. These techniques
involve certain risks. The Statement of Additional Information contains
more information about these practices, including limitations on their use
that are designed to reduce some of the risks.
Investing in Small, Unseasoned Companies. The Fund may invest in
securities of small, unseasoned companies. These are companies that have
been in operation for less than three years, counting the operations of
any predecessors. Securities of these companies may have limited
liquidity (which means that the Fund may have difficulty selling them at
an acceptable price when it wants to) and the prices of these securities
may be volatile. The Fund may not invest more than 5% of its net assets
in securities of small, unseasoned issuers. That limit is a fundamental
policy.
Foreign Securities. To broaden its opportunities to seek income or
capital growth, the Fund may purchase equity and debt securities issued
or guaranteed by foreign companies or foreign governments, including
foreign government agencies. The Fund may buy securities of companies or
governments in any country, developed or underdeveloped. The Fund may
invest up to 100% of its assets in foreign securities. However, the Fund
normally does not expect to have more than 35% of its assets invested in
foreign securities. The Fund will hold foreign currency only in
connection with the purchase or sale of foreign securities. If the Fund's
securities are held abroad, the countries in which they are held and the
sub-custodians holding them must be approved by the Fund's Board of
Trustees.
Foreign securities have special risks. For example, foreign issuers are
not subject to the same accounting and disclosure requirements that U.S.
companies are subject to. The value of foreign investments may be affected
by changes in foreign currency rates, exchange control regulations,
expropriation or nationalization of a company's assets, foreign taxes,
delays in settlement of transactions, changes in governmental economic or
monetary policy in the U.S. or abroad, or other political and economic
factors. More information about the risks and potential rewards of
investing in foreign securities is contained in the Statement of
Additional Information.
Writing Covered Calls. The Fund may write (that is, sell) covered call
options (calls) to raise cash for income to distribute to shareholders,
or for liquidity purposes (for example, to meet redemption requirements)
or for defensive reasons. The Fund receives cash (called a premium) when
it writes a call. The call gives the buyer the ability to buy the
security from the Fund at the call price during the period the call may
be exercised. If the value of the security does not rise above the call
price, it is likely that the call will lapse without being exercised,
while the Fund keeps the cash premium (and the security).
The Fund may write calls only if certain conditions are met: (1) after
writing any call, not more than 25% of the Fund's total assets may be
subject to calls; (2) the calls must be listed on a domestic securities
exchange or quoted on the Automated Quotation System of the National
Association of Securities Dealers, Inc. (NASDAQ); and (3) each call must
be "covered" while it is outstanding; that means the Fund must own the
securities on which the call is written or it must own other securities
that are acceptable for the escrow arrangements required for calls. The
Fund can also write calls on foreign currencies (discussed below). The
Fund may also write covered calls on Futures Contracts it owns (these are
described in the next section), but these calls must be covered by
securities or other segregated liquid assets the Fund owns, so that it
will be able to satisfy its obligations if the call is exercised.
If a covered call written by the Fund is exercised on a security that
has increased in value, the Fund will be required to sell the security at
the call price and will not be able to realize any profit if the security
has increased in value above the call price.
Hedging With Options, Futures and Forward Contracts. The Fund may buy
and sell options, futures and forward contracts to try to manage its
exposure to declining prices on its portfolio securities or to establish
a position in the equity securities market as a temporary substitute for
purchasing individual securities. Some of these strategies, such as
selling futures, buying puts and writing covered calls, hedge the Fund's
portfolio against price fluctuations. Other hedging strategies, such as
buying futures and buying call options, tend to increase the Fund's
exposure to the market as a temporary substitute for purchasing
securities. Forward contracts are used to try to manage foreign currency
risks on the Fund's foreign investments.
The Fund may purchase and sell certain kinds of futures contracts, put
and call options, forward contracts, interest-rate swap transactions, and
options on futures, broadly-based stock indices and on foreign currencies.
These are all referred to as "hedging instruments." The Fund does not use
hedging instruments for speculative purposes. The hedging instruments the
Fund may use are described below and in greater detail in "Other
Investment Techniques and Strategies" in the Statement of Additional
Information.
Futures. The Fund may buy and sell futures contracts that relate to
(1) broadly-based stock indices (these are referred to as Stock Index
Futures), (2) interest rates (Interest Rate Futures), and (3) other
securities indexes (Financial Futures). All of these Futures are
described in the Statement of Additional Information.
Puts and Calls. The Fund may purchase put options (puts). Buying a put
on an investment gives the Fund the right to sell the investment to a
seller of a put on that investment at a set price. The Fund can buy only
those puts that relate to (1) securities that the Fund owns, (2) Stock
Index Futures, (3) broadly-based stock indices or (4) foreign currencies.
The Fund can buy a put on a Stock Index Future whether or not the Fund
owns the particular Stock Index Future in its portfolio. The Fund may not
sell a put other than a put that it previously purchased.
The Fund may purchase calls only on securities, broadly-based stock
indices, Stock Index Futures and foreign currencies, or to terminate its
obligation on a call the Fund previously wrote. The Fund may buy or sell
foreign currency puts and calls only if they are traded on a securities
or commodities exchange or over-the-counter market, or are quoted by
recognized dealers in those options. Foreign currency options are used
to try to protect against declines in the dollar value of foreign
securities the Fund owns, or to protect against increase in the dollar
cost of buying foreign securities. A call or put may not be purchased if
as a result of that purchase the value of all of the Fund's put and call
options would exceed 5% of the Fund's total assets.
Forward Contracts. Forward contracts are foreign currency exchange
contracts. They are used to buy or sell foreign currency for future
delivery at a fixed price. The Fund uses them to "lock-in" the U.S.
dollar price of a security dominated in a foreign currency that the Fund
has bought or sold, or to protect against losses from changes in the
relative values of the U.S. dollar and a foreign 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.
Interest Rate 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 may swap a right to receive floating
rate payments for fixed rate payments. The Fund enters into swaps only
on securities it owns. The Fund may not enter into swaps with respect to
more than 25% of its total assets. Also, the Fund will segregate liquid
assets (such as cash or U.S. Government securities) to cover any amounts
it could owe under swaps that exceed the amounts it is entitled to
receive, and it will adjust that amount daily, as needed.
Hedging instruments can be volatile investments and may involve special
risks. The use of hedging instruments requires special skills and
knowledge of investment techniques that are different than what is
required for normal portfolio management. If the Manager uses a hedging
instrument at the wrong time or judges market conditions incorrectly,
hedging strategies may reduce the Fund's return. The Fund could also
experience losses if the prices of its futures and options positions were
not correlated with its other investments or if it could not close out a
position because of an illiquid market for the future or option.
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, the use of forward contracts may reduce the gain
that would otherwise result from a change in the relationship between the
U.S. dollar and a foreign currency. To limit its exposure in foreign
currency exchange contracts, the Fund limits its exposure to the amount
of its assets denominated in the foreign currency. Interest rate swaps
are subject to credit risks (if the other party fails to meet its
obligations) and also to interest rate risks. The Fund could be obligated
to pay more under its swap agreements than it receives under them, as a
result of interest rate changes. These risks are described in greater
detail in the Statement of Additional Information.
Illiquid and Restricted Securities. Under the policies and procedures
established by the Fund's Board of Trustees, the Manager determines the
liquidity of certain of the Fund's investments. Investments may be
illiquid because of the absence of an active trading market, making it
difficult to value them or dispose of them promptly at an acceptable
price. A restricted security is one that has a contractual restriction on
its resale or which cannot be sold publicly until it is registered under
the Securities Act of 1933. The Fund will not invest more than 10% of its
net assets in illiquid or restricted securities (that limit may increase
to 15% if certain state laws are changed or the Fund's shares are no
longer sold in those states). The Fund's percentage limitation on these
investments does not apply to certain restricted securities that are
eligible for resale to qualified institutional purchasers.
Derivative Investments. The Fund can invest in a number of different
kinds of "derivative investments." The Fund may use some types of
derivatives for hedging purposes, and may invest in others because they
offer the potential for increased income and principal value. In general,
a "derivative investment" is a specially-designed investment whose
performance is linked to the performance of another investment or
security, such as an option, future, index or currency. In the broadest
sense, derivative investments include exchange-traded options and futures
contracts (please refer to "Writing Covered Calls" and "Hedging with
Options and Futures Contracts," above).
One risk of investing in derivative investments is that the company
issuing the instrument might not pay the amount due on the maturity of the
instrument. There is also the risk that the underlying investment or
security might not perform the way the Manager expected it to perform.
The performance of derivative investments may also be influenced by
interest rate changes in the U.S. and abroad. All of these risks can mean
that the Fund will realize less income than expected from it's
investments, or that it can lose part of the value of its investments,
which will affect the Fund's share price. Certain derivative investments
held by the Fund may trade in the over-the-counter markets and may be
illiquid. If that is the case, the Fund's investment in them will be
limited, as discussed in "Illiquid and Restricted Securities," above.
Another type of derivative the Fund may invest in is an "index-linked"
note. On the maturity of this type of debt security, payment is made
based on the performance of an underlying index, rather than based on a
set principal amount for a typical note. Another derivative investment
the Fund may invest in is a currency-indexed security. These are
typically short-term or intermediate-term debt securities. Their value
at maturity or the interest rates at which they pay income are determined
by the change in value of the U.S. dollar against one or more foreign
currencies or an index. In some cases, these securities may pay an amount
at maturity based on a multiple of the amount of the relative currency
movements. This variety of index security offers the potential for
greater income but at a greater risk of loss.
Other derivative investments the Fund may invest in include "debt
exchangeable for common stock" of an issuer or "equity-linked debt
securities" of an issuer. At maturity, the debt security is exchanged for
common stock of the issuer or is payable in an amount based on the price
of the issuer's common stock at the time of maturity. In either case
there is a risk that the amount payable at maturity will be less than the
principal amount of the debt (because the price of the issuer's common
stock is not as high as was expected).
Loans of Portfolio Securities. To attempt to increase its income, the
Fund may lend its portfolio securities to brokers, dealers and other
financial institutions. These loans are limited to not more than 10% of
the Fund's net assets and are subject to other conditions described in the
Statement of Additional Information. The Fund presently does not intend
to lend its portfolio securities, but if it does, the value of securities
loaned is not expected to exceed 5% of the value of its total assets.
Repurchase Agreements. The Fund may enter into repurchase agreements.
In a repurchase transaction, the Fund buys a security and simultaneously
sells it to the vendor for delivery at a future date. There is no limit
on the amount of the Fund's net assets that may be subject to repurchase
agreements of seven days or less. Repurchase agreements must be fully
collateralized. However, if the vendor fails to pay the resale price on
the delivery date, the Fund may incur costs in disposing of the collateral
and may experience losses if there is any delay in its ability to do so.
The Fund will not enter into a repurchase agreement that causes more than
10% of its net assets to be subject to repurchase agreements having a
maturity beyond seven days.
"When-Issued" and Delayed Delivery Transactions. The Fund may 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 may be a risk of loss to the Fund if the
value of the security declines prior to the settlement date.
Temporary Defensive Investments. When stock market prices are falling
or in other unusual economic or business circumstances, the Fund may
invest all or a portion of its assets in defensive securities. Securities
selected for defensive purposes usually will include debt securities, such
as (1) U.S. Treasury Bills and other obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities, (2) commercial
paper rated "A-3" or better by Standard & Poor's Corporation or "P-3" or
better by Moody's Investors Service, Inc., or (3) certificates of deposit,
bankers' acceptances or other bank obligations.
Other Investment Restrictions. The Fund has other investment
restrictions which are fundamental policies. Under these fundamental
policies, the Fund cannot do any of the following: (1) buy securities
issued or guaranteed by any one issuer (except the U.S. Government or any
of its agencies or instrumentalities) if (with respect to 75% of its total
assets) more than 5% of the Fund's total assets would be invested in
securities of that issuer, or if the Fund would then own more than 10% of
that issuer's voting securities; (2) engage in short sales or purchase
securities on margin; however, the Fund may make margin deposits in
connection with any of the hedging instruments it may use; (3) borrow
money or mortgage, pledge or hypothecate the Fund's assets; the escrow,
collateral and margin arrangements involved with hedging instruments are
not considered to involve a mortgage, hypothecation or pledge; (4)
concentrate more than 25% of the Fund's assets in any one industry; or (5)
buy or sell commodities or commodity contracts other than those hedging
instruments which are considered commodities.
All of the percentage restrictions described above and elsewhere in
this Prospectus apply only at the time the Fund purchases a security, and
the Fund need not dispose of a security merely because the size of the
Fund's assets has changed or the security has increased in value relative
to the size of the Fund. There are other fundamental policies discussed
in the Statement of Additional Information.
How the Fund is Managed
Organization and History. The Fund was originally incorporated in
Maryland in 1967 but was reorganized in 1986 as a Massachusetts business
trust. The Fund is an open-end, diversified management investment company,
with an unlimited number of authorized shares of beneficial interest.
The Fund is governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under Massachusetts law. The
Trustees meet periodically throughout the year to oversee the Fund's
activities, review its performance, and review the actions of the Manager.
"Trustees and Officers of the Fund" in the Statement of Additional
Information names the Trustees and provides more information about them
and the officers of the Fund. Although the Fund is not required by law
to hold annual meetings, it may hold shareholder meetings from time to
time on important matters, and shareholders have the right to call a
meeting to remove a Trustee or to take other action described in the
Fund's Declaration of Trust.
The Board of Trustees has the power, without shareholder approval, to
divide unissued shares of the Fund into two or more classes. The Board
has done so, and the Fund currently has two classes of shares, Class A and
Class B. Each class has its own dividends and distributions and pays
certain expenses which may be different for the different classes. Each
class may have a different net asset value. Each share has one vote at
shareholder meetings, with fractional shares voting proportionally. Only
shares of a particular class vote together on matters that affect that
class alone. Shares are freely transferrable.
The Manager and Its Affiliates. The Fund is managed by the Manager,
Oppenheimer Management Corporation, which is responsible for selecting the
Fund's investments and handles its day-to-day business. The Manager
carries out its duties, subject to the policies established by the Board
of Trustees, under an Investment Advisory Agreement which states the
Manager's responsibilities. The Agreement sets forth the fees paid by the
Fund to the Manager and describes the expenses that the Fund is
responsible to pay to conduct its business.
The Manager has operated as an investment adviser since 1959. The
Manager and its affiliates currently manage investment companies,
including other OppenheimerFunds, with assets of more than $28 billion as
of September 30, 1994, and with more than 1.8 million shareholder
accounts. The Manager is owned by Oppenheimer Acquisition Corp., a
holding company that is owned in part by senior officers of the Manager
and controlled by Massachusetts Mutual Life Insurance Company, a mutual
life insurance company.
Portfolio Manager. The Portfolio Manager of the Fund is John P. Doney.
He is a Vice President of the Manager. He has been the person principally
responsible for the day-to-day management of the Fund's portfolio since
June 22, 1992. During the past five years, and prior to joining the
Manager, Mr. Doney served as Senior Vice President and Chief Investment
Officer of Equities of National Securities & Research Corporation (a
mutual fund investment adviser) and was a Vice President of the National
Affiliated Investment Companies.
Fees and Expenses. Under the Investment Advisory Agreement, the Fund
pays the Manager the following annual fees, which decline on additional
assets as the Fund grows: 0.75% of the first $100 million of aggregate
net assets, 0.70% of the next $100 million, 0.65% of the next $100
million, 0.60% of the next $100 million, 0.55% of the next $100 million,
and 0.50% of net assets in excess of $500 million. The Fund's management
fee for its last fiscal year was 0.54% of average annual net assets for
both its Class A and Class B shares, which may be higher than the rate
paid by some other mutual funds.
The Fund pays expenses related to its daily operations, such as
custodian fees, Trustees' fees, transfer agency fees, legal and auditing
costs. Those expenses are paid out of the Fund's assets and are not paid
directly by shareholders. However, those expenses reduce the net asset
value of shares, and therefore are indirectly borne by shareholders
through their investment. More information about the investment advisory
agreement and the other expenses paid by the Fund is contained in the
Statement of Additional Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of
Additional Information. That section discusses how brokers and dealers are
selected for the Fund's portfolio transactions. When deciding which
brokers to use, the Manager is permitted by the investment advisory
agreement to consider whether brokers have sold shares of the Fund or any
other funds for which the Manager serves as investment adviser.
The Distributor. The Fund's shares are sold through dealers and
brokers that have a sales agreement with Oppenheimer Funds Distributor,
Inc., a subsidiary of the Manager that acts as the Fund's Distributor.
The Distributor also distributes the shares of other mutual funds managed
by the Manager (the "OppenheimerFunds") and is sub-distributor for funds
managed by a subsidiary of the Manager.
The Transfer Agent. The Fund's transfer agent is Oppenheimer
Shareholder Services, a division of the Manager, which acts as the
shareholder servicing agent for the Fund and the other OppenheimerFunds
on an "at-cost" basis. Shareholders should direct inquiries about their
accounts to the Transfer Agent at the address and toll-free numbers shown
below in this Prospectus and on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the terms "total
return" and "average annual total return" to illustrate its performance.
The performance of each class of shares is shown separately, because the
performance of each class will usually be different as a result of the
different kinds of expenses each class bears. This performance
information may be useful to help you see how well your investment has
done and to compare it to other funds or market indices, as we have done
below.
It is important to understand that the fund's total returns represent
past performance and should not be considered to be predictions of future
returns or performance. This performance data is described below, but
more detailed information about how total returns are calculated is
contained in the Statement of Additional Information, which also contains
information about other ways to measure and compare the Fund's
performance. The Fund's investment performance will vary over time,
depending on market conditions, the composition of the portfolio, expenses
and which class of shares you purchase.
-
Total Returns. There are different types of total returns used to
measure the Fund's performance. Total return is the change in value of
a hypothetical investment in the Fund over a given period, assuming that
all dividends and capital gains distributions are reinvested in additional
shares. The cumulative total return measures the change in value over the
entire period (for example, ten years). An average annual total return
shows the average rate of return for each year in a period that would
produce the cumulative total return over the entire period. However,
average annual total returns do not show the Fund's actual year-by-year
performance.
When total returns are quoted for Class A shares, they reflect the
payment of the current maximum initial sales charge. When total returns
are shown for Class B shares, they reflect the effect of the contingent
deferred sales charge that applies to the period for which total return
is shown. Total returns may also be quoted "at net asset value," without
considering the effect of the sales charge, and those returns would be
reduced if sales charges were deducted.
How Has the Fund Performed? Below is a discussion by the Manager of the
Fund's performance during its last fiscal year ended June 30, 1994,
followed by a graphical comparison of the Fund's performance to an
appropriate broad-based market index.
Management's Discussion of Performance. During the past fiscal year,
the Fund's performance was affected by changes in the direction of the
stock and bond markets from the prior year. The stock markets declined
from nearly record highs as the U.S. economy strengthened and concerns
about inflation increased. At the same time, general interest rates moved
from very low levels, with the Federal Reserve raising short-term rates
four-times between February and May of 1994. As interest rates rose, both
the stock and bond markets declined. At the beginning of the fiscal year,
to enhance income, the Fund began to increase its position in convertible
securities, which generally provide higher current income than common
stocks, and that focus continued throughout the year. In the stock
portfolio, the Manager emphasized securities of financial service firms,
particularly regional banks, which tended to be less volatile than the
rest of the stock market. As the stock market declined, the Manager used
the proceeds of securities sales to purchase shares of companies having
attractive appreciation possibilities, to seek the Fund's secondary
objective.
Comparing the Fund's Performance to the Market. The chart below shows
the performance of a hypothetical $10,000 investment in each Class of
shares of the Fund held until June 30, 1994. In the case of Class A
shares, performance is measured over a ten-year period, and in the case
of Class B shares, from the inception of the Class on August 17, 1993.
In both cases, all dividends and capital gains distributions were
reinvested in additional shares. The graph reflects the deduction of the
5.75% current maximum initial sales charge on Class A shares and the
maximum 5% contingent deferred sales charge on Class B shares.
The Fund's performance is compared to the performance of the S&P 500
Index, a broad-based index of equity securities widely regarded as a
general measurement of the performance of the U.S. equity securities
market. Index performance reflects the reinvestment of dividends but does
not consider the effect of capital gains or transaction costs, and none
of the data below shows the effect of taxes. Also, the Fund's performance
reflects the effect of Fund business and operating expenses. While index
comparisons may be useful to provide a benchmark for the Fund's
performance, it must be noted that the Fund's investments are not limited
to the securities in the S&P 500 index, which does not include debt
securities. Moreover, the index performance data does not reflect any
assessment of the risk of the investments included in the index.
<PAGE>
Oppenheimer Equity Income Fund
Comparison of Change in Value
of a $10,000 Hypothetical Investment to the
S&P 500 Index
(Graph)
Past performance is not predictive of future performance.
Oppenheimer Equity Income Fund
Average Annual Total Returns Cumulative Total Return
of the Fund at 6/30/94 of the Fund at 6/30/94
A Shares 1-Year 5-Year 10-Year B Shares Life: *
-5.14% 6.67% 12.58% -6.95%
_____________________
*Class B shares of the Fund were first publicly offered on 8/17/93.
ABOUT YOUR ACCOUNT
How to Buy Shares
Classes of Shares. The Fund offers investors two different classes of
shares. The different classes of shares represent investments in the same
portfolio of securities but are subject to different expenses and will
likely have different share prices.
Class A Shares. If you buy Class A shares, you pay an initial sales
charge (on investments up to $1 million). If you purchase Class A shares
as part of an investment of at least $1 million in shares of one or more
OppenheimerFunds, you will not pay an initial sales charge but if you sell
any of those shares within 18 months after your purchase, you may pay a
contingent deferred sales charge, which will vary depending on the amount
you invested. Sales charges are described below.
Class B Shares. If you buy Class B shares, you pay no sales charge at
the time of purchase, but if you sell your shares within six years, you
will normally pay a contingent deferred sales charge that varies depending
on how long you own your shares. It is described 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 better suited to your needs depends on a number of factors which
you should discuss with your financial advisor. The Fund's operating
costs that apply to a class of shares and the effect of the different
types of sales charges on your investment will vary your investment
results over time. The most important factors are how much you plan to
invest, how long you plan to hold your investment, and whether you
anticipate exchanging your shares for shares of other OppenheimerFunds
(not all of which currently offer Class B shares). If your goals and
objectives change over time and you plan to purchase additional shares,
you should re-evaluate those factors to see if you should consider another
class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We used the
sales charge rates that apply to Class A and B, considering the effect of
the annual asset-based sales charge on Class B expenses (which, like all
expenses, will affect your investment return). For the sake of
comparison, we have assumed that there is a 10% rate of appreciation in
the investment each year. Of course, the actual performance of your
investment cannot be predicted and will vary, based on the Fund's actual
investment returns and the operating expenses borne by each class of
shares, and which class you invest in. The factors discussed below are
not intended to be investment advice or recommendations, because each
investor's financial considerations are different.
How Long Do You Expect to Hold Your Investment? The Fund is designed
for long-term 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.
The effect of the sales charge over time, using our assumptions, will
generally depend on the amount invested. Because of the effect of class-
based expenses, your choice will also depend on how much you invest.
How Much Do You Plan to Invest? If you plan to invest a substantial
amount over the long term, the reduced sales charges available for larger
purchases of Class A shares may offset the effect of paying an initial
sales charge on your investment (which reduces the amount of your
investment dollars used to buy shares for your account), compared to the
effect over time of higher expenses on Class B, for which no initial sales
charge is paid. Additionally, dividends payable to Class B shareholders
will be reduced by the additional expenses borne solely by Class B, such
as the asset-based sales charge described below.
In general, if you plan to invest less than $100,000, Class B shares
may be more advantageous than Class A shares, using the assumptions in our
hypothetical example. However, if you plan to invest more than $100,000
(not only in the Fund, but possibly in other OppenheimerFunds as well),
then Class A shares generally will be more advantageous than Class B,
because of the effect of the reduction of initial sales charges on larger
purchases of Class A shares (described in "Reduced Sales Charges for Class
A Share Purchases," below). That is also the case because the annual
asset-based sales charge on Class B shares will have a greater impact on
larger investments than the initial sales charge on Class A shares because
of the reductions of initial sales charge available for larger purchases.
And for investors who invest $1 million or more, in most cases Class
A shares will be the most advantageous choice, no matter how long you
intend to hold your shares. For that reason, the Distributor normally
will not accept purchase orders of $1 million or more of Class B shares
from a single investor.
Of course, these examples are based on approximations of the effect of
current sales charges and expenses on a hypothetical investment over time,
using the assumptions stated above. Therefore, these examples should not
be relied on as rigid guidelines.
Are There Differences in Account Features That Matter to You? Because
some account features may not be available to Class B shareholders, or
other features (such as Automatic Withdrawal Plans) might not be advisable
(because of the effect of contingent deferred sales charge) in non-
retirement accounts for Class B shareholders, you should carefully review
how you plan to use your investment account before deciding which class
of shares to buy. Also, because not all OppenheimerFunds currently offer
Class B shares, and because exchanges are permitted only to the same class
of shares in other OppenheimerFunds, you should consider how important the
exchange privilege is likely to be for you.
How Does It Affect Payments to My Broker? A salesperson, such as a
broker, or any other person who is entitled to receive compensation for
selling Fund shares may receive different compensation for selling one
class than another class. It is important that investors understand that
the purpose of the Class B contingent deferred sales charge and asset-
based sales charge is the same as the purpose of the front-end sales
charge on sales of Class A shares: to compensate the Distributor for
commissions it pays to dealers and financial institutions for selling
shares.
How Much Must You Invest? You can open a Fund account with a minimum
initial investment of $1,000 and make additional investments at any time
with as little as $25. There are reduced minimum investments under special
investment plans:
With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7) custodial
plans and military allotment plans, you can make initial and subsequent
investments of as little as $25; and subsequent purchases of at least $25
can be made by telephone through AccountLink.
Under pension and profit-sharing plans and Individual Retirement
Accounts (IRAs), you can make an initial investment of as little as $250
(if your IRA is established under an Asset Builder Plan, the $25 minimum
applies), and subsequent investments may be as little as $25.
There is no minimum investment requirement if you are buying shares by
reinvesting dividends from the Fund or other OppenheimerFunds (a list of
them appears in the Statement of Additional Information, or you can ask
your dealer or call the Transfer Agent), or by reinvesting distributions
from unit investment trusts that have made arrangements with the
Distributor.
How Are Shares Purchased? You can buy shares several ways -- through
any dealer, broker or financial institution that has a sales agreement
with the Distributor, or directly through the Distributor, or
automatically from your bank account through an Asset Builder Plan under
the OppenheimerFunds AccountLink service. When you buy shares, be sure to
specify Class A or Class B shares. If you do not choose, your investment
will be made in Class A shares.
Buying Shares Through Your Dealer. Your dealer will place your order
with the Distributor on your behalf.
Buying Shares Through the Distributor. Complete an OppenheimerFunds New
Account Application and return it with a check payable to "Oppenheimer
Funds Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217.
If you don't list a dealer on the application, the Distributor will act
as your agent in buying the shares. However, we recommend that you
discuss your investment first with a financial advisor, to be sure it is
appropriate for you.
Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or
other financial institution that is an Automated Clearing House (ACH)
member. You can then transmit funds electronically to purchase shares,
to send redemption proceeds, and to transmit dividends and distributions.
Shares are purchased for your account on AccountLink on the regular
business day the Distributor is instructed by you to initiate the ACH
transfer to buy shares. You can provide those instructions automatically,
under an Asset Builder Plan, described below, or by telephone instructions
using OppenheimerFunds PhoneLink, also described below. You should request
AccountLink privileges on the application or dealer settlement
instructions used to establish your account. Please refer to "AccountLink"
below for more details.
Asset Builder Plans. You may purchase shares of the Fund (and up to
four other OppenheimerFunds) automatically each month from your account
at a bank or other financial institution under an Asset Builder Plan with
AccountLink. Details are on the Application and in the Statement of
Additional Information.
At What Price Are Shares Sold? Shares are sold at the public offering
price based on the net asset value (and any initial sales charge that
applies) that is next determined after the Distributor receives the
purchase order in Denver. In most cases, to enable you to receive that
day's offering price, the Distributor must receive your order by 4:00
P.M., New York time (all references to time in this Prospectus mean "New
York time"). The net asset value of each class of shares is determined
as of that time on each day The New York Stock Exchange is open (which is
a "regular business day").
If you buy shares through a dealer, the dealer must receive your order
by 4:00 P.M., on a regular business day and transmit it to the Distributor
so that it is received before the Distributor's close of business that
day, which is normally 5:00 P.M. The Distributor may reject any purchase
order for the Fund's shares, in its sole discretion.
Class A Shares. Class A shares are sold at their offering price, which
is normally net asset value plus an initial sales charge. However, in
some cases, described below, purchases are not subject to an initial sales
charge, and the offering price will be the net asset value. In some cases,
reduced sales charges may be available, as described below. Out of the
amount you invest, the Fund receives the net asset value to invest for
your account. The sales charge varies depending on the amount of your
purchase. A portion of the sales charge may be retained by the
Distributor and allocated to your dealer as commission. The current sales
charge rates and commissions paid to dealers and brokers are as follows:
- --------------------------------------------------------------------------
Front-End Sales Charge Commission as
As a Percentage of: Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
- --------------------------------------------------------------------------
Less than $25,000 5.75% 6.10% 4.75%
$25,000 or more but
less than $50,000 5.50% 5.82% 4.75%
$50,000 or more but
less than $100,000 4.75% 4.99% 4.00%
$100,000 or more but
less than $250,000 3.75% 3.90% 3.00%
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
$500,000 or more but
less than $1 million 2.00% 2.04% 1.60%
- --------------------------------------------------------------------------
The Distributor reserves the right to reallow the entire commission to
dealers. If that occurs, the dealer may be considered an "underwriter"
under Federal securities laws.
Class A Contingent Deferred Sales Charge. There is no initial sales
charge on purchases of Class A shares of any one or more OppenheimerFunds
aggregating $1 million or more. However, the Distributor pays dealers of
record commissions on such purchases in an amount equal to the sum of 1.0%
of the first $2.5 million, plus 0.50% of the next $2.5 million, plus 0.25%
of share purchases over $5 million. That commission will be paid only on
the amount of those purchases in excess of $1 million that were not
previously subject to a front-end sales charge and dealer commission.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge
(called the "Class A contingent deferred sales charge") will be deducted
from the redemption proceeds. That sales charge will be equal to 1.0% of
the aggregate net asset value of either (1) the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original cost of the shares, whichever is less.
However, the Class A contingent deferred sales charge will not exceed the
aggregate amount of the commissions the Distributor paid to your dealer
on all Class A shares of all OppenheimerFunds you purchased subject to
the Class A contingent deferred sales charge.
In determining whether a contingent deferred sales charge is payable,
the Fund will first redeem shares that are not subject to the sales
charge, including shares purchased by reinvestment of dividends and
capital gains, and then will redeem other shares in the order that you
purchased them. The Class A contingent deferred sales charge is waived
in certain cases described in "Waivers of Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges of
shares under the Fund's Exchange Privilege (described below). However,
if the shares acquired by exchange are redeemed within 18 months of the
end of the calendar month of the purchase of the exchanged shares, the
sales charge will apply.
Special Arrangements With Dealers. The Distributor may advance up to
13 months' commissions to dealers that have established special
arrangements with the Distributor for Asset Builder Plans for their
clients. Dealers whose sales of Class A shares of OppenheimerFunds (other
than money market funds) under OppenheimerFunds-sponsored 403(b)(7)
custodial plans exceed $5 million per year (calculated per quarter), will
receive monthly one-half of the Distributor's retained commissions on
those sales, and if those sales exceed $10 million per year, those dealers
will receive the Distributor's entire retained commission on those sales.
Reduced Sales Charges for Class A Share Purchases. You may be eligible
to buy Class A shares at reduced sales charge rates in one or more of the
following ways:
Right of Accumulation. To qualify for the lower sales charge rates
that apply to larger purchases of Class A shares, you and your spouse can
add together Class A shares you purchase for your individual accounts, or
jointly, or on behalf of your children who are minors, under trust or
custodial accounts. A fiduciary can count all shares purchased for a
trust, estate or other fiduciary account (including one or more employee
benefit plans of the same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class A shares
of the Fund and other OppenheimerFunds. You can also include Class A
shares of OppenheimerFunds you previously purchased subject to a sales
charge, provided that you still hold your investment in one of the
OppenheimerFunds. The value of those shares will be based on the greater
of the amount you paid for the shares or their current value (at offering
price). The OppenheimerFunds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from the
Transfer Agent. The reduced sales charge will apply only to current
purchases and must be requested when you buy your shares.
Letter of Intent. Under a Letter of Intent, you may purchase Class A
shares of the Fund and other OppenheimerFunds during a 13-month period at
the reduced sales charge rate that applies to the total amount of the
intended purchases. This can include purchases made up to 90 days before
the date of the Letter. More information is contained in the Application
and in "Reduced Sales Charges" in the Statement of Additional Information.
Waivers of Class A Sales Charges. No sales charge is imposed on sales
of Class A shares to the following investors: (1) the Manager or its
affiliates; (2) present or former officers, directors, trustees and
employees (and their "immediate families" as defined in "Reduced Sales
Charges" in the Statement of Additional Information) of the Fund, the
Manager and its affiliates, and retirement plans established by them for
their employees; (3) registered management investment companies, or
separate accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose; (4) 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; (5)
employees and registered representatives (and their spouses) of dealers
or brokers described above or financial institutions that have entered
into sales arrangements with such dealers or brokers (and are identified
to the Distributor) or with the Distributor; the purchaser must certify
to the Distributor at the time of purchase that the purchase is for the
purchaser's own account (or for the benefit of such employee's spouse or
minor children); (6) dealers, brokers or registered investment advisers
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; (7) dealers, brokers or
registered investment advisers that have entered into an agreement with
the Distributor to sell shares of defined contribution employee retirement
plans for which the dealer, broker or investment adviser provides
administration services.
Additionally, no sales charge is imposed on shares that are (a) issued
in plans of reorganization, such as mergers, asset acquisitions and
exchange offers, to which the Fund is a party, or (b) purchased by the
reinvestment of loan repayments by a participant in a retirement plan for
which the Manager or its affiliates acts as sponsor, or (c) purchased by
the reinvestment of dividends or other distributions reinvested from the
Fund or other OppenheimerFunds (other than Oppenheimer Cash Reserves) or
unit investment trusts for which reinvestment arrangements have been made
with the Distributor. There is a further discussion of this policy in
"Reduced Sales Charges" in the Statement of Additional Information.
The contingent deferred sales charge does not apply to purchases of
Class A shares at net asset value described above and is also waived if
shares are redeemed in the following cases: (1) retirement distributions
or loans to participants or beneficiaries from qualified retirement plans,
deferred compensation plans or other employee benefit plans ("Retirement
Plans"), (2) returns of excess contributions made to Retirement Plans, (3)
Automatic Withdrawal Plan payments that are limited to no more than 12%
of the original account value annually, (4) involuntary redemptions of
shares by operation of law or under the procedures set forth in the Fund's
Declaration of Trust or adopted by the Board of Trustees, and (5) if, at
the time an order is placed for Class A shares that would otherwise be
subject to the Class A contingent deferred sales charge, the dealer agrees
to accept the dealer's portion of the commission payable on the sale in
installments of 1/18th of the commission per month (with no further
commission payable if the shares are redeemed within 18 months of
purchase).
Service Plan for Class A Shares. The Fund has adopted a Service Plan
for Class A shares to reimburse the Distributor for a portion of its costs
incurred in connection with the personal service and maintenance of
accounts that hold Class A shares. Reimbursement is made quarterly at an
annual rate that may not exceed 0.25% of the average annual net assets of
Class A shares of the Fund. The Distributor uses all of those fees to
compensate dealers, brokers, banks and other financial institutions
quarterly for providing personal service and maintenance of accounts of
their customers that hold Class A shares and to reimburse itself (if the
Fund's Board of Trustees authorizes such reimbursements, which it has not
yet done) for its other expenditures under the Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and
providing other services at the request of the Fund or the Distributor.
Payments are made by the Distributor quarterly at an annual rate not to
exceed 0.25% of the average annual net assets of Class A shares held in
accounts of the dealer or its customers. As discussed in "Expenses,"
above, the Board of Trustees has set a rate of 0.15% for net assets
representing shares of the Fund sold before April 1, 1991. That rate can
change. The payments under the Plan increase the annual expenses of Class
A shares. For more details, please refer to "Distribution and Service
Plans" in the Statement of Additional Information.
Class B Shares. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed
within 6 years of their purchase, a contingent deferred sales charge will
be deducted from the redemption proceeds. That sales charge will not
apply to shares purchased by the reinvestment of dividends or capital
gains distributions. The charge will be assessed on the lesser of the net
asset value of the shares at the time of redemption or the original
purchase price. The contingent deferred sales charge is not imposed on the
amount of your account value represented by the increase in net asset
value over the initial purchase price (including increases due to the
reinvestment of dividends and capital gains distributions). The Class B
contingent deferred sales charge is paid to the Distributor to reimburse
its expenses of providing distribution-related services to the Fund in
connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 6 years, and (3) shares held the longest during the
6-year period.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
Contingent Deferred Sales Charge
Years Since Beginning of Month In on Redemptions in that Year
Which Purchase Order Was Accepted (As % of Amount Subject to Charge)
- --------------------------------- ----------------------------------
0 - 1 5.0%
1 - 2 4.0%
2 - 3 3.0%
3 - 4 3.0%
4 - 5 2.0%
5 - 6 1.0%
6 and following None
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of the
month in which the purchase was made.
Waivers of Class B Sales Charge. The Class B contingent deferred sales
charge will be waived if the shareholder requests it for any of the
following redemptions: (1) distributions to participants or beneficiaries
from Retirement Plans, if the distributions are made (a) under an
Automatic Withdrawal Plan after the participant reaches age 59-1/2, as
long as the payments are no more than 10% of the account value annually
(measured from the date the Transfer Agent receives the request), or (b)
following the death or disability (as defined in the Internal Revenue
Code) of the participant or beneficiary; (2) redemptions from accounts
other than Retirement Plans following the death or disability of the
shareholder (the disability must have occurred after the account was
established and you must provide evidence of a determination of disability
by the Social Security Administration), (3) returns of excess
contributions to Retirement Plans, and (4) distributions from IRAs
(including SEP-IRAs and SAR/SEP accounts) before the participant is age
591/2, and distributions from 403(b)(7) custodial plans or pension or
profit sharing plans before the participant is age 591/2 but only after
the participant has separated from service, if the distributions are made
in substantially equal periodic payments over the life (or life
expectancy) of the participant or the joint lives (or joint life and last
survivor expectancy) of the participant and the participant's designated
beneficiary (and the distributions must comply with other requirements for
such distributions under the Internal Revenue Code and may not exceed 10%
of the account value annually, measured from the date the Transfer Agent
receives the request).
The contingent deferred sales charge is also waived on Class B shares
in the following cases: (i) shares sold to the Manager or its affiliates;
(ii) 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; (iii) shares issued in plans of
reorganization to which the Fund is a party; and (iv) shares redeemed in
involuntary redemptions as described below. Further details about this
policy are contained in "Reduced Sales Charges" in the Statement of
Additional Information.
Automatic Conversion of Class B Shares. 72 months after you purchase
Class B shares, those shares will automatically convert to Class A shares.
This conversion feature relieves Class B shareholders of the asset-based
sales charge that applies to Class B shares under the Class B Distribution
Plan, described below. The conversion is based on the relative net asset
value of the two classes, and no sales load or other charge is imposed.
When Class B shares convert, any other Class B shares that were acquired
by the reinvestment of dividends and distributions on the converted shares
will also convert to Class A shares. The conversion feature is subject to
the continued availability of a tax ruling described in "Alternative Sales
Arrangements - Class A and Class B Shares" in the Statement of Additional
Information.
Distribution and Service Plan for Class B Shares. The Fund has adopted
a Distribution and Service Plan for Class B shares to compensate the
Distributor for its services and costs in distributing Class B shares and
servicing accounts. Under the Plan, the Fund pays the Distributor an
annual "asset-based sales charge" of 0.75% per year on Class B shares that
are outstanding for 6 years or less. The Distributor also receives a
service fee of 0.25% per year. Both fees are computed on the average
annual net assets of Class B shares, determined as of the close of each
regular business day. The asset-based sales charge allows investors to buy
Class B shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell Class B shares.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class B shares. Those
services are similar to those provided under the Class A Service Plan,
described above. The asset-based sales charge and service fees increase
Class B expenses by up to 1.00% of average net assets per year.
The Distributor pays the 0.25% service fee to dealers in advance for
the first year after Class B shares have been sold by the dealer. After
the shares have been held for a year, the Distributor pays the fee on a
quarterly basis. The Distributor pays sales commissions of 3.75% of the
purchase price to dealers from its own resources at the time of sale. The
Distributor retains the asset-based sales charge to recoup the sales
commissions it pays, the advances of service fee payments it makes, and
its financing costs.
The Distributor's actual expenses in selling Class B shares may be more
than the payments it receives from contingent deferred sales charges
collected on redeemed shares and from the Fund under the Distribution and
Service Plan for Class B shares. Therefore, those expenses may be carried
over and paid in future years. At June 30, 1994, the end of the Plan
year, the Distributor had incurred unreimbursed expenses under the Plan
of $3,688,007 (equal to 4.20% of the Fund's net assets represented by
Class B shares on that date), which have been carried over into the
present Plan year. If the 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 expenses it incurred before the Plan was
terminated.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to
your account at your bank or other financial institution to enable you to
send money electronically between those accounts to perform a number of
types of account transactions. These include purchases of shares by
telephone (either through a service representative or by PhoneLink,
described below), automatic investments under Asset Builder Plans, and
sending dividends and distributions or Automatic Withdrawal Plan payments
directly to your bank account. Please refer to the Application for details
or call the Transfer Agent for more information.
AccountLink privileges must be requested on the Application you use to
buy shares, or on your dealer's settlement instructions if you buy your
shares through your dealer. After your account is established, you can
request AccountLink privileges on signature-guaranteed instructions to the
Transfer Agent. AccountLink privileges will apply to each shareholder
listed in the registration on your account as well as to your dealer
representative of record unless and until the Transfer Agent receives
written instructions terminating or changing those privileges. After you
establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the
Transfer Agent signed by all shareholders who own the account.
Using AccountLink to Buy Shares. Purchases may be made by telephone
only after your account has been established. To purchase shares in
amounts up to $250,000 through a telephone representative, call the
Distributor at 1-800-852-8457. The purchase payment will be debited from
your bank account.
PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system that enables shareholders to perform a number of account
transactions automatically using a touch-tone phone. PhoneLink may be used
on already-established Fund accounts after you obtain a Personal
Identification Number (PIN), by calling the special PhoneLink number: 1-
800-533-3310.
Purchasing Shares. You may purchase shares in amounts up to $100,000
by phone, by calling 1-800-533-3310. You must have established
AccountLink privileges to link your bank account with the Fund, to pay for
these purchases.
Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your
Fund account to another OppenheimerFunds account you have already
established by calling the special PhoneLink number. Please refer to "How
to Exchange Shares," below, for details.
Selling Shares. You can redeem shares by telephone automatically by
calling the PhoneLink number and the Fund will send the proceeds directly
to your AccountLink bank account. Please refer to "How to Sell Shares,"
below, for details.
Automatic Withdrawal and Exchange Plans. The Fund has several plans
that enable you to sell shares automatically or exchange them to another
OppenheimerFunds account on a regular basis:
Automatic Withdrawal Plans. If your Fund account is worth $5,000 or
more, you can establish an Automatic Withdrawal Plan to receive payments
of at least $50 on a monthly, quarterly, semi-annual or annual basis. The
checks may be sent to you or sent automatically to your bank account on
AccountLink. You may even set up certain types of withdrawals of up to
$1,500 per month by telephone. You should consult the Application and
Statement of Additional Information for more details.
Automatic Exchange Plans. You can authorize the Transfer Agent
automatically to exchange an amount you establish in advance for shares
of up to five other OppenheimerFunds on a monthly, quarterly, semi-annual
or annual basis under an Automatic Exchange Plan. The minimum purchase
for each OppenheimerFunds account is $25. These exchanges are subject to
the terms of the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Fund shares,
you have up to 6 months to reinvest all or part of the redemption proceeds
in Class A shares of the Fund or other OppenheimerFunds without paying a
sales charge. This privilege applies to Fund shares that you purchased
with an initial sales charge. It also applies to shares on which you paid
a contingent deferred sales charge when you redeemed them. You must be
sure to ask the Distributor for this privilege when you send your payment.
Please consult the Statement of Additional Information for more details.
Retirement Plans. Fund shares are available as an investment for your
retirement plans. If you participate in a plan sponsored by your employer,
the plan trustee or administrator must make the purchase of shares for
your retirement plan account. The Distributor offers a number of different
retirement plans that can be used by individuals and employers:
--Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses
--403(b)(7) Custodial Plans for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable organizations
--SEP-IRAs (Simplified Employee Pension Plans) for small business
owners or people with income from self-employment, including SARSEP-IRAs
--Pension and Profit-Sharing Plans for self-employed persons and other
employers
Please call the Distributor for the OppenheimerFunds plan documents,
which contain important information and applications.
How to Sell Shares
You can arrange to take money out of your account on any regular
business day by selling (redeeming) some or all of your shares. Your
shares will be sold at the next net asset value calculated after your
order is received and accepted by the Transfer Agent. The Fund offers you
a number of ways to sell your shares: in writing or by telephone. You can
also set up Automatic Withdrawal Plans to redeem shares on a regular
basis, as described above. If you have questions about any of these
procedures, and especially if you are redeeming shares in a special
situation, such as due to the death of the owner, or from a retirement
plan, please call the Transfer Agent first, at 1-800-525-7048, for
assistance.
Retirement Accounts. To sell shares in an OppenheimerFunds retirement
account in your name, call the Transfer Agent for a distribution request
form. There are special income tax withholding requirements for
distributions from retirement plans and you must submit a withholding form
with your request to avoid delay. If your retirement plan account is held
for you by your employer, you must arrange for the distribution request
to be sent by the plan administrator or trustee. There are additional
details in the Statement of Additional Information.
Certain Requests Require a Signature Guarantee. To protect you and the
Fund from fraud, certain redemption requests must be in writing and must
include a signature guarantee in the following situations (there may be
other situations also requiring a signature guarantee):
You wish to redeem more than $50,000 worth of shares and receive a
check
--A redemption check is not payable to all shareholders listed on the
account statement
--A redemption check is not sent to the address of record on your
statement
--Shares are being transferred to a Fund account with a different owner
or name
--Shares are redeemed by someone other than the owners (such as an
Executor)
Where Can I Have My Signature Guaranteed? The Transfer Agent will
accept a guarantee of your signature by a number of financial
institutions, including: a U.S. bank, trust company, credit union or
savings association, or by a foreign bank that has a U.S. correspondent
bank, or by a U.S. registered dealer or broker in securities, municipal
securities or government securities, or by a U.S. national securities
exchange, a registered securities association or a clearing agency. If you
are signing on behalf of a corporation, partnership or other business, or
as a fiduciary, you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that
includes:
- Your name
- The Fund's name
- Your Fund account number (from your statement)
- The dollar amount or number of shares to be redeemed
- Any special payment instructions
- Any share certificates for the shares you are selling, and
- Any special requirements or documents requested by the
Transfer Agent to assure proper authorization of the person
asking to sell shares.
Use the following address for requests by mail: Send courier or Express
Mail requests to:
Oppenheimer Shareholder Services Oppenheimer Shareholder
P.O. Box 5270, Denver, Colorado 80217 Services
10200 E. Girard Avenue,
Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of
record may also sell your shares by telephone. To receive the redemption
price on a regular business day, your call must be received by the
Transfer Agent by 4:00 P.M. You may not redeem shares held in an
OppenheimerFunds retirement plan or under a share certificate by
telephone.
--To redeem shares through a service representative, call 1-800-852-
8457
--To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address on
the account statement, or, if you have linked your Fund account to your
bank account on AccountLink, you may have the proceeds wired to that bank
account.
Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed by
telephone, in any 7-day period. The check must be payable to all owners
of record of the shares and must be sent to the address on the account
statement. This service is not available within 30 days of changing the
address on an account.
Telephone Redemptions Through AccountLink. There are no dollar limits
on telephone redemption proceeds sent to a bank account designated when
you establish AccountLink. Normally the ACH wire to your bank is initiated
on the business day after the redemption. You do not receive dividends
on the proceeds of the shares you redeemed while they are waiting to be
wired.
Selling Shares Through Your Dealer. The Distributor has made
arrangements to repurchase Fund shares from dealers and brokers on behalf
of their customers. Brokers or dealers may charge for that service.
Please refer to "Special Arrangements for Repurchase of Shares from
Dealers and Brokers" in the Statement of Additional Information for more
details.
<PAGE>
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain
OppenheimerFunds at net asset value per share at the time of exchange,
without sales charge. A $5 service fee will be deducted from the fund
account you are exchanging into to help defray administrative costs. That
charge is waived for automated exchanges made by brokers on Fund/SERV and
for automated exchanges between already established accounts on PhoneLink
described below. To exchange shares, you must meet several conditions:
Shares of the fund selected for exchange must be available for sale in
your state of residence
The prospectuses of this Fund and the fund whose shares you want to buy
must offer the exchange privilege
You must hold the shares you buy when you establish your account for
at least 7 days before you can exchange them; after the account is open
7 days, you can exchange shares every regular business day
You must meet the minimum purchase requirements for the fund you
purchase by exchange
Before exchanging into a fund, you should obtain and read its
prospectus
Shares of a particular class may be exchanged only for shares of the
same class in the other OppenheimerFunds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At
present, not all of the OppenheimerFunds offer the same classes of shares.
If a fund has only one class of shares that does not have a class
designation, they are "Class A" shares for exchange purposes. Certain
OppenheimerFunds offer Class A shares and Class B or Class C shares, and
a list can be obtained by calling the Distributor at 1-800-525-7048. In
some cases, sales charges may be imposed on exchange transactions. Please
refer to "How to Exchange Shares" in the Statement of Additional
Information for more details.
Exchanges may be requested in writing or by telephone:
Written Exchange Requests. Submit an OppenheimerFunds Exchange Request
form, signed by all owners of the account. Send it to the Transfer Agent
at the addresses listed in "How to Sell Shares."
Telephone Exchange Requests. Telephone exchange requests may be made
either by calling a service representative at 1-800-852-8457 or by using
PhoneLink for automated exchanges, by calling 1-800-533-3310. Telephone
exchanges may be made only between accounts that are registered with the
same name(s) and address. Shares held under certificates may not be
exchanged by telephone.
You can find a list of OppenheimerFunds currently available for
exchanges in the Statement of Additional Information or by calling a
service representative at 1-800-525-7048. Exchanges of shares involve a
redemption of the shares of the fund you own and a purchase of shares of
the other fund.
There are certain exchange policies you should be aware of:
Shares are normally redeemed from one fund and purchased from the other
fund in the exchange transaction on the same regular business day on which
the Transfer Agent receives an exchange request by 4:00 P.M. that is in
proper form. However, either fund may delay the purchase of shares of the
fund you are exchanging into if it determines it would be disadvantaged
by a same-day transfer of the proceeds to buy shares. For example, the
receipt of multiple exchange requests from a dealer in a "market-timing"
strategy might require the disposition of portfolio securities at a time
or price disadvantageous to the Fund.
Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request
that will disadvantage it, or to refuse multiple exchange requests
submitted by a shareholder or dealer.
The Fund may amend, suspend or terminate the exchange privilege at any
time. Although the Fund will attempt to provide you notice whenever it
is reasonably able to do so, it may impose these changes at any time.
If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for
exchange will be exchanged.
Shareholder Account Rules and Policies
- Net Asset Value Per Share is determined for each class of shares
as of 4:00 P.M. each day The New York Stock Exchange is open by dividing
the value of the Fund's net assets attributable to a class by the number
of shares of that class that are outstanding. The Fund's Board of
Trustees has established procedures to value the Fund's securities to
determine net asset value. In general, securities values are based on
market value. There are special procedures for valuing illiquid and
restricted securities, obligations for which market values cannot be
readily obtained, and call options and hedging instruments. These
procedures are described more completely in the Statement of Additional
Information.
The offering of shares may be suspended during any period in which the
determination of net asset value is suspended, and the offering may be
suspended by the Board of Trustees at any time the Board believes it is
in the Fund's best interest to do so.
Telephone Transaction Privileges for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any
time. If an account has more than one owner, the Fund and the Transfer
Agent may rely on the instructions of any one owner. Telephone privileges
apply to each owner of the account and the dealer representative of record
for the account unless and until the Transfer Agent receives cancellation
instructions from an owner of the account.
The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not
use reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise it will not be liable for losses or expenses
arising out of telephone instructions reasonably believed to be genuine.
If you are unable to reach the Transfer Agent during periods of unusual
market activity, you may not be able to complete a telephone transaction
and should consider placing your order by mail.
Redemption or transfer requests will not be honored until the Transfer
Agent receives all required documents in proper form. From time to time,
the Transfer Agent in its discretion may waive certain of the requirements
for redemptions stated in this Prospectus.
Dealers that can perform account transactions for their clients by
participating in NETWORKING through the National Securities Clearing
Corporation are responsible for obtaining their clients' permission to
perform those transactions and are responsible to their clients who are
shareholders of the Fund if the dealer performs any transaction
erroneously or improperly.
The redemption price for shares will vary from day to day because the
value of the securities in the Fund's portfolio fluctuates, and the
redemption price, which is the net asset value per share, will normally
be different for Class A and Class B shares. Therefore, the redemption
value of your shares may be more or less than their original cost.
Payment for redeemed shares is made ordinarily in cash and forwarded
by check or through AccountLink (as elected by the shareholder under the
redemption procedures described above) within 7 days after the Transfer
Agent receives redemption instructions in proper form, except under
unusual circumstances determined by the Securities and Exchange Commission
delaying or suspending such payments. The Transfer Agent may delay
forwarding a check or processing a payment via AccountLink for recently
purchased shares, but only until the purchase payment has cleared. That
delay may be as much as 15 days from the date the shares were purchased.
That delay may be avoided if you purchase shares by certified check or
arrange with your bank to provide telephone or written assurance to the
Transfer Agent that your purchase payment has cleared.
Involuntary redemptions of small accounts may be made by the Fund if
the account value has fallen below $200 for reasons other than the fact
that the market value of shares has dropped, and in some cases involuntary
redemptions may be made to repay the Distributor for losses from the
cancellation of share purchase orders.
Under unusual circumstances, shares of the Fund may be redeemed "in
kind," which means that the redemption proceeds will be paid with
securities from the Fund's portfolio. Please refer to "How to Sell
Shares" in the Statement of Additional Information for more details.
"Backup Withholding" of Federal income tax may be applied at the rate
of 31% from dividends, distributions and redemption proceeds (including
exchanges) if you fail to furnish the Fund a certified Social Security or
Employer Identification Number when you sign your application, or if you
violate Internal Revenue Service regulations on tax reporting of
dividends.
The Fund does not charge a redemption fee, but if your dealer or broker
handles your redemption, they may charge a fee. That fee can be avoided
by redeeming your Fund shares directly through the Transfer Agent. Under
the circumstances described in "How To Buy Shares," you may be subject to
a contingent deferred sales charges when redeeming certain Class A and
Class B shares.
To avoid sending duplicate copies of materials to households, the Fund
will mail only one copy of each annual and semi-annual report to
shareholders having the same surname and address on the Fund's records.
However, each shareholder may call the Transfer Agent at 1-800-525-7048
to ask that copies of those materials be sent personally to that
shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A and Class
B shares from net investment income and pays such dividends to
shareholders quarterly on or about the 29th of March, June, September and
December, but the Board of Trustees can change that date. It is expected
that distributions paid with respect to Class A shares will generally be
higher than for Class B shares because expenses allocable to Class B
shares will generally be higher.
During the Fund's fiscal year ended June 30, 1994, the Fund attempted
to pay dividends on its Class A shares at a constant level. That was done
keeping in mind the amount of net investment income and other
distributable income available from the Fund's portfolio investments.
However, the amount of each dividend can change from time to time (or
there might not be a dividend at all on either class) depending on market
conditions, the Fund's expenses, and the composition of the Fund's
portfolio. Attempting to pay dividends at a constant level required the
Manager to monitor the Fund's income stream from its investments and at
times to select higher yielding securities (appropriate to the Fund's
objectives and investment restrictions) to maintain income at the required
level. This practice did not affect the net asset values of either class
of shares. The Board of Trustees may change or end the Fund's targeted
dividend level for Class A shares at any time. There is no targeted
dividend level for Class B shares.
Capital Gains. The Fund may make distributions annually in December out
of any net short-term or long-term capital gains, and the Fund may make
supplemental distributions of dividends and capital gains following the
end of its fiscal year. Long-term capital gains will be separately
identified in the tax information the Fund sends you after the end of the
year. Short-term capital gains are treated as dividends for tax purposes.
There can be no assurance that the Fund will pay any capital gains
distributions in a particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. For
OppenheimerFunds retirement accounts, all distributions are reinvested.
For other accounts, you have four options:
Reinvest All Distributions in the Fund. You can elect to reinvest all
dividends and long-term capital gains distributions in additional shares
of the Fund.
Reinvest Long-Term Capital Gains Only. You can elect to reinvest long-
term capital gains in the Fund while receiving dividends by check or sent
to your bank account on AccountLink.
Receive All Distributions in Cash. You can elect to receive a check for
all dividends and long-term capital gains distributions or have them sent
to your bank on AccountLink.
Reinvest Your Distributions in Another OppenheimerFunds Account. You
can reinvest all distributions in another OppenheimerFunds account you
have established.
Taxes. If your account is not a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the
Fund. Long-term capital gains are taxable as long-term capital gains when
distributed to shareholders. It does not matter how long you held your
shares. Dividends paid from short-term capital gains and net investment
income are taxable as ordinary income. Distributions are subject to
federal income tax and may be subject to state or local taxes. Your
distributions are taxable when paid, whether you reinvest them in
additional shares or take them in cash. Every year the Fund will send you
and the IRS a statement showing the amount of each taxable distribution
you received in the previous year.
"Buying a Dividend": When a fund goes ex-dividend, its share price is
reduced by the amount of the distribution. If you buy shares on or just
before the ex-dividend date, or just before the Fund declares a capital
gains distribution, you will pay the full price for the shares and then
receive a portion of the price back as a taxable dividend or capital gain.
Taxes on Transactions: Share redemptions, including redemptions for
exchanges, are subject to capital gains tax. A capital gain or loss is
the difference between the price you paid for the shares and the price you
received when you sold them.
Returns of Capital: In certain cases distributions made by the Fund may
be considered a non-taxable return of capital to shareholders. If that
occurs, it will be identified in notices to shareholders.
This information is only a summary of certain federal tax information
about your investment. More information is contained in the Statement of
Additional Information, and in addition you should consult with your tax
adviser about the effect of an investment in the Fund on your particular
tax situation.
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER EQUITY INCOME FUND
Graphic material included in Prospectus of Oppenheimer Equity Income
Fund: "Comparison of Total Return of Oppenheimer Equity Income Fund with
the S&P 500 Index - Change in Value of a $10,000 Hypothetical Investment"
A linear graph will be included in the Prospectus of Oppenheimer Equity
Income Fund (the "Fund") depicting the initial account value and
subsequent account value of a hypothetical $10,000 investment in the Fund.
In the case of the Fund's Class A shares, that graph will cover each of
the Fund's last ten fiscal years from 6/30/84 through 6/30/94 and in the
case of the Fund's Class B shares will cover the period from the inception
of the class (August 17, 1993) through 6/30/94. The graph will compare
such values with hypothetical $10,000 investments over the same time
periods in the S&P 500 Index. Set forth below are the relevant data
points that will appear on the linear graph. Additional information with
respect to the foregoing, including a description of the S&P 500 Index,
is set forth in the Prospectus under "Performance of the Fund - Comparing
the Fund's Performance to the Market."
Fiscal Year Oppenheimer S&P 500
(Period) Ended Equity Income A Index
6/30/84 $ 9,425 $10,000
6/30/85 $12,479 $13,096
6/30/86 $16,026 $17,787
6/30/87 $19,303 $22,262
6/30/88 $19,697 $20,719
6/30/89 $22,317 $24,971
6/30/90 $24,340 $29,079
6/30/91 $25,236 $31,222
6/30/92 $27,826 $35,403
6/30/93 $32,491 $40,221
6/30/94 $32,703 $40,786
Fiscal Oppenheimer S&P
Period Ended Equity Income B 500 Index
8/17/93(1) $10,000 $10,000
6/30/94 $ 9,305 $ 9,810
- ----------------------
(1) Class B shares of the Fund were first publicly offered on August 17,
1993.
<PAGE>
Oppenheimer Equity Income Fund
3410 South Galena Street
Denver, Colorado 80231
1-800-525-7048
Investment Advisor
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent OPPENHEIMER
Oppenheimer Shareholder Services Equity Income Fund
P.O. Box 5270 Prospectus
Denver, Colorado 80217 Effective November 1, 1994
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche, LLP
1560 Broadway
Denver, Colorado 80202
Legal Counsel
Myer, Swanson & Adams, P.C.
1600 Broadway OppenheimerFunds
Denver, Colorado 80202
No dealer, broker, salesperson or any other person has been authorized to
give any information or to make any representations other than those
contained in this Prospectus or the Statement of Additional Information
and, if given or made, such information and representations must not be
relied upon as having been authorized by the Fund, Oppenheimer Management
Corporation, Oppenheimer Funds Distributor, Inc. or any affiliate thereof.
This Prospectus does not constitute an offer to sell or a solicitation of
an offer to buy any of the securities offered hereby in any state to any
person to whom it is unlawful to make such an offer in such state.
<PAGE>
Oppenheimer Equity Income Fund
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
Statement of Additional Information dated November 1, 1994
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated November 1, 1994. It should be read
together with the Prospectus, which may be obtained by writing to the
Fund's Transfer Agent, Oppenheimer Shareholder Services, at P.O. Box 5270,
Denver, Colorado 80217 or by calling the Transfer Agent at the toll-free
number shown above.
TABLE OF CONTENTS
Page
About the Fund
Investment Objectives and Policies. . . . . . . . . . . . . . 2
Investment Policies and Strategies.. . . . . . . . . . . 2
Other Investment Techniques and Strategies . . . . . . . 4
Other Investment Restrictions. . . . . . . . . . . . . .17
How the Fund is Managed . . . . . . . . . . . . . . . . . . .17
Organization and History . . . . . . . . . . . . . . . .17
Trustees and Officers of the Fund. . . . . . . . . . . .18
The Manager and Its Affiliates . . . . . . . . . . . . .20
Brokerage Policies of the Fund. . . . . . . . . . . . . . . .22
Performance of the Fund . . . . . . . . . . . . . . . . . . .23
Distribution and Service Plans. . . . . . . . . . . . . . . .26
About Your Account. . . . . . . . . . . . . . . . . . . . . .28
How To Buy Shares . . . . . . . . . . . . . . . . . . . . . .28
How To Sell Shares. . . . . . . . . . . . . . . . . . . . . .34
How To Exchange Shares. . . . . . . . . . . . . . . . . . . .38
Dividends, Capital Gains and Taxes. . . . . . . . . . . . . .40
Additional Information About the Fund . . . . . . . . . . . .40
Financial Information About the Fund. . . . . . . . . . . . .42
Independent Auditors' Report. . . . . . . . . . . . . . . . .42
Financial Statements. . . . . . . . . . . . . . . . . . . . .43
Appendix: Ratings of Investments . . . . . . . . . . . . . A-1
<PAGE>
ABOUT THE FUND
Investment Objectives and Policies
Investment Policies and Strategies. The investment objectives and
policies of the Fund are described in the Prospectus. Set forth below is
supplemental information about those policies and the types of securities
in which the Fund invests, as well as the strategies the Fund may use to
try to achieve its objectives. Capitalized terms used in this Statement
of Additional Information have the same meaning as those terms have in the
Prospectus.
In selecting securities for the Fund's portfolio, the Fund's investment
adviser, Oppenheimer Management Corporation (the "Manager"), evaluates the
merits of particular equity and fixed-income securities primarily through
the exercise of its own investment analysis. This may include, among other
things, evaluation of the history of the issuer's operations, prospects
for the industry of which the issuer is part, the issuer's financial
condition, the issuer's pending product developments and developments by
competitors, the effect of general market and economic conditions on the
issuer's business, and legislative proposals or new laws that might affect
the issuer.
The portion of the Fund's assets allocated to particular securities and
types of special investment methods selected will depend upon the judgment
of the Fund's Manager as to the future movement of the equity and fixed-
income securities markets. If the Manager believes that economic
conditions favor dividend-paying equity and convertible securities and
fixed-income investments having higher yields, the Fund will emphasize
securities and investment methods selected to achieve its investment
objectives. If the Manager believes that a market decline is likely,
defensive shorter-term securities and investment methods may be emphasized
(See "Temporary Defensive Investments," below).
Investment Risks of Fixed-Income Securities. All fixed-income
securities are subject to two types of risks: credit risk and interest
rate risk. Credit risk relates to the ability of the issuer to meet
interest or principal payments on a security as they become due.
Generally, higher yielding lower-grade bonds are subject to credit risk
to a greater extent than lower yielding, investment grade bonds. Interest
rate risk refers to the fluctuations in value of fixed-income securities
resulting solely from the inverse relationship between price and yield of
outstanding fixed-income securities. An increase in prevailing interest
rates will generally reduce the market value of already-issued fixed-
income investments, and a decline in interest rates will tend to increase
their value. In addition, debt securities with longer maturities, which
tend to produce higher yields, are subject to potentially greater changes
in their prices from changes in interest rates capital than obligations
with shorter maturities. Fluctuations in the market value of fixed-income
securities after the Fund buys them will not affect the interest payable
on those securities, and thus the cash income from such securities.
However, those price fluctuations will be reflected in the valuations of
these securities and therefore the Fund's net asset values.
As stated in the Prospectus, the Fund may not invest more than 10% of
its assets in non-convertible bonds and debentures in the lower rating
categories of Moody's and Standard & Poor's, the principal rating
services. High yield securities, whether rated or unrated, may be subject
to greater market fluctuations and risks of loss of income and principal
than lower-yielding, higher-rated, fixed-income securities. Risks of high
yield securities may include (i) limited liquidity and secondary market
support, (ii) substantial market price volatility resulting from changes
in prevailing interest rates, (iii) subordination of the obligations to
the prior claims of banks and other senior lenders, (iv) the operation of
mandatory sinking fund or call/redemption provisions during periods of
declining interest rates that could cause the Fund to be able to reinvest
premature redemption proceeds only in lower-yielding portfolio securities,
(v) the possibility that earnings of the issuer may be insufficient to
meet its debt service, and (vi) the issuer's low creditworthiness and
potential for insolvency during periods of rising interest rates and
economic downturn. As a result of the limited liquidity of high yield
securities, at times their prices have experienced significant and rapid
declines when a substantial number of holders decided to sell
simultaneously. A decline is also likely in the high yield bond market
during a general economic downturn. An economic downturn or an increase
in interest rates could severely disrupt the market for high yield bonds
and adversely affect the value of outstanding bonds and the ability of the
issuers to repay principal and interest. In addition, there have been
several Congressional attempts to limit the use of tax and other
advantages of high yield bonds which, if enacted, could adversely affect
the value of these securities and the Fund's net asset value. For
example, federally-insured savings and loan associations have been
required to divest their investments in high yield bonds.
Convertible Securities. While convertible securities are a form of
debt security in many cases, their conversion feature (allowing conversion
into equity securities) causes them to be regarded more as "equity
equivalents." As a result, the rating assigned to the security has less
impact on the Manager's investment decision with respect to convertible
securities than in the case of non-convertible fixed-income securities.
To determine whether convertible securities should be regarded as "equity
equivalents," the Manager examines the following factors: (1) whether,
at the option of the investor, the convertible security can be exchanged
for a fixed number of shares of common stock of the issuer, (2) whether
the issuer of the convertible securities has restated its earnings per
share of common stock on a fully diluted basis (considering the effect of
converting the convertible securities), and (3) the extent to which the
convertible security may be a defensive "equity substitute," providing the
ability to participate in any appreciation in the price of the issuer's
common stock.
Warrants and Rights. Warrants basically are options to purchase equity
securities at set prices valid for a specified period of time. The prices
of warrants do not necessarily move in a manner parallel to the prices of
the underlying securities. The price the Fund pays for a warrant will be
lost unless the warrant is exercised prior to its expiration. 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.
- Zero Coupon Securities. The Fund may invest in zero coupon
securities issued by the U.S. Treasury or by private issuers, such as
corporations. Zero coupon U.S. Treasury securities include: (1) U.S.
Treasury bills without interest coupons, (2) U.S. Treasury notes and bonds
that have been stripped of their unmatured interest coupons and (3)
receipts or certificates representing interests in such stripped debt
obligations or coupons. These securities usually trade at a deep discount
from their face or par value and will be subject to greater fluctuations
in market value in response to changing interest rates than debt
obligations of comparable maturities that make current payments of
interest. However, the lack of periodic interest payments means that the
interest rate is "locked in" and there is no risk of having to reinvest
periodic interest payments in securities having lower rates.
Because the Fund accrues taxable income from zero coupon securities
without receiving cash, the Fund may be required to sell portfolio
securities in order to pay dividends or redemption proceeds for its
shares, which require the payment of cash. This will depend on several
factors: the proportion of shareholders who elect to receive dividends in
cash rather than reinvesting dividends in additional shares of the Fund,
and the amount of cash income the Fund receives from other investments and
the sale of shares. In either case, cash distributed or held by the Fund
that is not reinvested by investors in additional Fund shares will hinder
the Fund from seeking current income.
Other Investment Techniques and Strategies
- - Writing Covered Calls. As described in the Prospectus, the Fund may
write covered calls. When the Fund writes a call on an investment, it
receives a premium and agrees to sell the callable investment to a
purchaser of a corresponding call during the call period (usually not more
than 9 months) at a fixed exercise price (which may differ from the market
price of the underlying investment) regardless of market price changes
during the call period. To terminate its obligation on a call it has
written, the Fund may purchase a corresponding call in a "closing
purchase transaction." A profit or loss will be realized, depending upon
whether the net of the amount of option transaction costs and the premium
received on the call the Fund has written is more or less than the price
of the call the Fund subsequently purchased. A profit may also be
realized if the call lapses unexercised, because the Fund retains the
underlying investment and the premium received. Those profits are
considered short-term capital gains for Federal income tax purposes, as
are premiums on lapsed calls, and when distributed by the Fund are taxable
as ordinary income. If the Fund could not effect a closing purchase
transaction due to the lack of a market, it would have to hold the
callable investment until the call lapsed or was exercised.
The Fund may also write calls on Futures without owning a futures
contract or deliverable securities, provided that at the time the call is
written, the Fund covers the call by segregating in escrow an equivalent
dollar value of deliverable securities or liquid assets. The Fund will
segregate additional liquid assets if the value of the escrowed assets
drops below 100% of the current value of the Future. In no circumstances
would an exercise notice as to a Future put the Fund in a short futures
position.
The Fund's Custodian, or a securities depository acting for the
Custodian, will act as the Fund's escrow agent, through the facilities of
the Options Clearing Corporation ("OCC"), as to the investments on which
the Fund has written options that are traded on exchanges, or as to other
acceptable escrow securities, so that no margin will be required from the
Fund for such option transactions. OCC will release the securities
covering a call on the expiration of the call or when the Fund enters into
a closing purchase transaction. Call writing affects the Fund's turnover
rate and the brokerage commissions it pays. Commissions, normally higher
than on general securities transactions, are payable on writing or
purchasing a call.
- Hedging With Options and Futures Contracts. The Fund may use
hedging instruments for the purposes described in the Prospectus. When
hedging to attempt to protect against declines in the market value of the
Fund's portfolio, or to permit the Fund to retain unrealized gains in the
value of portfolio securities which have appreciated, or to facilitate
selling securities for investment reasons, the Fund may: (i) sell Futures,
(ii) buy puts or such Futures or securities, or (iii) write covered calls
on securities or on Futures. When hedging to establish a position in the
equity securities markets as a temporary substitute for the purchase of
individual equity securities the Fund may: (i) buy Futures, or (ii) buy
calls on such Futures or securities held by it. Normally, the Fund would
then purchase the equity securities and terminate the hedging position.
The Fund's strategy of hedging with Futures and options on Futures will
be incidental to the Fund's investment activities in the underlying cash
market. In the future, the Fund may employ hedging instruments and
strategies that are not presently contemplated but which may be developed,
to the extent such investment methods are consistent with the Fund's
investment objective, and are legally permissible and disclosed in the
Prospectus. Additional information about the hedging instruments the Fund
may use is provided below.
- Stock Index Futures, Financial Futures and Interest Rate Futures.
The Fund may buy and sell futures contracts relating to a securities
index ("Financial Futures"), including "Stock Index Futures," a type of
Financial Future for which the index used as the basis for trading is a
broadly-based stock index (including stocks that are not limited to
issuers in a particular industry or group of industries). A stock index
assigns relative values to the common stocks included in the index and
fluctuates with the changes in the market value of those stocks. Stock
indices cannot be purchased or sold directly. Financial futures are
contracts based on the future value of the basket of securities that
comprise the underlying index. The contracts obligate the seller to
deliver, and the purchaser to take, cash to settle the futures transaction
or to enter into an offsetting contract. No physical delivery of the
securities underlying the index is made on settling the futures
obligation. No monetary amount is paid or received by the Fund on the
purchase or sale of a Financial Future or Stock Index Future.
The Fund may also buy Futures relating to debt securities ("Interest Rate
Futures"). An Interest Rate Future obligates the seller to deliver and
the purchaser to take a specific type of debt security at a specific
future date for a fixed price to settle the futures transaction, or to
enter into an offsetting contract. As with Financial Futures, no monetary
amount is paid or received by the Fund on the purchase of an Interest Rate
Future.
Upon entering into a Futures transaction, the Fund will be required to
deposit an initial margin payment, in cash or U.S. Treasury bills, with
the futures commission merchant (the "futures broker"). Initial margin
payments will be deposited with the Fund's Custodian in an account
registered in the futures broker's name; however, the futures broker can
gain access to that account only under certain specified conditions. As
the Future is marked to market (that is, its value on the Fund's books is
changed) to reflect changes in its market value, subsequent margin
payments, called variation margin, will be paid to or by the futures
broker on a daily basis.
At any time prior to the expiration of the Future, the Fund may elect
to close out its position by taking an opposite position, at which time
a final determination of variation margin is made and additional cash is
required to be paid by or released to the Fund. Any gain or loss is then
realized by the Fund on the Future for tax purposes. Although Financial
Futures and Stock Index Futures by their terms call for settlement by the
delivery of cash, and Interest Rate Futures call for the delivery of a
specific debt security, in most cases the settlement obligation is
fulfilled without such delivery by entering into an offsetting
transaction. All Futures transactions are effected through a clearing
house associated with the exchange on which the contracts are traded.
- Purchasing Puts and Calls. The Fund may purchase calls to protect
against the possibility that the Fund's portfolio will not participate in
an anticipated rise in the securities market. When the Fund purchases a
call, it pays a premium (other than in a closing purchase transaction)
and, except as to calls on stock indices, has the right to buy the
underlying investment from a seller of a corresponding call on the same
investment during the call period at a fixed exercise price. In
purchasing a call, the Fund benefits only if the call is sold at a profit
or if, during the call period, the market price of the underlying
investment is above the sum of the call price, transaction costs, and the
premium paid, and the call is exercised. If the call is not exercised or
sold (whether or not at a profit), it will become worthless at its
expiration date and the Fund will lose its premium payment and the right
to purchase the underlying investment. When the Fund purchases a call on
a stock index, it pays a premium, but settlement is in cash rather than
by delivery of the underlying investment to the Fund.
When the Fund purchases a put, it pays a premium and, except as to puts
on stock indices, has the right to sell the underlying investment to a
seller of a corresponding put on the same investment during the put period
at a fixed exercise price. Buying a put on an investment the Fund owns
(a "protective put") enables the Fund to attempt to protect itself during
the put period against a decline in the value of the underlying investment
below the exercise price by selling the underlying investment at the
exercise price to a seller of a corresponding put. If the market price
of the underlying investment is equal to or above the exercise price and
as a result the put is not exercised or resold, the put will become
worthless at its expiration and the Fund will lose the premium payment and
the right to sell the underlying investment. However, the put may be sold
prior to expiration (whether or not at a profit).
Puts and calls on broadly-based stock indices or Stock Index Futures
are similar to puts and calls on securities or futures contracts except
that all settlements are in cash and gain or loss depends on changes in
the index in question (and thus on price movements in the stock market
generally) rather than on price movements of individual securities or
futures contracts. When the Fund buys a call on a stock index or Stock
Index Future, it pays a premium. If the Fund exercises the call during
the call period, a seller of a corresponding call on the same investment
will pay the Fund an amount of cash to settle the call if the closing
level of the stock index or Future upon which the call is based is greater
than the exercise price of the call. That cash payment is equal to the
difference between the closing price of the call and the exercise price
of the call times a specified multiple (the "multiplier") which determines
the total dollar value for each point of difference. When the Fund buys
a put on a stock index or Stock Index Future, it pays a premium and has
the right during the put period to require a seller of a corresponding
put, upon the Fund's exercise of its put, to deliver cash to the Fund to
settle the put if the closing level of the stock index or Stock Index
Future upon which the put is based is less than the exercise price of the
put. That cash payment is determined by the multiplier, in the same
manner as described above as to calls.
When the Fund purchases a put on a stock index, or on a Stock Index
Future not owned by it, the put protects the Fund to the extent that the
index moves in a similar pattern to the securities the Fund holds. The
Fund can either resell the put or, in the case of a put on a Stock Index
Future, buy the underlying investment and sell it at the exercise price.
The resale price of the put will vary inversely with the price of the
underlying investment. If the market price of the underlying investment
is above the exercise price, and as a result the put is not exercised, the
put will become worthless on the expiration date. In the event of a
decline in price of the underlying investment, the Fund could exercise or
sell the put at a profit to attempt to offset some or all of its loss on
its portfolio securities.
The Fund's option activities may affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Fund may
cause the Fund to sell related portfolio securities, thus increasing its
turnover rate. The exercise by the Fund of puts on securities will cause
the sale of underlying investments, increasing portfolio turnover.
Although the decision whether to exercise a put it holds is within the
Fund's control, holding a put might cause the Fund to sell the related
investments for reasons that would not exist in the absence of the put.
The Fund will pay a brokerage commission each time it buys or sells a
call, put or an underlying investment in connection with the exercise of
a put or call. Those commissions may be higher than the commissions for
direct purchases or sales of the underlying investments.
Premiums paid for options are small in relation to the market value of
the underlying investments and, consequently, put and call options offer
large amounts of leverage. The leverage offered by trading in options
could result in the Fund's net asset value being more sensitive to changes
in the value of the underlying investments.
- Options on Foreign Currency. The Fund intends to write and
purchase calls on foreign currencies. The Fund may purchase and write
puts and calls on foreign currencies that are traded on a securities or
commodities exchange or over-the-counter markets or are quoted by major
recognized dealers in such options. It does so to protect against
declines in the dollar value of foreign securities and against increases
in the dollar cost of foreign securities to be acquired. If the Manager
anticipates a rise in the dollar value of a foreign currency in which
securities to be acquired are denominated, the increased cost of such
securities may be partially offset by purchasing calls or writing puts on
that foreign currency. If a decline in the dollar value of a foreign
currency is anticipated, the decline in value of portfolio securities
denominated in that currency may be partially offset by writing calls or
purchasing puts on that foreign currency. However, in the event of
currency rate fluctuations adverse to the Fund's position, it would lose
the premium it paid and transactions costs.
A call written on a foreign currency by the Fund is covered if the Fund
owns the underlying foreign currency covered by the call or has an
absolute and immediate right to acquire that foreign currency without
additional cash consideration (or for additional cash consideration held
in a segregated account by its custodian) upon conversion or exchange of
other foreign currency held in its portfolio. A call may be written by
the Fund on a foreign currency to provide a hedge against a decline due
to an expected adverse change in the exchange rate in the U.S. dollar
value of a security which the Fund owns or has the right to acquire and
which is denominated in the currency underlying the option. This is a
cross-hedging strategy. In such circumstances, the Fund collateralizes
the option by maintaining in a segregated account with the Fund's
custodian, cash or U.S. Government Securities in an amount not less than
the value of the underlying foreign currency in U.S. dollars marked-to-
market daily.
- Forward Contracts. The Fund may enter into foreign currency
exchange contracts ("Forward Contracts"), which obligate the seller to
deliver and the purchaser to take a specific amount of foreign currency
at a specific future date for a fixed price. A Forward Contract involves
bilateral obligations of one party to purchase, and another party to sell,
a specific currency at a future date (which may be any fixed number of
days from the date of the contract agreed upon by the parties), at a price
set at the time the contract is entered into. These contracts are traded
in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. The Fund may enter
into a Forward Contract in order to "lock in" the U.S. dollar price of a
security denominated in a foreign currency which it has purchased or sold
but which has not yet settled, or to protect against a possible loss
resulting from an adverse change in the relationship between the U.S.
dollar and a foreign currency.
There is a risk that use of Forward Contracts may reduce the gain that
would otherwise result from a change in the relationship between the U.S.
dollar and a foreign currency. Forward contracts include standardized
foreign currency futures contracts which are traded on exchanges and are
subject to procedures and regulations applicable to other Futures. The
Fund may also enter into a forward contract to sell a foreign currency
denominated in a currency other than that in which the underlying security
is denominated. This is done in the expectation that there is a greater
correlation between the foreign currency of the forward contract and the
foreign currency of the underlying investment than between the U.S. dollar
and the foreign currency of the underlying investment. This technique is
referred to as "cross hedging." The success of cross hedging is dependent
on many factors, including the ability of the Manager to correctly
identify and monitor the correlation between foreign currencies and the
U.S. dollar. To the extent that the correlation is not identical, the
Fund may experience losses or gains on both the underlying security and
the cross currency hedge.
The Fund may use Forward Contracts to protect against uncertainty in
the level of future exchange rates. The use of Forward Contracts does not
eliminate fluctuations in the prices of the underlying securities the Fund
owns or intends to acquire, but it does fix a rate of exchange in advance.
In addition, although Forward Contracts limit the risk of loss due to a
decline in the value of the hedged currencies, at the same time they limit
any potential gain that might result should the value of the currencies
increase.
The Fund will not speculate with foreign currency exchange contracts.
There is no limitation as to the percentage of the Fund's assets that may
be committed to foreign currency exchange contracts. The Fund does not
enter into such forward contracts or maintain a net exposure in such
contracts to the extent that the Fund would be obligated to deliver an
amount of foreign currency in excess of the value of the Fund's assets
denominated in that currency, or enter into a "cross hedge," unless it is
denominated in a currency or currencies that the Manager believes will
have price movements that tend to correlate closely with the currency in
which the investment being hedged is denominated. See "Tax Aspects of
Covered Calls and Hedging Instruments" below for a discussion of the tax
treatment of foreign currency exchange contracts.
The Fund may enter into Forward Contracts with respect to specific
transactions. For example, when the Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when
the Fund anticipates receipt of dividend payments in a foreign currency,
the Fund may desire to "lock-in" the U.S. dollar price of the security or
the U.S. dollar equivalent of such payment by entering into a Forward
Contract, for a fixed amount of U.S. dollars per unit of foreign currency,
for the purchase or sale of the amount of foreign currency involved in the
underlying transaction ("transaction hedge"). The Fund will thereby be
able to protect itself against a possible loss resulting from an adverse
change in the relationship between the currency exchange rates during the
period between the date on which the security is purchased or sold, or on
which the payment is declared, and the date on which such payments are
made or received.
The Fund may also use Forward Contracts to lock in the U.S. dollar
value of portfolio positions ("position hedge"). In a position hedge, for
example, when the Fund believes that foreign currency may suffer a
substantial decline against the U.S. dollar, it may enter into a forward
sale contract to sell an amount of that foreign currency approximating the
value of some or all of the Fund's portfolio securities denominated in
such foreign currency, or when the Fund believes that the U.S. dollar may
suffer a substantial decline against a foreign currency, it may enter into
a forward purchase contract to buy that foreign currency for a fixed
dollar amount. In this situation the Fund may, in the alternative, enter
into a forward contract to sell a different foreign currency for a fixed
U.S. dollar amount where the Fund believes that the U.S. dollar value of
the currency to be sold pursuant to the forward contract will fall
whenever there is a decline in the U.S. dollar value of the currency in
which portfolio securities of the Fund are denominated ("cross hedge").
The Fund's Custodian will place cash or U.S. Government securities or
other liquid high-quality debt securities in a separate account of the
Fund having a value equal to the aggregate amount of the Fund's
commitments under forward contracts to cover its short positions. If the
value of the securities placed in the separate account declines,
additional cash or securities will be placed in the account on a daily
basis so that the value of the account will equal the amount of the Fund's
commitments with respect to such contracts. As an alternative to
maintaining all or part of the separate account, the Fund may purchase a
call option permitting the Fund to purchase the amount of foreign currency
being hedged by a forward sale contract at a price no higher than the
forward contract price, or the Fund may purchase a put option permitting
the Fund to sell the amount of foreign currency subject to a forward
purchase contract at a price as high or higher than the forward contract
price. Unanticipated changes in currency prices may result in poorer
overall performance for the Fund than if it had not entered into such
contracts.
The precise matching of the Forward Contract amounts and the value of
the securities involved will not generally be possible because the future
value of such securities in foreign currencies will change as a
consequence of market movements in the value of these securities between
the date the Forward Contract is entered into and the date it is sold.
Accordingly, it may be necessary for the Fund to purchase additional
foreign currency on the spot (i.e., cash) market (and bear the expense of
such purchase), if the market value of the security is less than the
amount of foreign currency the Fund is obligated to deliver and if a
decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some
of the foreign currency received upon the sale of the portfolio security
if its market value exceeds the amount of foreign currency the Fund is
obligated to deliver. The projection of short-term currency market
movements is extremely difficult, and the successful execution of a short-
term hedging strategy is highly uncertain. Forward Contracts involve the
risk that anticipated currency movements will not be accurately predicted,
causing the Fund to sustain losses on these contracts and transactions
costs.
At or before the maturity of a Forward Contract requiring the Fund to
sell a currency, the Fund may either sell a portfolio security and use the
sale proceeds to make delivery of the currency or retain the security and
offset its contractual obligation to deliver the currency by purchasing
a second contract pursuant to which the Fund will obtain, on the same
maturity date, the same amount of the currency that it is obligated to
deliver. Similarly, the Fund may close out a Forward Contract requiring
it to purchase a specified currency by entering into a second contract
entitling it to sell the same amount of the same currency on the maturity
date of the first contract. The Fund would realize a gain or loss as a
result of entering into such an offsetting Forward Contract under either
circumstance to the extent the exchange rate or rates between the
currencies involved moved between the execution dates of the first
contract and offsetting contract.
The cost to the Fund of engaging in Forward Contracts varies with
factors such as the currencies involved, the length of the contract period
and the market conditions then prevailing. Because Forward Contracts are
usually entered into on a principal basis, no fees or commissions are
involved. Because such contracts are not traded on an exchange, the Fund
must evaluate the credit and performance risk of each particular
counterparty under a Forward Contract.
Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. The Fund may convert foreign currency from time
to time, and investors should be aware of the costs of currency
conversion. Foreign exchange dealers do not charge a fee for conversion,
but they do seek to realize a profit based on the difference between the
prices at which they buy and sell various currencies. Thus, a dealer may
offer to sell a foreign currency to the Fund at one rate, while offering
a lesser rate of exchange should the Fund desire to resell that currency
to the dealer.
- Interest Rate Swap Transactions. Swap agreements entail both
interest rate risk and credit risk. There is a risk that, based on
movements of interest rates in the future, the payments made by the Fund
under a swap agreement will have been greater than those received by it.
Credit risk arises from the possibility that the counterparty will
default. If the counterparty to an interest rate swap defaults, the
Fund's loss will consist of the net amount of contractual interest
payments that the Fund has not yet received. The Manager will monitor the
creditworthiness of counterparties to the Fund's interest rate swap
transactions on an ongoing basis. The Fund will enter into swap
transactions with appropriate counterparties pursuant to master netting
agreements.
A master netting agreement provides that all swaps done between the
Fund and that counterparty under the master agreement shall be regarded
as parts of an integral agreement. If on any date amounts are payable in
the same currency in respect of one or more swap transactions, the net
amount payable on that date in that currency shall be paid. In addition,
the master netting agreement may provide that if one party defaults
generally or on one swap, the counterparty may terminate the swaps with
that party. Under such agreements, if there is a default resulting in a
loss to one part, the measure of that part's damages is calculated by
reference to the average cost of a replacement swap with respect to each
swap (i.e., the mark-to-market value at the time of the termination of
each swap). The gains and losses on all swaps are then netted, and the
result is the counterparty's gain or loss on termination. The termination
of all swaps and the netting of gains and losses on termination is
generally referred to as "aggregation." The Fund will not invest more
than 25% of its assets in interest rate swap transactions.
- Regulatory Aspects of Hedging Instruments. The Fund is required
to operate within certain guidelines and restrictions with respect to its
use of Futures and options on Futures established by the Commodity Futures
Trading Commission ("CFTC"). In particular the Fund is exempted from
registration with the CFTC as a "commodity pool operator" if the Fund
complies with the requirements of Rule 4.5 adopted by the CFTC. Under
this Rule the Fund will not, as to any positions, whether long, short or
a combination thereof, enter into Futures transactions and options thereon
for which the aggregate initial margins and premiums exceed 5% of the fair
market value of the Fund's assets, with certain exclusions as defined in
the Rule. Under the Rule, the Fund also must use short Futures and
Futures options positions 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 option exchanges governing the maximum number of options
that may be written or held by a single investor or group of investors
acting in concert, regardless of whether the options were written or
purchased on the same or different exchanges or are held in one or more
accounts or through one or more different exchanges or through one or more
brokers. Thus the number of options which the Fund may write or hold may
be affected by options written or held by other entities, including other
investment companies having the same adviser as the Fund (or an adviser
that is an affiliate of the Fund's adviser). The exchanges also impose
position limits on Futures transactions. An exchange may order the
liquidation of positions found to be in violation of those limits and may
impose certain other sanctions.
Due to requirements under the Investment Company Act, when the Fund
purchases a Future, the Fund will maintain, in a segregated account or
accounts with its Custodian, cash or readily-marketable, short-term
(maturing in one year or less) debt instruments in an amount equal to the
market value of the securities underlying such Future, less the margin
deposit applicable to it.
- Tax Aspects of Covered Calls and Hedging Instruments. The Fund
intends to qualify as a "regulated investment company" under the Internal
Revenue Code (although it reserves the right not to qualify). That
qualification enables the Fund to "pass through" its income and realized
capital gains to shareholders without having to pay tax on them. This
avoids a "double tax" on that income and capital gains, since shareholders
normally will be taxed on the dividends and capital gains they receive
from the Fund (unless the Fund's shares are held in a retirement account
or the shareholder is otherwise exempt from tax). One of the tests for
the Fund's qualification as a regulated investment company is that less
than 30% of its gross income must be derived from gains realized on the
sale of securities held for less than three months. To comply with this
30% cap, the Fund will limit the extent to which it engages in the
following activities, but will not be precluded from them: (i) selling
investments, including Stock Index Futures, held for less than three
months, whether or not they were purchased on the exercise of a call held
by the Fund; (ii) purchasing options which expire in less than three
months; (iii) effecting closing transactions with respect to calls or puts
written or purchased less than three months previously; (iv) exercising
puts or calls held by the Fund for less than three months; or (v) writing
calls on investments held less than three months.
Certain foreign currency exchange contracts (Forward Contracts) in
which the Fund may invest are treated as "section 1256 contracts." Gains
or losses relating to section 1256 contracts generally are characterized
under the Internal Revenue Code as 60% long-term and 40% short-term
capital gains or losses. However, foreign currency gains or losses
arising from certain section 1256 contracts (including Forward Contracts)
generally are treated as ordinary income or loss. In addition, section
1256 contracts held by the Fund at the end of each taxable year are
"marked-to-market" with the result that unrealized gains or losses are
treated as though they were realized. These contracts also may be marked-
to-market for purposes of the excise tax applicable to investment company
distributions and for other purposes under rules prescribed pursuant to
the Internal Revenue Code. An election can be made by the Fund to exempt
these transactions from this marked-to-market treatment.
Certain Forward Contracts entered into by the Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may
affect the character of gains (or losses) realized by the Fund on straddle
positions. Generally, a loss sustained on the disposition of a
position(s) making up a straddle is allowed only to the extent such loss
exceeds any unrecognized gain in the offsetting positions making up the
straddle. Disallowed loss is generally allowed at the point where there
is no unrecognized gain in the offsetting positions making up the
straddle, or the offsetting position is disposed of.
Under the Internal Revenue Code, gains or losses attributable to
fluctuations in exchange rates which occur between the time the Fund
accrues interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the Fund
actually collects such receivables or pays such liabilities generally are
treated as ordinary income or ordinary loss. Similarly, on disposition
of debt securities denominated in a foreign currency and on disposition
of foreign currency forward contracts, gains or losses attributable to
fluctuations in the value of a foreign currency between the date of
acquisition of the security or contract and the date of disposition also
are treated as an ordinary gain or loss. Currency gains and losses are
offset against market gains and losses before determining a net "section
988" gain or loss under the Internal Revenue Code, which may increase or
decrease the amount of the Fund's investment company income available for
distribution to its shareholders.
- Risks of Hedging With Options and Futures. An option position
may be closed out only on a market that provides secondary trading for
options of the same series, and there is no assurance that a liquid
secondary market will exist for any particular option. In addition to the
risks associated with hedging that are discussed in the Prospectus and
above, there is a risk in using short hedging by (i) selling Stock Index
Futures or (ii) purchasing puts on stock indices or Stock Index Futures
to attempt to protect against declines in the value of the Fund's equity
securities. The risk is that the prices of Stock Index Futures will
correlate imperfectly with the behavior of the cash (i.e., market value)
prices of the Fund's equity securities. The ordinary spreads between
prices in the cash and futures markets are subject to distortions, due to
differences in the natures of those markets. First, all participants in
the futures markets are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit requirements,
investors may close out futures contracts through offsetting transactions
which could distort the normal relationship between the cash and futures
markets. Second, the liquidity of the futures markets 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 markets could be reduced, thus
producing distortion. Third, from the point of view of speculators, the
deposit requirements in the futures markets are less onerous than margin
requirements in the securities markets. Therefore, increased
participation by speculators in the futures markets may cause temporary
price distortions.
The risk of imperfect correlation increases as the composition of
the Fund's portfolio diverges from the securities included in the
applicable index. To compensate for the imperfect correlation of
movements in the price of the equity securities being hedged and movements
in the price of the hedging instruments, the Fund may use hedging
instruments in a greater dollar amount than the dollar amount of equity
securities being hedged if the historical volatility of the prices of the
equity securities being hedged is more than the historical volatility of
the applicable index. It is also possible that if the Fund has used
hedging instruments in a short hedge, the market may advance and the value
of equity securities held in the Fund's portfolio may decline. If that
occurred, the Fund would lose money on the hedging instruments and also
experience a decline in value in its portfolio securities. However, while
this could occur for a very brief period or to a very small degree, over
time the value of a diversified portfolio of equity securities will tend
to move in the same direction as the indices upon which the hedging
instruments are based.
If the Fund uses hedging instruments to establish a position in the
equities markets as a temporary substitute for the purchase of individual
equity securities (long hedging) by buying Stock Index Futures and/or
calls on such Futures, on securities or on stock indices, it is possible
that the market may decline. If the Fund then concludes not to invest in
equity securities at that time because of concerns as to a possible
further market decline or for other reasons, the Fund will realize a loss
on the hedging instruments that is not offset by a reduction in the price
of the equity securities purchased.
- Investing in Small, Unseasoned Companies. The securities of
small, unseasoned companies may have a limited trading market, which may
adversely affect the Fund's ability to dispose of them and can reduce the
price the Fund might be able to obtain for them. If other investors trade
the same securities when the Fund attempts to dispose of its holdings, the
Fund may receive lower prices than might otherwise be obtained, because
of the thinner market for such securities. The limitation against
investing more than 5% of the Fund's net assets in securities of companies
(including predecessors) with a record of less than three years'
continuous operation does not apply to public utilities or pipeline
companies.
- Foreign Securities. "Foreign securities" include equity and debt
securities of companies organized under the laws of countries other than
the United States and debt securities of foreign governments that are
traded on foreign securities exchanges or in the foreign over-the-counter
markets. Securities of foreign issuers that are represented by American
Depository Receipts or that are listed on a U.S. securities exchange or
traded in the U.S. over-the-counter markets are not considered "foreign
securities" for the purpose of the Fund's investment allocations, because
they are not subject to many of the special considerations and risks,
discussed below, that apply to foreign securities traded and held abroad.
The Fund may invest in U.S. dollar-denominated foreign debt
obligations known as "Brady Bonds," which are issued for the exchange of
existing commercial bank loans to foreign entities for new obligations
that are generally collateralized by zero coupon U.S. Treasury securities
having the same maturity. Because the Fund may purchase securities
denominated in foreign currencies, a change in the value of such foreign
currency against the U.S. dollar will 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.
Investing in foreign securities offers potential benefits not
available from investing solely in securities of domestic issuers,
including the opportunity to invest in foreign issuers that appear to
offer growth potential, or in foreign countries with economic policies or
business cycles different from those of the U.S., or to reduce
fluctuations in portfolio value by taking advantage of foreign stock
markets that do not move in a manner parallel to U.S. markets. If the
Fund's portfolio securities are held abroad, the countries in which they
may be held and the sub-custodians holding them must be approved by the
Fund's Board of Trustees under applicable rules of the Securities and
Exchange Commission.
- Risks of Foreign Investing. Investments in foreign securities
present special additional risks and considerations not typically
associated with investments in domestic securities: reduction of income
by foreign taxes; fluctuation in value of foreign portfolio investments
due to changes in currency rates and control regulations (e.g., currency
blockage); transaction charges for currency exchange; lack of public
information about foreign issuers; lack of uniform accounting, auditing
and financial reporting standards comparable to those applicable to
domestic issuers; less volume on foreign exchanges than on U.S. exchanges;
greater volatility and less liquidity on foreign markets than in the U.S.;
less regulation of foreign issuers, stock exchanges and brokers than in
the U.S.; greater difficulties in commencing lawsuits; higher brokerage
commission rates than in the U.S.; increased risks of delays in settlement
of portfolio transactions or loss of certificates for portfolio
securities; possibilities in some countries of expropriation, confiscatory
taxation, political, financial or social instability or adverse diplomatic
developments; and 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.
- Restricted and Illiquid Securities. To enable the Fund to sell
restricted securities not registered under the Securities Act of 1933, the
Fund may have to cause those securities to be registered. The expenses
of registration of restricted securities may be negotiated by the Fund
with the issuer at the time such securities are purchased by the Fund,
if such registration is required before such securities may be sold
publicly. When registration must be arranged because the Fund wishes to
sell the security, a considerable period may elapse between the time the
decision is made to sell the securities and the time the Fund would be
permitted to sell them. The Fund would bear the risks of any downward
price fluctuation during that period. The Fund may also acquire, through
private placements, securities having contractual restrictions on their
resale, which might limit the Fund's ability to dispose of such securities
and might lower the amount realizable upon the sale of such securities.
The Fund has percentage limitations that apply to purchases of
restricted securities, as stated in the Prospectus. Those percentage
restrictions do not limit purchases of restricted securities that are
eligible for sale to qualified institutional purchasers pursuant to Rule
144A under the Securities Act of 1933, provided that those securities have
been determined to be liquid by the Board of Trustees of the Fund or by
the Manager under Board-approved guidelines. Those guidelines take into
account the trading activity for such securities and the availability of
reliable pricing information, among other factors. If there is a lack of
trading interest in a particular Rule 144A security, the Fund's holding
of that security may be deemed to be illiquid.
- Loans of Portfolio Securities. The Fund may lend its portfolio
securities subject to the restrictions stated in the Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral on each business day must at least equal the value of the
loaned securities and must consist of cash, bank letters of credit or
securities of the U.S. Government (or its agencies or instrumentalities).
To be acceptable as collateral, letters of credit must obligate a bank to
pay amounts demanded by the Fund if the demand meets the terms of the
letter. Such terms and the issuing bank must be satisfactory to the Fund.
When it lends securities, the Fund receives amounts 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, and
(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.
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.
- "When-Issued" and Delayed Delivery Transactions. The Fund may
purchase securities on a "when-issued" basis, and may purchase or sell
such securities on a "delayed delivery" basis. Although the Fund will
enter into such transactions for the purpose of acquiring securities for
its portfolio or for delivery pursuant to options contracts it has entered
into, the Fund may dispose of a commitment prior to settlement. "When-
issued" or "delayed delivery" refers to securities whose terms and
indenture are available and for which a market exists, but which are not
available for immediate delivery. When such transactions are negotiated,
the price (which is generally expressed in yield terms) is fixed at the
time the commitment is made, but delivery and payment for the securities
take place at a later date. The Fund does not intend to make such
purchases for speculative purposes. The commitment to purchase a security
for which payment will be made on a future date may be deemed a separate
security and involve a risk of loss if the value of the security declines
prior to the settlement date. During the period between commitment by the
Fund and settlement (generally within two months but not to exceed 120
days), no payment is made for the securities purchased by the purchaser,
and no interest accrues to the purchaser from the transaction. Such
securities are subject to market fluctuation; the value at delivery may
be less than the purchase price. The Fund will maintain a segregated
account with its Custodian, consisting of cash, U.S. Government securities
or other high grade debt obligations at least equal to the value of
purchase commitments until payment is made.
The Fund will engage in when-issued transactions in order to secure
what is considered to be an advantageous price and yield at the time of
entering into the obligation. When the Fund engages in when-issued or
delayed delivery transactions, it relies on the buyer or seller, as the
case may be, to consummate the transaction. Failure of the buyer or
seller to do so may result in the Fund losing the opportunity to obtain
a price and yield considered to be advantageous. At the time the Fund
makes a commitment to purchase or sell a security on a when-issued or
forward commitment basis, it records the transaction and reflects the
value of the security purchased, or if a sale, the proceeds to be
received, in determining its net asset value. If the Fund chooses to (i)
dispose of the right to acquire a when-issued security prior to its
acquisition or (ii) dispose of its right to deliver or receive against a
forward commitment, it may incur a gain or loss.
To the extent the Fund engages in when-issued and delayed delivery
transactions, it will do so for the purpose of acquiring or selling
securities consistent with its investment objective and policies and not
for the purposes of investment leverage. The Fund enters into such
transactions only with the intention of actually receiving or delivering
the securities, although (as noted above), when-issued securities and
forward commitments may be sold prior to settlement date. In addition,
changes in interest rates before settlement in a direction other than that
expected by the Manager will affect the value of such securities and may
cause a loss to the Fund.
When-issued transactions and forward commitments allow the Fund a
technique to use against anticipated changes in interest rates and prices.
For instance, in periods of rising interest rates and falling prices, the
Fund might sell securities in its portfolio on a forward commitment basis
to attempt to limit its exposure to anticipated falling prices. In
periods of falling interest rates and rising prices, the Fund might sell
portfolio securities and purchase the same or similar securities on a
when-issued or forward commitment basis, thereby obtaining the benefit of
currently higher cash yields.
- Repurchase Agreements. The Fund may acquire securities subject
to repurchase agreements for liquidity purposes to meet anticipated
redemptions, or pending the investment of the proceeds from sales of Fund
shares, or pending the settlement of purchases of portfolio securities.
In a repurchase transaction, the Fund acquires a security from, and
simultaneously resells it to, an approved vendor. An "approved vendor"
is a U.S. commercial bank or the U.S. branch of a foreign bank or a
broker-dealer which has been designated a primary dealer in government
securities, which must meet credit requirements set by the Fund's Board
of Trustees from time to time. The 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 the resale typically will occur within one to five days of the
purchase. Repurchase agreements are considered "loans" under the
Investment Company Act, collateralized by the underlying security. The
Fund's repurchase agreements require that at all times while the
repurchase agreement is in effect, the value of the collateral must equal
or exceed the repurchase price to fully collateralize the repayment
obligation. Additionally, the Manager will impose creditworthiness
requirements to confirm that the vendor is financially sound and will
continuously monitor the collateral's value.
- Temporary Defensive Investments. When the equity markets in
general are declining, the Fund may commit an increasing portion of its
assets to defensive securities. These may include the types of securities
described in the Prospectus. When investing for defensive purposes, the
Fund will normally emphasize investment in short-term debt securities
(that is, securities maturing in one year or less from the date of
purchase), since those types of securities are generally more liquid and
usually may be disposed of quickly without significant gains or losses so
that the Manager may have liquid assets when it wishes to make investments
in securities for appreciation possibilities.
Other Investment Restrictions
The Fund's most significant investment restrictions are set forth in
the Prospectus. There are additional investment restrictions that the Fund
must follow that are also fundamental policies. Fundamental policies and
the Fund's investment objectives cannot be changed without the vote of a
"majority" of the Fund's outstanding voting securities. Under the
Investment Company Act, such a "majority" vote is defined as the vote of
the holders of the lesser of (1) 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 (2) more than 50% of the
outstanding shares.
Under these additional restrictions, the Fund cannot: (1) act as an
underwriter of securities of other issuers; (2) buy or sell real estate
or interests in real estate investment trusts; (3) buy or sell any
securities, other than shares of the Fund, from or to any officer or
Trustee of the Fund or officer or director of the Manager or firms of
which any of them are members (however, such persons may act as brokers
for the Fund); (4) buy or retain securities of any issuer if those
officers and Trustees of the Fund or officers and directors of the Manager
who beneficially own more than .5% of the securities of the issuer
together own more than 5% of the securities of such issuer; (5) invest in
securities of any company for the purpose of management or the exercise
of control; (6) buy securities of other investment companies, except in
connection with a merger or consolidation; (7) cease to maintain its
business as an investment company as defined in the Investment Company
Act; or (8) accept the purchase price for any of its shares without
immediately thereafter issuing an appropriate number of shares.
How the Fund Is Managed
Organization and History. As a Massachusetts business trust, the Fund
is not required to hold, and does not plan to hold, regular annual
meetings of shareholders. The Fund will hold meetings when required to do
so by the Investment Company Act or other applicable law, or when a
shareholder meeting is called by the Trustees or upon proper request of
the shareholders. Shareholders have the right, upon the declaration in
writing or vote of two-thirds of the outstanding shares of the Fund, to
remove a Trustee. The Trustees will call a meeting of shareholders to
vote on the removal of a Trustee upon the written request of the record
holders of 10% of its outstanding shares. In addition, if the Trustees
receive a request from at least 10 shareholders (who have been
shareholders for at least six months) holding shares of the Fund valued
at $25,000 or more or holding at least 1% of the Fund's outstanding
shares, whichever is less, stating that they wish to communicate with
other shareholders to request a meeting to remove a Trustee, the Trustees
will then either make the Fund's shareholder list available to the
applicants or mail their communication to all other shareholders at the
applicants' expense, or the Trustees may take such other action as set
forth under Section 16(c) of the Investment Company Act.
The Fund's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides
for indemnification and reimbursement of expenses out of its property for
any shareholder held personally liable for its obligations. The
Declaration of Trust also provides that the Fund shall, upon request,
assume the defense of any claim made against any shareholder for any act
or obligation of the Fund and satisfy any judgment thereon. Thus, while
Massachusetts law permits a shareholder of a business trust (such as the
Fund) to be held personally liable as a "partner" under certain
circumstances, the risk of a Fund shareholder incurring financial loss on
account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Trust, and any
shareholder of the Trust, agrees under the Trust's Declaration of Trust
to look solely to the assets of the Trust for satisfaction of any claim
or demand which may arise out of any dealings with the Trust, and the
Trustees shall have no personal liability to any such person, to the
extent permitted by law.
Trustees And Officers of the Fund. The Fund's Trustees and officers and
their principal occupations and business affiliations during the past five
years are listed below. All of the Trustees are also trustees, directors
or managing general partners of Oppenheimer Total Return Fund, Inc.,
Oppenheimer High Yield Fund, Oppenheimer Integrity Funds, Oppenheimer Cash
Reserves, Oppenheimer Tax-Exempt Bond Fund, Oppenheimer Limited-Term
Government Fund, The New York Tax-Exempt Income Fund, Inc., Oppenheimer
Champion High Yield Fund, Oppenheimer Main Street Funds, Inc., Oppenheimer
Strategic Funds Trust, Oppenheimer Strategic Income & Growth Fund,
Oppenheimer Strategic Investment Grade Bond Fund, Oppenheimer Strategic
Short-Term Income Fund and Oppenheimer Variable Account Funds; as well as
the following "Centennial Funds": Daily Cash Accumulation Fund, Inc.,
Centennial America Fund, L.P., Centennial Money Market Trust, Centennial
Government Trust, Centennial New York Tax Exempt Trust, Centennial Tax
Exempt Trust and Centennial California Tax Exempt Trust, (all of the
foregoing funds are collectively referred to as the "Denver-based
OppenheimerFunds"). Mr. Fossel is President and Mr. Swain is Chairman of
the Denver-based OppenheimerFunds. As of October 3, 1994, the Trustees
and officers of the Fund as a group owned less than 1% of the Fund's
outstanding shares.
Robert G. Avis, Trustee*
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
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
Charles Conrad, Jr., Trustee
1447 Vista del Cerro, Las Cruces, New Mexico, 88005
Vice President of McDonnell Douglas Ltd.; formerly associated with the
National Aeronautics and Space Administration.
Jon S. Fossel, President and Trustee*
Two World Trade Center, New York, New York 10048-0203
Chairman, Chief Executive Officer and a director of the Manager; President
and a director of Oppenheimer Acquisition Corp. ("OAC"), the Manager's
parent holding company; President and a director of HarbourView Asset
Management Corporation ("HarbourView"), a subsidiary of the Manager; a
director of Shareholder Services, Inc. ("SSI") and Shareholder Financial
Services, Inc. ("SFSI"), transfer agent subsidiaries of the Manager;
formerly President of the Manager.
Raymond J. Kalinowski, Trustee
44 Portland Drive, St. Louis, Missouri 63131
Formerly Vice Chairman and a director of A.G. Edwards, Inc., parent
holding company of A.G. Edwards & Sons, Inc. (a broker-dealer), of which
he was a Senior Vice President.
C. Howard Kast, Trustee
2552 East Alameda, Denver, Colorado 80209
Formerly the Managing Partner of Deloitte, Haskins & Sells (an accounting
firm).
Robert M. Kirchner, Trustee
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Ned M. Steel, Trustee
3416 S. Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; formerly Senior Vice
President and a director of Van Gilder Insurance Corp. (insurance
brokers).
James C. Swain, Chairman and Trustee*
3410 South Galena Street, Denver, Colorado 80231
Vice Chairman of the Manager; President and Director of Centennial Asset
Management Corporation, an investment adviser subsidiary of the Manager
("Centennial"); formerly Chairman of the Board of SSI.
Andrew J. Donohue, Vice President
Two World Trade Center, New York, New York 10048-0203
Executive Vice President and General Counsel of the Manager and
Oppenheimer Funds Distributor, Inc. (the "Distributor"); an officer of
other OppenheimerFunds; formerly Senior Vice President and Associate
General Counsel of the Manager and the Distributor; formerly a Partner in
Kraft & McManimon (a law firm), prior to which he was an officer of First
Investors Corporation (a broker-dealer) and First Investors Management
Company, Inc. (broker-dealer and investment adviser) and a director and
an officer of the First Investors Family of Funds and First Investors Life
Insurance Company.
George C. Bowen, Vice President, Secretary and Treasurer
3410 South Galena Street Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President and
Treasurer of the Distributor and HarbourView; Senior Vice President,
Treasurer, Assistant Secretary and a director of Centennial; Vice
President, Treasurer and Secretary of SSI and SFSI; an officer of other
OppenheimerFunds.
John P. Doney, Vice President and Portfolio Manager
Two World Trade Center, New York, N.Y. 10048-0203
Vice President of the Manager; formerly Senior Vice President and Chief
Investment Officer-Equities of National Securities & Research Corporation
(mutual fund investment adviser) and Vice President of the National
affiliated investment companies.
Robert G. Zack, Assistant Secretary
Two World Trade Center, New York, New York 10048-0203
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI and SFSI; an officer of other OppenheimerFunds.
Robert J. Bishop, Assistant Treasurer
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an officer
of other OppenheimerFunds; previously a Fund Controller of the Manager,
prior to which he was an
Accountant for Resolution Trust Corporation and previously an Accountant
and Commissions Supervisor for Stuart James Company Inc., a broker-dealer.
Scott Farrar, Assistant Treasurer
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting, an officer
of other OppenheimerFunds; previously a Fund Controller for the Manager,
prior to which he was an International Mutual Fund Supervisor for Brown
Brothers Harriman & Co. (a bank) and previously a Senior Fund Accountant
for State Street Bank & Trust Company, before which he was a sales
representative for Control Colorado Planning.
__________________
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
- Remuneration of Trustees. The officers of the Fund are
affiliated with the Manager; they and the Trustees of the Fund who are
affiliated with the Manager (Mr. Swain and Mr. Fossel, who are both
officers and Trustees) receive no salary or fee from the Fund. During the
Fund's fiscal year ended June 30, 1994, the remuneration (including
expense reimbursements) paid to all Trustees of the Fund (excluding Mr.
Fossel and Mr. Swain) as a group for services as Trustees and as members
of one or more committees totaled $71,550.
- Major Shareholders. As of October 3, 1994, no person owned of
record or was known by the Fund to own beneficially 5% or more of the
shares of the Fund as a whole or either class of the Fund's outstanding
shares.
The Manager and Its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled by
Massachusetts Mutual Life Insurance Company. OAC is also owned in part
by certain of the Manager's directors and officers, some of whom also
serve as officers of the Fund, and two of whom (Mr. Fossel and Mr. Swain)
serve as Trustees of the Fund.
- The Investment Advisory Agreement. The investment advisory
agreement between the Manager and the Fund requires the Manager, at its
expense, to provide the Fund with adequate office space, facilities and
equipment, and to provide and supervise the activities of all
administrative and clerical personnel required to provide effective
corporate administration for the Fund, including the compilation and
maintenance of records with respect to its operations, the preparation and
filing of specified reports, and composition of proxy materials and
registration statements for continuous public sale of shares of the Fund.
Expenses not expressly assumed by the Manager under the advisory
agreement or by the Distributor under the General Distributor's Agreement
are paid by the Fund. The advisory agreement lists examples of expenses
paid by the Fund, the major categories of which relate to interest, taxes,
brokerage commissions, fees to certain Trustees, legal and audit expenses,
custodian and transfer agent expenses, share issuance costs, certain
printing and registration costs and non-recurring expenses, including
litigation costs. For the Fund's fiscal years ended June 30, 1992, 1993,
and 1994, the management fees paid by the Fund to the Manager were
$8,377,583, $9,038,385, and $10,114,770, respectively.
The advisory agreement contains a provision limiting the Fund's
expenses. That provision provides that the Manager will reimburse the
Fund for its annual expenses, other than taxes, interest, brokerage
commissions and extraordinary non-recurring expenses, that exceed in any
fiscal year 1.5% of the first $30 million of the Fund's average annual net
assets plus 1% of the Fund's average annual net assets in excess of $30
million. The payment of the management fee at the end of any month will
be reduced as necessary so that there will not be any accrued but unpaid
liability under this expense limitation.
The advisory agreement provides that as long as it shall have
acted with due care and in good faith, the Manager is not liable for any
loss sustained by reason of any investment, the adoption of any investment
policy, or the purchase, sale or retention of any security. However, the
Agreement does not exculpate the Manager from willful misfeasance, bad
faith, or gross negligence in the performance of its duties or from
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 and to use the name "Oppenheimer" in
connection with its other investment activities. If the Manager shall no
longer act as investment adviser to the Fund, the right of the Fund to use
the name "Oppenheimer" as part of its name may be withdrawn.
- The Distributor. Under its General Distributor's Agreement with
the Fund, the Distributor acts as the Fund's principal underwriter in the
continuous public offering of the Fund's Class A and Class B shares but
is not obligated to sell a specific number of shares. Expenses normally
attributable to sales, (excluding payments under the Distribution and
Service Plans but including advertising and the cost of printing and
mailing prospectuses, other than those furnished to existing
shareholders), are borne by the Distributor. During the Fund's fiscal
years ended June 30, 1992, 1993, and 1994, the aggregate sales charges on
sales of the Fund's Class A shares were $10,813,848, $8,573,285. and
$7,807,280, respectively, of which the Distributor and an affiliated
broker-dealer retained in the aggregate $3,194,485, $2,683,153, and
$2,506,452 in those respective years. During the Fund's fiscal year ended
June 30, 1994, the contingent deferred sales charges collected on the
Fund's Class B shares totalled $65,013, all of which the Distributor
retained. For additional information about distribution of the Fund's
shares and the expenses connected with such activities, please refer to
"Distribution and Service Plans," below.
- The Transfer Agent. Oppenheimer Shareholder Services, the Fund's
Transfer Agent, is responsible for maintaining the Fund's shareholder
registry and shareholder accounting records, and for shareholder servicing
and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the
duties of the Manager under the advisory agreement is to arrange the
portfolio transactions for the Fund. The advisory agreement contains
provisions relating to the employment of broker-dealers ("brokers") to
effect the Fund's portfolio transactions. In doing so, the Manager is
authorized by the advisory agreement to employ broker-dealers, including
"affiliated" brokers, as that term is defined in the Investment Company
Act, as may, in its best judgment based on all relevant factors,
implement the policy of the Fund to obtain, at reasonable expense, the
"best execution" (prompt and reliable execution at the most favorable
price obtainable) of such transactions. The Manager need not seek
competitive commission bidding but is expected to minimize the commissions
paid to the extent consistent with the interest and policies of the Fund
as established by its Board of Trustees. Purchases of 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.
Under the advisory agreement, the Manager is authorized to select
brokers that provide brokerage and/or research services for the Fund
and/or the other accounts over which the Manager or its affiliates have
investment discretion. The commissions paid to such brokers may be higher
than another qualified broker would have charged if a good faith
determination is made by the Manager that the commission is fair and
reasonable in relation to the services provided. Subject to the foregoing
considerations, the Manager may also consider sales of shares of the Fund
and other investment companies managed by the Manager or its affiliates
as a factor in the selection of brokers for the Fund's portfolio
transactions.
Description of Brokerage Practices Followed by the Manager. Subject
to the provisions of the advisory agreement, and the procedures and rules
described above, allocations of brokerage are made by portfolio managers
of the Manager under the supervision of the Manager's executive officers.
Transactions in securities other than those for which an exchange is the
primary market are generally done with principals or market makers.
Brokerage commissions are paid primarily for effecting transactions in
listed securities and are otherwise paid only if it appears likely that
a better price or execution can be obtained. When the Fund engages in an
option transaction, ordinarily the same broker will be used for the
purchase or sale of the option and any transaction in the securities to
which the option relates. When possible, concurrent orders to purchase
or sell the same security by more than one of the accounts managed by the
Manager or its affiliates are combined. The transactions effected
pursuant to such combined orders are averaged as to price and allocated
in accordance with the purchase or sale orders actually placed for each
account.
The research services provided by a particular broker may be
useful only to one or more of the advisory accounts of the Manager and its
affiliates, and investment research received for the commissions of those
other accounts may be useful both to the Fund and one or more of such
other accounts. Such research, which may be supplied by a third party at
the instance of a broker, includes information and analyses on particular
companies and industries as well as market or economic trends and
portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the 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 research services provided by brokers broaden the scope and
supplement the research activities of the Manager, by making available
additional views for consideration and comparisons, and by enabling the
Manager to obtain market information for the valuation of securities held
in the Fund's portfolio or being considered for purchase. The Board of
Trustees, including the "independent" Trustees of the Fund (those Trustees
of the Fund who are not "interested persons" as defined in the Investment
Company Act, and who have no direct or indirect financial interest in the
operation of the advisory agreement or the Distribution Plans described
below) annually reviews information furnished by the Manager as to the
commissions paid to brokers furnishing such services so that the Board may
ascertain whether the amount of such commissions was reasonably related
to the value or benefit of such services.
During the Fund's fiscal years ended June 30, 1992, 1993, and
1994, total brokerage commissions paid by the Fund (not including spreads
or concessions on principal transactions on a net trade basis) were
$1,033,501, $1,000,874, and $4,522,951, respectively. During the fiscal
year ended June 30, 1994, $449,507 was paid to brokers as commissions in
return for research services; the aggregate dollar amount of those
transactions was $236,379,547. The transactions giving rise to those
commissions were allocated in accordance with the Manager's internal
allocation procedures.
Performance of the Fund
Total Return Information. As described in the Prospectus, from time
to time the "average annual total return," "cumulative total return,"
"average annual total return at net asset value" and "total return at net
asset value" of an investment in a class of shares of the Fund may be
advertised. An explanation of how these total returns are calculated for
each class and the components of those calculations is set forth below.
The Fund's advertisements of its performance data must, under
applicable rules of the Securities and Exchange Commission, include the
average annual total returns for each class of shares of the Fund for the
1, 5, and 10-year periods (or the life of the class, if less) ending as
of the most recently-ended calendar quarter prior to the publication of
the advertisement. This enables an investor to compare the Fund's
performance to the performance of other funds for the same periods.
However, a number of factors should be considered before using such
information as a basis for comparison with other investments. An
investment in the Fund is not insured; its returns and share prices are
not guaranteed and normally will fluctuate on a daily basis. When
redeemed, an investor's shares may be worth more or less than their
original cost. Returns for any given past period are not a prediction or
representation by the Fund of future returns. The returns of Class A and
Class B shares of the Fund are affected by portfolio quality, the type of
investments the Fund holds and its operating expenses allocated to the
particular class.
- Average Annual Total Returns. The "average annual total return"
of each class is an average annual compounded rate of return for each year
in a specified number of years. It is the rate of return based on the
change in value of a hypothetical initial investment of $1,000 ("P" in the
formula below) held for a number of years ("n") to achieve an Ending
Redeemable Value ("ERV") of that investment, according to the following
formula:
( ERV ) 1/n
(-----) -1 = Average Annual Total Return
( P )
- Cumulative Total Returns. The cumulative "total return"
calculation measures the change in value of a hypothetical investment of
$1,000 over an entire period of years. Its calculation uses some of the
same factors as average annual total return, but it does not average the
rate of return on an annual basis. Cumulative total return is determined
as follows:
ERV - P
- ------- = Total Return
P
In calculating total returns for Class A shares, the current
maximum sales charge of 5.75% (as a percentage of the offering price) is
deducted from the initial investment ("P") (unless the return is shown at
net asset value, as described below). For Class B shares, the payment of
the applicable contingent deferred sales charge (5.0% for the first year,
4.0% for the second year, 3.0% for the third and fourth year, 2.0% in the
fifth year, 1.0% in the sixth year and none thereafter) is applied to the
investment result for the period shown (unless the total return is shown
at net asset value, as described below). Total returns also assume that
all dividends and capital gains distributions during the period are
reinvested to buy additional shares at net asset value per share, and that
the investment is redeemed at the end of the period. The "average annual
total returns" on an investment in Class A shares of the Fund for the one,
five and ten year periods ended June 30, 1994 were -5.14%, 6.67% and
12.58%, respectively. During a portion of the periods for which total
returns are shown for Class A shares, the Fund's maximum initial sales
charge rate was higher. As a result, performance of an actual investment
during those periods would be less than the results shown. The cumulative
"total return" on Class A shares for the ten year period ended June 30,
1994 was 227.03%. The cumulative total return on Class B shares for the
period from August 17, 1993 (the commencement of the offering of the
shares) through June 30, 1994 was -6.95%.
- Total Returns at Net Asset Value. From time to time the Fund may
also quote an average annual total return at net asset value or a
cumulative total return at net asset value for Class A or Class B shares.
Each is based on the difference in net asset value per share at the
beginning and the end of the period for a hypothetical investment in that
class of shares (without considering front-end or contingent deferred
sales charges) and takes into consideration the reinvestment of dividends
and capital gains distributions. The cumulative total return at net asset
value of the Fund's Class A shares for the ten-year period ended June 30,
1994 was 246.98%. The average annual total returns at net asset value for
the one, five and ten-year periods ended June 30, 1994, for Class A shares
were .65%, 7.94% and 13.25%, respectively. The cumulative total return
at net asset value on the Fund's Class B shares for the fiscal period from
August 17, 1993 through June 30, 1994 was -2.35%.
Other Performance Comparisons. From time to time the Fund may publish the
ranking of its Class A or Class B shares by Lipper Analytical Services,
Inc. ("Lipper"), a widely-recognized independent mutual fund monitoring
service. Lipper monitors the performance of regulated investment
companies, including the Fund, and ranks their performance for various
periods based on categories relating to investment objectives. The
performance of the Fund is ranked against (i) all other funds, (ii) all
other "equity income" funds and (iii) all other "equity income" funds with
assets of more than $1 billion. 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.
From time to time the Fund may publish the ranking of the
performance by Morningstar, Inc., an independent mutual fund monitoring
service that ranks mutual funds, including the Fund, monthly in broad
investment categories (equity, taxable bond, municipal bond and hybrid)
based on risk-adjusted investment return. Investment return measures a
fund's three, five and ten-year average annual total returns (when
available) in excess of 90-day U.S. Treasury bill returns after
considering sales charges and expenses. Risk measures fund performance
below 90-day U.S. Treasury bill monthly returns. Risk and return are
combined to produce star rankings reflecting performance relative to the
average fund in a fund's category. Five stars is the "highest" ranking
(top 10%), four stars is "above average" (next 22.5%), three stars is
"average" (next 35%), two stars is "below average" (next 22.5%) and one
star is "lowest" (bottom 10%). Morningstar ranks the Fund in relation to
other equity funds. Rankings are subject to change.
The total return on an investment in the Fund's Class A or Class
B shares may be compared with performance for the same period of either
the Dow-Jones Industrial Average ("Dow") or the Standard & Poor's 500
Index ("S&P 500"), both of which are widely recognized indices of stock
market performance. Both indices consist of unmanaged groups of common
stocks; the Dow consists of thirty such issues. The performance of both
indices includes a factor for the reinvestment of income dividends.
Neither index reflects reinvestment of capital gains or takes transaction
charges or taxes into consideration as these items are not applicable to
indices.
Investors may also wish to compare the Fund's Class A or Class B
return to the returns on fixed income investments available from banks and
thrift institutions, such as 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 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, and Treasury bills are guaranteed as to principal and interest by
the U.S. government.
From time to time, the Fund's Manager may publish rankings or
ratings of the Manager (or Transfer Agent) or the investor services
provided by them to shareholders of the OppenheimerFunds, other than
performance rankings of the OppenheimerFunds themselves. Those ratings
or rankings of shareholder/investor services by third parties may compare
the OppenheimerFunds' services to those of other mutual fund families
selected by the rating or ranking services and may be based upon the
opinions of the rating or ranking service itself, based on its research
or judgment, or based upon surveys of investors, brokers, shareholders or
others.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A shares and a
Distribution and Service Plan for Class B shares under Rule 12b-1 of the
Investment Company Act pursuant to which the Fund will reimburse the
Distributor quarterly for all or a portion of its costs incurred in
connection with the distribution and/or servicing of the shares of that
class, as described in the Prospectus. Each Plan has been approved by a
vote of (i) the Board of Trustees of the Fund, including a majority of the
Independent Trustees, cast in person at a meeting called for the purpose
of voting on that Plan, and (ii) the holders of a "majority" (as defined
in the Investment Company Act) of the shares of each class. For the
Distribution and Service Plan for Class B shares, that vote was cast by
the Manager as the sole initial holder of Class B shares of the Fund.
In addition, under the Plans the Manager and the Distributor, in
their sole discretion, from time to time may use their own resources
(which, in the case of the Manager, may include profits from the advisory
fee it receives from the Fund) to make payments to brokers, dealers or
other financial institutions (each is referred to as a "Recipient" under
the Plans) for distribution and administrative services they perform. The
Distributor and the Manager may, in their sole discretion, increase or
decrease the amount of payments they make from their own resources to
Recipients.
Unless terminated as described below, each Plan continues in
effect from year to year but only as long as its continuance is
specifically approved at least annually by the Fund's Board of Trustees
and its Independent Trustees by a vote cast in person at a meeting called
for the purpose of voting on such continuance. Either 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. Neither
Plan may be amended to increase materially the amount of payments to be
made unless such amendment is approved by shareholders of the class
affected by the amendment. All material amendments must be approved by
the Independent Trustees.
While the Plans are in effect, the Treasurer of the Fund shall
provide separate written reports to the Fund's Board of Trustees at least
quarterly on the amount of all payments made pursuant to each Plan, the
purpose for which each payment was made and the identity of each Recipient
that received any payment. The report for the Class B Plan shall also
include the distribution costs for that quarter, and such costs for
previous fiscal periods that have been carried forward, as explained in
the Prospectus and below. Those reports, including the allocations on
which they are based, will be subject to the review and approval of the
Independent Trustees in the exercise of their fiduciary duty. Each Plan
further provides that while it is in effect, the selection and nomination
of those Trustees of the Fund who are not "interested persons" of the Fund
is committed to the discretion of the Independent Trustees. This does not
prevent the involvement of others in such selection and nomination if the
final decision on selection or nomination is approved by a majority of the
Independent Trustees.
Under the Plans, no payment will be made to any Recipient in any
quarter if the aggregate net asset value of all Fund shares held by the
Recipient for itself and its customers, did not exceed a minimum amount,
if any, that may be determined from time to time by a majority of the
Fund's Independent Trustees. Initially, the Board of Trustees has set the
fees at the maximum rate (except for assets representing Class A shares
acquired prior to April 1, 1991, for which the rate is 0.15% for the
current fiscal year) and set no requirement for a minimum amount of the
assets.
For the fiscal year ended June 30, 1994, payments under the Class
A Plan totalled $2,986,993, all of which was paid by the Distributor to
Recipients, including $195,662 paid to MML Investor Services, Inc., an
affiliate of the Distributor. Any unreimbursed expenses incurred by the
Distributor with respect to Class A shares for any fiscal year may not be
recovered in subsequent years. Payments received by the Distributor under
the Plan for Class A shares will not be used to pay any interest expense,
carrying charge, or other financial costs, or allocation of overhead by
the Distributor.
The Class B Plan allows the service fee payment to be paid by the
Distributor to Recipients in advance for the first year Class B shares are
outstanding, and thereafter on a quarterly basis, as described in the
Prospectus. Service fee payments by the Distributor to Recipients will
be made (i) in advance for the first year Class B shares are outstanding,
following the purchase of shares, in an amount equal to 0.25% of the net
asset value of the shares purchased by the Recipient or its customers and
(ii) thereafter, on a quarterly basis, computed as of the close of
business each day at an annual rate of .25% of the average daily net asset
value of Class B shares held in accounts of the Recipient or its
customers. An exchange of shares does not entitle the Recipient to an
advance service fee payment. In the event Class B shares are redeemed
during the first year that the shares are outstanding, the Recipient will
be obligated to repay a pro rata portion of the advance payment for those
shares to the Distributor. Payments made under the Class B Plan during the
fiscal year ended June 30, 1994 totalled $411,604, all paid by the
Distributor to Recipients, including $32 paid to a dealer affiliated with
the Distributor.
Although the Class B Plan permits the Distributor to retain both
the asset-based sales charges and the service fee on Class B shares, or
to pay Recipients the service fee on a quarterly basis, without payment
in advance, the Distributor intends to pay the service fee to Recipients
in the manner described above. A minimum holding period may be
established from time to time under the Class B Plan by the Board.
Initially, the Board has set no minimum holding period. All payments
under the Class B Plan are subject to the limitations imposed by the Rules
of Fair Practice of the National Association of Securities Dealers, Inc.
on payments of asset-based sales charges and service fees. The
Distributor anticipates that it will take a number of years for it to
recoup (from the Fund's payments to the Distributor under the Class B Plan
and recoveries of the contingent deferred sales charge) the sales
commissions paid to authorized brokers or dealers.
Asset-based sales charge payments are designed to permit an
investor to purchase shares of the Fund without the assessment of a front-
end sales load and at the same time permit the Distributor to compensate
brokers and dealers in connection with the sale of Class B shares of the
Fund. The Distributor's actual distribution expenses for any given year
may exceed the aggregate of payments received pursuant to the Class B Plan
and from contingent deferred sales charges, and such expenses will be
carried forward and paid in future years. The Fund will be charged only
for interest expenses, carrying charges or other financial costs that are
directly related to the carry-forward of actual distribution expenses.
For example, if the Distributor incurred distribution expenses of $4
million in a given fiscal year, of which $2,000,000 was recovered in the
form of contingent deferred sales charges paid by investors and $1,600,000
was reimbursed in the form of payments made by the Fund to the Distributor
under the Class B Plan, the balance of $400,000 (plus interest) would be
subject to recovery in future fiscal years from such sources.
The Class B Plan allows for the carry-forward of distribution
expenses, to be recovered from asset-based sales charges in subsequent
fiscal periods, as described in the Prospectus. The asset-based sales
charge paid to the Distributor by the Fund under the Class B Plan is
intended to allow the Distributor to recoup the cost of sales commissions
paid to authorized brokers and dealers at the time of sale, plus financing
costs, as described in the Prospectus. Such payments may also be used to
pay for the following expenses in connection with the distribution of
Class B shares: (i) financing the advance of the service fee payment to
Recipients under the Class B Plan, (ii) compensation and expenses of
personnel employed by the Distributor to support distribution of Class B
shares, and (iii) costs of sales literature, advertising and prospectuses
(other than those furnished to current shareholders) and state "blue sky"
registration fees.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A and Class B Shares. The
availability of two classes of shares permits an investor to choose the
method of purchasing shares that is more beneficial to the investor
depending on the amount of the purchase, the length of time the investor
expects to hold shares and other relevant circumstances. Investors should
understand that the purpose and function of the deferred sales charge and
asset-based sales charge with respect to Class B shares are the same as
those of the initial sales charge with respect to Class A shares. Any
salesperson or other person entitled to receive compensation for selling
Fund shares may receive different compensation with respect to one class
of shares than the other. The Distributor will not accept any order for
$1 million or more of Class B shares on behalf of a single investor (not
including dealer "street name" or omnibus accounts) because generally it
will be more advantageous for that investor to purchase Class A shares of
the Fund instead.
The two classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class
B shares and the dividends payable on Class B shares will be reduced by
incremental expenses borne solely by that class, including the asset-based
sales charge to which Class B shares are subject.
The conversion of Class B shares to Class A shares after six years
is subject to the continuing availability of a private letter ruling from
the Internal Revenue Service, or an opinion of counsel or tax adviser, to
the effect that the conversion of B shares does not constitute a taxable
event for the holder under Federal income tax law. If such a revenue
ruling or opinion is no longer available, the automatic conversion feature
may be suspended, in which event no further conversions of Class B shares
would occur while such suspension remained in effect. Although Class B
shares could then be exchanged for Class A shares on the basis of relative
net asset value of the two classes, without the imposition of a sales
charge or fee, such exchange could constitute a taxable event for the
holder, and absent such exchange, Class B shares might continue to be
subject to the asset-based sales charge for longer than six years.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A and Class B shares recognizes two
types of expenses. General expenses that do not pertain specifically to
either class are allocated pro rata to the shares of each class, based on
the percentage of the net assets of such class to the Fund's total assets,
and then equally to each outstanding share within a given class. Such
general expenses include (i) management fees, (ii) legal, bookkeeping and
audit fees, (iii) printing and mailing costs of shareholder reports,
Prospectuses, Statements of Additional Information and other materials for
current shareholders, (iv) fees to Independent Trustees, (v) custodian
expenses, (vi) share issuance costs, (vii) organization and start-up
costs, (viii) interest, taxes and brokerage commissions, and (ix) non-
recurring expenses, such as litigation costs. Other expenses that are
directly attributable to a class are allocated equally to each outstanding
share within that class. Such expenses include (i) Distribution Plan
fees, (ii) incremental transfer and shareholder servicing agent fees and
expenses, (iii) registration fees and (iv) shareholder meeting expenses,
to the extent that such expenses pertain to a specific class rather than
to the Fund as a whole.
Determination of Net Asset Values Per Share. The net asset values per
share of Class A and Class B shares of the Fund are determined each day
The New York Stock Exchange (the "NYSE") is open, as of 4:00 P.M., New
York time, that day, by dividing the value of the Fund's net assets
attributable to that class by the number of shares of that class
outstanding. The NYSE's most recent annual announcement (which is subject
to change) states that it will close on New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. It may also close on other days. The Fund may invest
a substantial portion of its assets in foreign securities primarily listed
on foreign exchanges which may trade on Saturdays or customary U.S.
business holidays on which the NYSE is closed. Because the Fund's net
asset value will not be calculated on those days, the Fund's net asset
values per share may be significantly affected on such days when
shareholders may not purchase or redeem shares.
The Fund's Board of Trustees has established procedures for the
valuation of the Fund's securities, generally as follows: (i) equity
securities traded on a securities exchange or on NASDAQ for which last
sale information is regularly reported are valued at the last reported
sale price on their primary exchange or NASDAQ that day (or, in the
absence of sales that day, at values based on the last sales prices of the
preceding trading day, or closing bid and asked prices); (ii) securities
traded on NASDAQ and other unlisted equity securities for which last sale
prices are not regularly reported but for which over-the-counter market
quotations are readily available are valued at the highest closing bid
price at the time of valuation, or, if no closing bid price is reported,
on the basis of a closing bid price obtained from a dealer who maintains
an active market in that security; (iii) debt securities having a maturity
in excess of 60 days are valued at the mean between the bid and asked
prices determined by a portfolio pricing service approved by the Board or
obtained from active market makers on the basis of reasonable inquiry;
(iv) short-term debt securities having a remaining maturity of 60 days or
less are valued at cost, adjusted for amortization of premiums and
accretion of discounts; (v) securities (including restricted securities)
not having readily-available market quotations are valued at fair value
under the Board's procedures; and (vi) securities traded on foreign
exchanges are valued at the closing or last sales prices reported on a
principal exchange, or, if none, at the mean between closing bid and asked
prices and reflect prevailing rates of exchange taken from the closing
price on the London foreign exchange market that day.
Trading in securities on European and Asian exchanges and over-
the-counter markets is normally completed before the close of the NYSE.
Events affecting the values of foreign securities traded in stock markets
that occur between the time their prices are determined and the close of
the NYSE will not be reflected in the Fund's calculation of net asset
value unless the Board of Trustees or the Manager, under procedures
established by the Board of Trustees, determines that the particular event
would materially affect the Fund's net asset value, in which case an
adjustment would be made. Foreign currency will be valued as close to the
time fixed for the valuation date as is reasonably practicable. The
values of securities denominated in foreign currency will be converted to
U.S. dollars at the prevailing rates of exchange at the time of valuation.
Puts, calls and Futures held by the Fund are valued at the last
sales price on the principal exchange on which they are traded, or on
NASDAQ, as applicable, or, if there are no sales that day, in accordance
with (i), above. Forward currency contracts are valued at the closing
price on the London foreign exchange market. When the Fund writes an
option, an amount equal to the premium received by the Fund is included
in the Fund's Statement of Assets and Liabilities as an asset, and an
equivalent deferred credit is included in the liability section. The
deferred credit is "marked-to-market" to reflect the current market value
of the option. In determining the Fund's gain on investments, if a call
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 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.
AccountLink. When shares are purchased through AccountLink, each
purchase must be at least $25.00. Shares will be purchased on the regular
business day the Distributor is instructed to initiate the Automated
Clearing House transfer to buy the shares. Dividends will begin to accrue
on such shares on the day the Fund receives Federal Funds for such
purchase through the ACH system before 4:00 P.M., which is normally 3 days
after the ACH transfer is initiated. The Distributor and the Fund are not
responsible for any delays. If the Federal Funds are received after 4:00
P.M., dividends will begin to accrue on the next regular business day
after such Federal Funds are received.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales
charge rate may be obtained for Class A shares under Right of Accumulation
and Letters of Intent because of the economies of sales efforts and
reduction in expenses realized by the Distributor, dealers and brokers
making such sales. No sales charge is imposed in certain other
circumstances described in the Prospectus because the Distributor incurs
little or no selling expenses. The term "immediate family" refers to
one's spouse, children, grandchildren, grandparents, parents, parents-in-
law, brothers and sisters, sons- and daughters-in-law, a sibling's spouse
and a spouse's siblings.
- The OppenheimerFunds. The OppenheimerFunds are those mutual
funds for which the Distributor acts as the distributor or the sub-
distributor and include the following:
Oppenheimer Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Bond Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Time Fund
Oppenheimer Target Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Champion High Yield Fund
Oppenheimer Investment Grade Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Environment Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Diversified Income Fund
and the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
There is an initial sales charge on the purchase of Class A shares
of each of the OppenheimerFunds except Money Market Funds (under certain
circumstances described herein, redemption proceeds of Money Market Fund
shares may be subject to a contingent deferred sales charge).
- Letters of Intent. A Letter of Intent ("Letter") is the
investor's statement of intention to purchase Class A shares of the Fund
(and other eligible OppenheimerFunds) sold with a front-end sales charge
during the 13-month period from the investor's first purchase pursuant to
the Letter (the "Letter of Intent period"), which may, at the investor's
request, include purchases made up to 90 days prior to the date of the
Letter. The Letter states the investor's intention to make the aggregate
amount of purchases (excluding any purchases made by reinvestments of
dividends or distributions or purchases made at net asset value without
sales charge), which together with the investor's holdings of such funds
(calculated at their respective public offering prices calculated on the
date of the Letter) will equal or exceed the amount specified in the
Letter. This enables the investor to obtain the reduced sales charge rate
(as set forth in the Prospectus) applicable to purchases of shares in that
amount (the "intended purchase amount"). Each purchase under the Letter
will be made at the public offering price applicable to a single lump-sum
purchase of shares in the intended purchase amount, as described in the
Prospectus.
In submitting a Letter, the investor makes no commitment to
purchase shares, but if the investor's purchases of shares within the
Letter of Intent period, when added to the value (at offering price) of
the investor's holdings of shares on the last day of that period, do not
equal or exceed the intended purchase amount, the investor agrees to pay
the additional amount of sales charge applicable to such purchases, as set
forth in "Terms of Escrow," below (as those terms may be amended from time
to time). The investor agrees that shares equal in value to 5% of the
intended purchase amount will be held in escrow by the Transfer Agent
subject to the Terms of Escrow. Also, the investor agrees to be bound by
the terms of the Prospectus, this Statement of Additional Information and
the Application used for such Letter of Intent, and if such terms are
amended, as they may be from time to time by the Fund, that those
amendments will apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent
period do not equal or exceed the intended purchase amount, the
commissions previously paid to the dealer of record for the account and
the amount of sales charge retained by the Distributor will be adjusted
to the rates applicable to actual purchases. If total eligible purchases
during the Letter of Intent period exceed the intended purchase amount and
exceed the amount needed to qualify for the next sales charge rate
reduction set forth in the applicable prospectus, the sales charges paid
will be adjusted to the lower rate, but only if and when the dealer
returns to the Distributor the excess of the amount of commissions allowed
or paid to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the
Distributor will be used to purchase additional shares for the investor's
account at the net asset value per share in effect on the date of such
purchase, promptly after the Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of
Intent period will be deducted. It is the responsibility of the dealer
of record and/or the investor to advise the Distributor about the Letter
in placing any purchase orders for the investor during the Letter of
Intent period. All of such purchases must be made through the
Distributor.
- Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in value
to 5% of the intended purchase amount specified in the Letter shall be
held in escrow by the Transfer Agent. For example, if the intended
purchase amount is $50,000, the escrow shall be shares valued in the
amount of $2,500 (computed at the public offering price adjusted for a
$50,000 purchase). Any dividends and capital gains distributions on the
escrowed shares will be credited to the investor's account.
2. If the intended purchase amount specified under the Letter
is completed within the thirteen-month Letter of Intent period, the
escrowed shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent
period the total purchases pursuant to the Letter are less than the
intended purchase amount specified in the Letter, the investor must remit
to the Distributor an amount equal to the difference between the dollar
amount of sales charges actually paid and the amount of sales charges
which would have been paid if the total amount purchased had been made at
a single time. Such sales charge adjustment will apply to any shares
redeemed prior to the completion of the Letter. If such difference in
sales charges is not paid within twenty days after a request from the
Distributor or the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed shares necessary
to realize such difference in sales charges. Full and fractional shares
remaining after such redemption will be released from escrow. If a
request is received to redeem escrowed shares prior to the payment of such
additional sales charge, the sales charge will be withheld from the
redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes
and appoints the Transfer Agent as attorney-in-fact to surrender for
redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the
holding of which may be counted toward completion of the Letter) do not
include any shares sold without a front-end sales charge or without being
subject to a Class A contingent deferred sales charge unless (for the
purpose of determining completion of the obligation to purchase shares
under the Letter) the shares were acquired in exchange for shares of one
of the OppenheimerFunds whose shares were acquired by payment of a sales
charge.
6. Shares held in escrow hereunder will automatically be
exchanged for shares of another fund to which an exchange is requested,
as described in the section of the Prospectus entitled "Exchange
Privilege," and the escrow will be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank
account, a check (minimum $25) for the initial purchase must accompany the
application. Shares purchased by Asset Builder Plan payments from bank
accounts are subject to the redemption restrictions for recent purchases
described in "How To Sell Shares," in the Prospectus. Asset Builder Plans
also enable shareholders of Oppenheimer Cash Reserves to use those
accounts for monthly automatic purchases of shares of up to four other
OppenheimerFunds.
There is a front-end sales charge on the purchase of certain
OppenheimerFunds, or a contingent deferred sales charge may apply to
shares purchased by Asset Builder payments. An application should be
obtained from the Distributor, completed and returned, and a prospectus
of the selected fund(s) should be obtained from the Distributor or your
financial advisor before initiating Asset Builder payments. The amount
of the Asset Builder investment may be changed or the automatic
investments may be terminated at any time by writing to the Transfer
Agent. A reasonable period (approximately 15 days) is required after the
Transfer Agent's receipt of such instructions to implement them. The Fund
reserves the right to amend, suspend, or discontinue offering such plans
at any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for the
Fund's shares (for example, when a purchase check is returned to the Fund
unpaid) causes a loss to be incurred when the net asset value of the
Fund's shares on the cancellation date is less than on the purchase date.
That loss is equal to the amount of the decline in the net asset value per
share multiplied by the number of shares in the purchase order. The
investor is responsible for that loss. If the investor fails to
compensate the Fund for the loss, the Distributor will do so. The Fund
may reimburse the Distributor for that amount by redeeming shares from any
account registered in that investor's name, or the Fund or the Distributor
may seek other redress.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and conditions for
redemptions set forth in the Prospectus.
- Involuntary Redemptions. The Fund's Board of Trustees has the
right to cause the involuntary redemption of the shares held in any
account if the aggregate net asset value of those shares is less than $200
or such lesser amount as the Board may fix. The Board of Trustees will
not cause the involuntary redemption of shares in an account if the
aggregate net asset value of the shares has fallen below the stated
minimum solely as a result of market fluctuations. Should the Board elect
to exercise this right, it may also fix, in accordance with the Investment
Company Act, the requirements for any notice to be given to the
shareholders in question (not less than 30 days), or the Board may set
requirements for granting permission to the Shareholder to increase the
investment, and set other terms and conditions so that the shares would
not be involuntarily redeemed.
- Payments "In Kind". The Prospectus states that payment for
shares tendered for redemption is ordinarily made in cash. However, the
Board of Trustees of the Fund may determine that it would be detrimental
to the best interests of the remaining shareholders of the Fund to make
payment of a redemption order wholly or partly in cash. In that case the
Fund may pay the redemption proceeds in whole or in part by a distribution
"in kind" of securities from the portfolio of the Fund, in lieu of cash,
in conformity with applicable rules of the Securities and Exchange
Commission. The Fund has elected to be governed by Rule 18f-1 under the
Investment Company Act, pursuant to which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net assets
of the Fund during any 90-day period for any one shareholder. If shares
are redeemed in kind, the redeeming shareholder might incur brokerage or
other costs in selling the securities for cash. The method of valuing
securities used to make redemptions in kind will be the same as the method
the Fund uses to value its portfolio securities described above under the
"Determination of Net Asset Values Per Share" and that valuation will be
made as of the time the redemption price is determined.
Reinvestment Privilege. Within six months of a redemption, a
shareholder may reinvest all or part of the redemption proceeds of (i)
Class A shares, or (ii) Class B shares that were subject to the Class B
contingent deferred sales charge when redeemed. The reinvestment may be
made without sales charge only in Class A shares of the Fund or any of the
other OppenheimerFunds into which shares of the Fund are exchangeable as
described below, at the net asset value next computed after the Transfer
Agent receives the reinvestment order. The shareholder must ask the
Distributor for that privilege at the time of reinvestment. Any capital
gain that was realized when the shares were redeemed is taxable, and
reinvestment will not alter any capital gains tax payable on that gain.
If there has been a capital loss on the redemption, some or all of the
loss may not be tax deductible, depending on the timing and amount of the
reinvestment. Under the Internal Revenue Code, if the redemption proceeds
of Fund shares on which a sales charge was paid are reinvested in shares
of the Fund or another of the OppenheimerFunds within 90 days of payment
of the sales charge, the shareholder's basis in the shares of the Fund
that were redeemed may not include the amount of the sales charge paid.
That would reduce the loss or increase the gain recognized from the
redemption. However, in that case the sales charge would be added to the
basis of the shares acquired by the reinvestment of the redemption
proceeds. The Fund may amend, suspend or cease offering this reinvestment
privilege at any time as to shares redeemed after the date of such
amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a
contingent deferred sales charge of either class at the time of transfer
to the name of another person or entity (whether the transfer occurs by
absolute assignment, gift or bequest, not involving, directly or
indirectly, a public sale). The transferred shares will remain subject
to the contingent deferred sales charge, calculated as if the transferee
shareholder had acquired the transferred shares in the same manner and at
the same time as the transferring shareholder. If less than all shares
held in an account are transferred, and some but not all shares in the
account would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, the priorities described in the Prospectus under
"How to Buy Shares" for the imposition of the Class B contingent deferred
sales charge will be followed in determining the order in which shares are
transferred.
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans, or pension or
profit-sharing plans should be addressed to "Trustee, OppenheimerFunds
Retirement Plans," c/o the Transfer Agent at its address listed in "How
To Sell Shares" in the Prospectus or on the back cover of this Statement
of Additional Information. The request must: (i) state the reason for the
distribution; (ii) state the owner's awareness of tax penalties if the
distribution is premature; and (iii) conform to the requirements of the
plan and the Fund's other redemption requirements. Participants (other
than self-employed persons) in OppenheimerFunds-sponsored pension or
profit-sharing plans may not directly request redemption of their
accounts. The employer or plan administrator must sign the request.
Distributions from pension and profit sharing plans are subject to special
requirements under the Internal Revenue Code and certain documents
(available from the Transfer Agent) must be completed before the
distribution may be made. Distributions from retirement plans are subject
to withholding requirements under the Internal Revenue Code, and IRS Form
W-4P (available from the Transfer Agent) must be submitted to the Transfer
Agent with the distribution request, or the distribution may be delayed.
Unless the shareholder has provided the Transfer Agent with a certified
tax identification number, the Internal Revenue Code requires that tax be
withheld from any distribution even if the shareholder elects not to have
tax withheld. The Fund, the Manager, the Distributor, the Trustee and the
Transfer Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws and will not
be responsible for any tax penalties assessed in connection with a
distribution.
Special Arrangements for Repurchase of Shares from Dealers and Brokers.
The Distributor is the Fund's agent to repurchase its shares from
authorized dealers or brokers. The repurchase price will be the net asset
value next computed after the receipt of an order placed by such dealer
or broker, except that orders received from dealers or brokers after 4:00
P.M. on a regular business day will be processed at that day's net asset
value if such orders were received by the dealer or broker from its
customers prior to 4:00 P.M., and were transmitted to and received by the
Distributor prior to its close of business that day (normally 5:00 P.M.).
Payment ordinarily will be made within seven days after the Distributor's
receipt of the required redemption documents, with signature(s) guaranteed
as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of
the Fund valued at $5,000 or more can authorize the Transfer Agent to
redeem shares (minimum $50) automatically on a monthly, quarterly, semi-
annual or annual basis under an Automatic Withdrawal Plan. Shares will
be redeemed three business days prior to the date requested by the
shareholder for receipt of the payment. Automatic withdrawals of up to
$1,500 per month may be requested by telephone if payments are to be made
by check payable to all shareholders of record and sent to the address of
record for the account (and if the address has not been changed within the
prior 30 days). Required minimum distributions from OppenheimerFunds-
sponsored retirement plans may not be arranged on this basis. Payments
are normally made by check, but shareholders having AccountLink privileges
(see "How To Buy Shares") may arrange to have Automatic Withdrawal Plan
payments transferred to the bank account designated on the
OppenheimerFunds New Account Application or signature-guaranteed
instructions. The Fund cannot guarantee receipt of a payment on the date
requested and reserves the right to amend, suspend or discontinue offering
such plans at any time without prior notice. Because of the sales charge
assessed on Class A share purchases, shareholders should not make regular
additional Class A share purchases while participating in an Automatic
Withdrawal Plan. Class B shareholders should not establish withdrawal
plans that would require the redemption of shares purchased subject to a
contingent deferred sales charge and held less than 6 years, because of
the imposition of the Class B contingent deferred sales charge on such
withdrawals (except where the Class B contingent deferred sales charge is
waived as described in the Prospectus under "Class B Contingent Deferred
Sales Charge").
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such plans,
as stated below and in the provisions of the OppenheimerFunds Application
relating to such Plans, as well as the Prospectus. These provisions may
be amended from time to time by the Fund and/or the Distributor. When
adopted, such amendments will automatically apply to existing Plans.
- Automatic Exchange Plans. Shareholders can authorize the
Transfer Agent (on the OppenheimerFunds Application or signature-
guaranteed instructions) to exchange a pre-determined amount of shares of
the Fund for shares (of the same class) of other OppenheimerFunds
automatically on a monthly, quarterly, semi-annual or annual basis under
an Automatic Exchange Plan. The minimum amount that may be exchanged to
each other fund account is $25. Exchanges made under these plans are
subject to the restrictions that apply to exchanges as set forth in "How
to Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
- Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a sales
charge will be redeemed first and shares acquired with reinvested
dividends and capital gains distributions will be redeemed next, followed
by shares acquired with a sales charge, to the extent necessary to make
withdrawal payments. Depending upon the amount withdrawn, the investor's
principal may be depleted. Payments made under withdrawal plans should
not be considered as a yield or income on your investment.
The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the "Planholder")
who executed the Plan authorization and application submitted to the
Transfer Agent. The Transfer Agent shall incur no liability to the
Planholder for any action taken or omitted by the Transfer Agent in good
faith to administer the Plan. Certificates will not be issued for shares
of the Fund purchased for and held under the Plan, but the Transfer Agent
will credit all such shares to the account of the Planholder on the
records of the Fund. Any share certificates held by a Planholder may be
surrendered unendorsed to the Transfer Agent with the Plan application so
that the shares represented by the certificate may be held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions
of capital gains must be reinvested in shares of the Fund, which will be
done at net asset value without a sales charge. Dividends on shares held
in the account may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be
made at the net asset value per share determined on the redemption date.
Checks or AccountLink payments of the proceeds of Plan withdrawals will
normally be transmitted three business days prior to the date selected for
receipt of the payment (receipt of payment on the date selected cannot be
guaranteed), according to the choice specified in writing by the
Planholder.
The amount and the interval of disbursement payments and the
address to which checks are to be mailed or AccountLink payments are to
be sent may be changed at any time by the Planholder by writing to the
Transfer Agent. The Planholder should allow at least two weeks' time in
mailing such notification for the requested change to be put in effect.
The Planholder may, at any time, instruct the Transfer Agent by written
notice (in proper form in accordance with the requirements of the then-
current Prospectus of the Fund) to redeem all, or any part of, the shares
held under the Plan. In that case, the Transfer Agent will redeem the
number of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by
writing to the Transfer Agent. A Plan may also be terminated at any time
by the Transfer Agent upon receiving directions to that effect from the
Fund. The Transfer Agent will also terminate a Plan upon receipt of
evidence satisfactory to it of the death or legal incapacity of the
Planholder. Upon termination of a Plan by the Transfer Agent or the Fund,
shares that have not been redeemed from the account will be held in
uncertificated form in the name of the Planholder, and the account will
continue as a dividend-reinvestment, uncertificated account unless and
until proper instructions are received from the Planholder or his or her
executor or guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated
form. Upon written request from the Planholder, the Transfer Agent will
determine the number of shares for which a certificate may be issued
without causing the withdrawal checks to stop because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the
Fund, the Planholder will be deemed to have appointed any successor
transfer agent to act as agent in administering the Plan.
How To Exchange Shares
As stated in the Prospectus, shares of a particular class of
OppenheimerFunds having more than one class of shares may be exchanged
only for shares of the same class of other OppenheimerFunds. Shares of
the OppenheimerFunds that have a single class without a class designation
are deemed "Class A" shares for this purpose. All OppenheimerFunds offer
Class A shares (except for Oppenheimer Strategic Diversified Income Fund),
but only the following other OppenheimerFunds currently offer Class B
shares:
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Investment Grade Bond Fund
Oppenheimer Value Stock Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer High Yield Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Cash Reserves (Class B shares are only
available by exchange)
Oppenheimer Growth Fund
Oppenheimer Global Fund
Oppenheimer Discovery Fund
Class A shares of OppenheimerFunds may be exchanged at net asset
value for shares of any Money Market Fund. Shares of any Money Market
Fund purchased without a sales charge may be exchanged for shares of
OppenheimerFunds offered with a sales charge upon payment of the sales
charge (or, if applicable, may be used to purchase shares of
OppenheimerFunds subject to a contingent deferred sales charge). Shares
of this Fund acquired by reinvestment of dividends or distributions from
any other of the OppenheimerFunds 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 OppenheimerFunds.
No contingent deferred sales charge is imposed on exchanges of shares of
either class purchased subject to a contingent deferred sales charge.
However, when Class A shares acquired by exchange of Class A shares of
other OppenheimerFunds purchased subject to a Class A contingent deferred
sales charge are redeemed within 18 months of the end of the calendar
month of the initial purchase of the exchanged Class A shares, the Class
A contingent deferred sales charge is imposed on the redeemed shares (see
"Class A Contingent Deferred Sales Charge" in the Prospectus). The Class
B contingent deferred sales charge is imposed on Class B shares acquired
by exchange if they are redeemed within 6 years of the initial purchase
of the exchanged Class B shares.
When Class B 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 contingent deferred sales charge will be
followed in determining the order in which the shares are exchanged.
Shareholders should take into account the effect of any exchange on the
applicability and rate of any contingent deferred sales charge that might
be imposed in the subsequent redemption of remaining shares. Shareholders
owning shares of both classes must specify whether they intend to exchange
Class A or Class B shares.
The Fund reserves the right to reject telephone or written
exchange requests submitted in bulk by anyone on behalf of 10 or more
accounts. The Fund may accept requests for exchanges of up to 50 accounts
per day from representatives of authorized dealers that qualify for this
privilege. In connection with any exchange request, the number of shares
exchanged may be less than the number requested if the exchange or the
number requested would include shares subject to a restriction cited in
the Prospectus or this Statement of Additional Information or would
include shares covered by a share certificate that is not tendered with
the request. In those cases, only the shares available for exchange
without restriction will be exchanged.
When exchanging shares by telephone, a shareholder must either
have an existing account in, or obtain and acknowledge receipt of a
prospectus of, the fund to which the exchange is to be made. For full or
partial exchanges of an account made by telephone, any special account
features such as Asset Builder Plans, Automatic Withdrawal Plans and
retirement plan contributions will be switched to the new account unless
the Transfer Agent is instructed otherwise. If all telephone lines are
busy (which might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by
telephone and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day
the Transfer Agent receives an exchange request in proper form (the
"Redemption Date"). Normally, shares of the fund to be acquired are
purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The
Fund reserves the right, in its discretion, to refuse any exchange request
that may disadvantage it (for example, if the receipt of multiple exchange
requests from a dealer might require the disposition of portfolio
securities at a time or at a price that might be disadvantageous to the
Fund).
The different OppenheimerFunds available for exchange have
different investment objectives, policies and risks, and a shareholder
should assure that the Fund selected is appropriate for his or her
investment and should be aware of the tax consequences of an exchange.
For federal income tax purposes, an exchange transaction is treated as a
redemption of shares of one fund and a purchase of shares of another.
"Reinvestment Privilege," above, discusses some of the tax consequences
of reinvestment of redemption proceeds in such cases. The Fund, the
Distributor, and the Transfer Agent are unable to provide investment, tax
or legal advice to a shareholder in connection with an exchange request
or any other investment transaction.
Dividends, Capital Gains and Taxes
Tax Status of the Fund's Dividends and Distributions. The Federal tax
treatment of the Fund's dividends and capital gains distributions is
explained in the Prospectus under the caption "Dividends, Capital Gains
and Taxes." Special provisions of the Internal Revenue Code govern the
eligibility of the Fund's dividends for the dividends-received deduction
for corporate shareholders. Long-term capital gains distributions are not
eligible for the deduction. In addition, the amount of dividends paid by
the Fund which may qualify for the deduction is limited to the aggregate
amount of qualifying dividends that the Fund derives from its portfolio
investments that the Fund has held for a minimum period, usually 46 days.
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.
Under the Internal Revenue Code, by December 31 each year, the
Fund must distribute 98% of its taxable investment income earned from
January 1 through December 31 of that year and 98% of its capital gains
realized in the period from November 1 of the prior year through October
31 of the current year, or else the Fund must pay an excise tax on the
amounts not distributed. While it is presently anticipated that the Fund
will meet those requirements, the Fund's Board of Trustees and the Manager
might determine in a particular year that it would be in the best interest
of shareholders for the Fund not to make such distributions at the
required levels and to pay the excise tax on the undistributed amounts.
That would reduce the amount of income or capital gains available for
distribution to shareholders.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may
elect to reinvest all dividends and/or capital gains distributions in
shares of the same class of any of the other OppenheimerFunds listed in
"Reduced Sales Charges," above, at net asset value without sales charge.
Class B shareholders should be aware that as of the date of this Statement
of Additional Information, not all of the OppenheimerFunds offer Class B
shares. To elect this option, a shareholder must notify the Transfer
Agent in writing and either have an existing account in the fund selected
for reinvestment or must obtain a prospectus for that fund and an
application from the Distributor to establish an account. The investment
will be made at the net asset value per share in effect at the close of
business on the payable date of the dividend or distribution. Dividends
and/or distributions from shares of other OppenheimerFunds may be invested
in shares of this Fund on the same basis.
Additional Information About the Fund
The Custodian. The Bank of New York is the Custodian of the Fund's
assets. The Custodian's responsibilities include safeguarding and
controlling the Fund's portfolio securities, collecting income on the
portfolio securities and handling the delivery of such securities to and
from the Fund. The Manager has represented to the Fund that the banking
relationships between the Manager and the Custodian have been and will
continue to be unrelated to and unaffected by the relationship between the
Fund and the Custodian. It will be the practice of the Fund to deal with
the Custodian in a manner uninfluenced by any banking relationship the
Custodian may have with the Manager and its affiliates.
Independent 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 and certain other funds advised
by the Manager and its affiliates.
<PAGE>
Independent Auditors' Report
The Board of Trustees and Shareholders of Oppenheimer Equity Income Fund:
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Oppenheimer Equity Income Fund
as of June 30, 1994, the related statement of operations for the year then
ended, the statements of changes in net assets for the years ended June
30, 1994 and 1993, and the financial highlights for the period July 1,
1984 to June 30, 1994. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits 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 statements and
financial highlights are free of material misstatement. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned at June 30, 1994 by correspondence with
the custodian and brokers; where replies were not received from brokers,
we performed other auditing procedures. 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 audits provide a reasonable basis for
our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Oppenheimer Equity Income Fund at June 30, 1994, the results of its
operations, the changes in its net assets, and the financial highlights
for the respective stated periods, in conformity with generally accepted
accounting principles.
/s/ Deloitte & Touche
- ---------------------
DELOITTE & TOUCHE
Denver, Colorado
July 22, 1994
<PAGE>
Statement of Operations For the Year Ended June 30, 1994
- ------
Investment Income Interest $54,718,271
- ------
Dividends (net of withholding taxes of $315,970) 50,544,683
- ------
Total income 105,262,954
- ------
Expenses Management fees--Note 4 10,114,770
- ------
Distribution and service plan fees:
Class A--Note 4 2,986,993
Class B--Note 4 411,604
- ------
Transfer and shareholder servicing agent fees--Note 4 2,451,831
- ------
Shareholder reports 527,489
- ------
Custodian fees and expenses 231,210
- ------
Registration and filing fees:
Class A 93,411
Class B 37,554
- ------
Trustees' fees and expenses 71,550
- ------
Legal and auditing fees 68,743
- ------
Other 218,820
- ------
Total expenses 17,213,975
- ------
Net Investment Income 88,048,979
- ------
Realized and Unrealized
Gain (Loss) on Investments
And Foreign Currency
Transactions
Net realized gain (loss) from:
Investments 24,812,847
Foreign currency transactions (1,727,524)
- ------
Net change in unrealized appreciation or depreciation on:
Investments (93,532,224)
Translation of assets and liabilities denominated in foreign currencies
(8,069,199)
- ------
Net realized and unrealized loss on investments and foreign currency
transactions (78,516,100)
- ------
Net Increase in Net Assets Resulting From Operations $9,532,879
- ------
- ------
See accompanying Notes to Financial Statements.
10 Oppenheimer Equity Income Fund
<PAGE>
- ------
Statements of Changes in Net Assets
Year Ended June 30,
1994 1993
- ------
Operations Net investment income $88,048,979 $84,853,288
- ------
Net realized gain on investments and foreign currency transactions
23,085,323 52,518,543
- ------
Net change in unrealized appreciation or depreciation on investments
and translation of assets and liabilities denominated in foreign currencies
(101,601,423) 122,260,203
- ------ ------
Net increase in net assets resulting from operations 9,532,879 259,632,034
- ------
Equalization Net change 546,821 2,468,327
- ------
Dividends and
Distributions to
Shareholders
Dividends from net investment income:
Class A
($.47 per share and $.48 per share, respectively) (85,741,017) (83,156,753)
Class B
($.416 per share) (2,115,733) --
- ------
Dividends in excess of net investment income:
Class A ($.01 per share) (1,829,618) --
Class B ($.01 per share) (45,147) --
- ------
Distributions from net realized gain on investments and foreign
currency transactions:
Class A ($.1221 and $.145 per share, respectively) (22,569,711) (24,974,899)
Class B ($.1221 per share) (515,610) --
- ------
Distributions in excess of capital gains:
Class A ($.05 per share) (8,593,810) --
Class B ($.05 per share) (196,327) --
- ------
Beneficial Interest
Transactions
Net increase in net assets resulting from Class A beneficial interest
transactions--Note 2 88,576,248 80,452,974
- ------
Net increase in net assets resulting from Class B beneficial interest
transactions--Note 2 93,399,883 --
- ------
Net Assets Total increase 70,448,858 234,421,683
- ------
Beginning of year 1,790,345,792 1,555,924,109
- ------ ------
End of year [including undistributed (overdistributed) net investment income of
$(3,381,130) and $29,426,684, respectively] $1,860,794,650 $1,790,345,792
- ------ ------
- ------ ------
See accompanying Notes to Financial Statements.
11 Oppenheimer Equity Income Fund
<PAGE>
- ------
Financial Highlights
Class A Class B
- ------ ------
Period
Ended
Year Ended June 30, June 30,
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1994(1)
- ------
Per Share Operating Data:
Net asset value, beginning of period
$10.01 $9.15 $8.86 $9.18 $9.11 $8.51 $9.85 $9.26 $7.78 $6.83 $10.22
- ------
Income from investment operations:
Net investment income
.47 .50 .50 .48 .48 .52 .48 .46 .50 .47 .36
Net realized and unrealized gain
(loss) on investments, options
written and foreign currency transactions
(.39) .99 .39 (.17) .33 .58 (.35) 1.22 1.59 1.48 (.58)
- ------ ------ ------ ------ ------ ------ ------
- ------ ------ ------ ------
Total income from investment operations
.08 1.49 .89 .31 .81 1.10 .13 1.68 2.09 1.95 (.22)
- ------
Dividends and distributions
to shareholders:
Dividends from net investment income
(.47) (.48) (.48) (.48) (.50) (.48) (.60) (.48) (.46) (.45) (.42)
Dividends in excess of net investment income
(.01) -- -- -- -- -- -- -- -- -- (.01)
Distributions from net realized gain on investments, options written and foreign
currency transactions
(.12) (.15) (.12) (.15) (.24) (.02) (.87) (.61) (.15) (.55) (.12)
Distributions in excess of capital gains
(.05) -- -- -- -- -- -- -- -- -- (.05)
- ------ ------ ------ ------ ------ ------ ------
- ------ ------ ------ ------
Total dividends and distributions to shareholders
(.65) (.63) (.60) (.63) (.74) (.50) (1.47) (1.09) (.61) (1.00) (.60)
- ------
Net asset value, end of period
$9.44 $10.01 $9.15 $8.86 $9.18 $9.11 $8.51 $9.85 $9.26 $7.78 $9.40
- ------ ------ ------ ------ ------ ------ ------
- ------ ------ ------ ------
- ------ ------ ------ ------ ------ ------ ------
- ------ ------ ------ ------
- ------
<TABLE>
<S> <C>
Total Return, at Net Asset Value(2)
.65% 16.76% 10.26% 3.68% 9.07% 13.30% 2.04% 20.45% 28.42% 32.40%
(2.35)%
- ------
Ratios/Supplemental Data:
Net assets, end of period (in thousands)
$1,772,944 $1,790,346 $1,555,924 $1,393,303 $1,329,830 $1,017,074
$806,892 $730,655 $381,122 $134,828 $87,850
- ------
Average net assets (in thousands)
$1,831,606 $1,657,692 $1,525,599 $1,323,858 $1,179,704 $885,179
$743,232 $526,897 $228,642 $98,324 $47,414
- ------
Number of shares outstanding at end of period (in thousands)
187,841 178,819 170,117 157,239 144,921 111,613 94,824
74,169 41,166 17,321 9,341
- ------
Ratios to average net assets:
Net investment income 4.72% 5.12% 5.33% 5.31% 5.10%
5.89% 5.48% 5.08% 6.00% 7.01% 3.99%(3)
Expenses .90% .79% .82% .79% .79% .85% .83%
.91% 1.03% 1.11% 1.82%(3)
- ------
Portfolio turnover rate(4) 30.4% 59.0% 37.0% 64.0% 122.0%
91.4% 124.1% 94.7% 105.3% 122.5% 30.4%
</TABLE>
1. For the period from August 17, 1993 (inception of offering) to June 30, 1994.
2. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions reinvested
in additional shares on the reinvestment date, and redemption at the net asset
value calculated on the last business day of the fiscal period. Sales charges
are not reflected in the total returns.
3. Annualized.
4. The lesser of purchases or sales of portfolio securities for a year, divided
by the monthly average of the market value of portfolio securities owned during
the year. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the year
ended June 30, 1994 were $543,750,868 and $575,903,141, respectively.
See accompanying Notes to Financial Statements.
12 Oppenheimer Equity Income Fund
<PAGE>
- ------
Notes to Financial Statements
- ------
1. Significant
Accounting Policies
Oppenheimer Equity Income Fund (the Fund) is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The Fund's investment advisor is Oppenheimer Management
Corporation (the Manager). The Fund offers both Class A and Class B shares.
Class A shares are sold with a front-end sales charge. Class B shares may be
subject to a contingent deferred sales charge. Both classes of shares have
identical rights to earnings, assets and voting privileges, except that each
class has its own distribution and/or service plan, expenses directly
attributable to a particular class and exclusive voting rights with respect to
matters affecting a single class. Class B shares will automatically convert to
Class A shares six years after the date of purchase. The following is a summary
of significant accounting policies consistently followed by the Fund.
- ------
Investment Valuation. Portfolio securities are valued at 4:00 p.m. (New York
time) on each trading day. Listed and unlisted securities for which such
information is regularly reported are valued at the last sale price of the day
or, in the absence of sales, at values based on the closing bid or asked price
or the last sale price on the prior trading day. Long-term debt securities are
valued by a portfolio pricing service approved by the Board of Trustees.
Long-term debt securities which cannot be valued by the approved portfolio
pricing service are valued by averaging the mean between the bid and asked
prices obtained from two active market makers in such securities. Short-term
debt securities having a remaining maturity of 60 days or less are valued at
cost (or last determined market value) adjusted for amortization to maturity of
any premium or discount. Securities for which market quotes are not readily
available are valued under procedures established by the Board of Trustees to
determine fair value in good faith.
- ------
Foreign Currency Translation. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of securities and investment income are translated at
the rates of exchange prevailing on the respective dates of such transactions.
The Fund generally enters into forward currency exchange contracts as a
hedge, upon the purchase or sale of a security denominated in a foreign
currency. In addition, the Fund may enter into such contracts as a hedge against
changes in foreign currency exchange rates on portfolio positions. A forward
exchange is a commitment to purchase or sell a foreign currency at a future
date, at a negotiated rate. Risks may arise from the potential inability of the
counterparty to meet the terms of the contract and from unanticipated movements
in the value of a foreign currency relative to the U.S. dollar.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's results of operations.
- ------
Repurchase Agreements. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. If the seller of the agreement defaults and the value of
the collateral declines, or if the seller enters an insolvency proceeding,
realization of the value of the collateral by the Fund may be delayed or
limited.
- ------
Allocation of Income, Expenses and Gains and Losses. Income, expenses (other
than those attributable to a specific class) and gains and losses are allocated
daily to each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
13 Oppenheimer Equity Income Fund
<PAGE>
- ------
Notes to Financial Statements (Continued)
- ------
1. Significant
Accounting Policies
(continued)
Federal Income Taxes. The Fund intends to continue to comply with provisions of
the Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income tax provision is required.
- ------
Equalization. Prior to September 24, 1993, the Fund followed the accounting
practice of equalization, by which a portion of the proceeds from sales and
costs of redemptions of Fund shares equivalent on a per share basis to the
amount of undistributed net investment income were credited or charged to
undistributed income. The cumulative effect of the change in accounting practice
resulted in a reclassification of $32,950,419 from undistributed net investment
income to paid-in capital.
- ------
Distributions to Shareholders. Dividends and distributions to shareholders are
recorded on the ex-dividend date.
- ------
Change in Accounting for Distributions to Shareholders. Effective July 1, 1993,
the Fund adopted Statement of Position 93-2: Determination, Disclosure, and
Financial Statement Presentation of Income, Capital Gain, and Return of Capital
Distributions by Investment Companies. As a result, the Fund changed the
classification of distributions to shareholders to better disclose the
differences between financial statement amounts and distributions determined in
accordance with income tax regulations. Accordingly, subsequent to June 30,
1993, amounts have been reclassified to reflect a decrease in paid-in capital of
$7,105,629, an increase in undistributed net investment income of $3,005,844,
and an increase in undistributed capital gain on investments of $4,099,785.
During the year ended June 30, 1994, in accordance with Statement of Position
93-2, undistributed income was decreased by $1,727,524 and undistributed capital
gain on investments was increased by $1,727,524.
- ------
Other. Investment transactions are accounted for on the date the investments are
purchased or sold (trade date) and dividend income is recorded on the
ex-dividend date. Discount on securities purchased is amortized over the life of
the respective securities, in accordance with federal income tax requirements.
Realized gains and losses on investments and unrealized appreciation and
depreciation are determined on an identified cost basis, which is the same basis
used for federal income tax purposes. Interest on payment-in-kind debt
instruments is accrued as income at the coupon rate and a market adjustment is
made on the ex-date.
- ------
2. Shares of
Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of beneficial
interest of each class. Transactions in shares of beneficial interest were as
follows:
Year Ended June 30, 1994(1) Year Ended June 30, 1993
- ------ ------
Shares Amount Shares Amount
- ------
Class A:
Sold 26,551,307 $264,515,469 29,572,911 $276,573,097
Dividends and distributions reinvested
11,168,493 110,189,163 10,613,035 97,981,463
Redeemed (28,698,217) (286,128,384) (31,483,466) (294,101,586)
- ------ ------ ------ ------
Net increase 9,021,583 $88,576,248 8,702,480 $80,452,974
- ------ ------ ------ ------
- ------ ------ ------ ------
- ------
Class B:
Sold 9,581,829 $95,687,102 -- $--
Dividends and distributions reinvested 266,194 2,603,845 -- --
Redeemed (507,125) (4,891,064) -- --
- ------ ------ ------ ------
Net increase 9,340,898 $93,399,883 -- $--
- ------ ------ ------ ------
- ------ ------ ------ ------
1. For the year ended June 30, 1994 for Class A shares and for the period from
August 17, 1993 (inception of offering) to June 30, 1994 for Class B shares.
14 Oppenheimer Equity Income Fund
<PAGE>
- ------
- ------
3. Unrealized Gains and
Losses on Investments
At June 30, 1994, net unrealized appreciation on investments of $108,218,836 was
composed of gross appreciation of $187,771,512, and gross depreciation of
$79,552,676.
- ------
4. Management Fees and
Other Transactions
With Affiliates
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for an annual fee of .75% on
the first $100 million of net assets with a reduction of .05% on each $100
million thereafter, to .50% on net assets in excess of $500 million. The Manager
has agreed to reimburse the Fund if aggregate expenses (with specified
exceptions) exceed 1.5% of the first $30 million of average annual net assets of
the Fund, plus 1% of average annual net assets in excess of $30 million.
For the year ended June 30, 1994, commissions (sales charges paid by
investors) on sales of Class A shares totaled $7,807,280, of which $2,506,452
was retained by Oppenheimer Funds Distributor, Inc. (OFDI), a subsidiary of the
Manager, as general distributor, and by an affiliated broker/dealer. During the
period ended June 30, 1994, OFDI received contingent deferred sales charges of
$65,013 upon redemption of Class B shares, as reimbursement for sales
commissions advanced by OFDI at the time of sale of such shares.
Oppenheimer Shareholder Services (OSS), a division of the Manager, is the
transfer and shareholder servicing agent for the Fund, and for other registered
investment companies. OSS's total costs of providing such services are allocated
ratably to these companies.
Under separate approved plans, each class may expend up to .25% of its net
assets annually to reimburse OFDI for costs incurred in connection with the
personal service and maintenance of accounts that hold shares of the Fund (prior
to October 1, 1993, Class A reimbursements were made with respect to shares sold
subsequent to March 31, 1991), including amounts paid to brokers, dealers, banks
and other institutions. In addition, Class B shares are subject to an
asset-based sales charge of .75% of net assets annually, to reimburse OFDI for
sales commissions paid from its own resources at the time of sale and associated
financing costs. In the event of termination or discontinuance of the Class B
plan, the Board of Trustees may allow the Fund to continue payment of the
asset-based sales charge to OFDI for distribution expenses incurred on Class B
shares sold prior to termination or discontinuance of the plan. During the year
ended June 30, 1994, OFDI paid $195,662 to an affiliated broker/dealer as
reimbursement for Class A personal service and maintenance expenses and retained
$411,604 as reimbursement for Class B sales commissions and service fee
advances, as well as financing costs.
- ------
5. Restricted Securities
The Fund owns securities purchased in private placement transactions, without
registration under the Securities Act of 1933 (the Act). The securities are
valued under methods approved by the Board of Trustees as reflecting fair value.
The Fund intends to invest no more than 10% of its net assets (determined at the
time of purchase) in restricted and illiquid securities, excluding securities
eligible for resale pursuant to Rule 144A of the Act that are determined to be
liquid by the Board of Trustees or by the Manager under Board-approved
guidelines. Restricted and illiquid securities amount to $8,003,959, or .43% of
the Fund's net assets, at June 30, 1994.
Valuation
Cost Per Per Unit as of
Security Acquisition Date Unit June 30, 1994
- ------
AMR Corp., $3.00 Cum. Cv. Depositary Shares,
Series A Preferred Stock(1) 1/28/93--2/25/93 $49.82 $ 44.25
- ------
Banco Nacional de Comercio Exterior SNC
International Finance BV, 8% Gtd.
Matador Bonds, 8/5/03(1) 11/12/93 $97.88 $ 85.00
- ------
Banco Nacional de Mexico SA, 7% Exch.
Sub. Debs., 12/15/99(1) 12/1/92 $100.00 $107.00
- ------
Case Equipment Corp., Series A Cum. Cv.
Preferred Stock(1) 6/30/94 $50.09 $ 50.09
- ------
Chrysler Financial Corp., $4.625 Cv. Depositary
Shares, Series A Preferred Stock(1) 2/12/92 $50.00 $132.25
- ------
Citicorp, Cv. Depositary Shares, Series 13
Preferred Stock(1) 9/4/92--9/25/92 $62.94 $112.25
15 Oppenheimer Equity Income Fund
<PAGE>
- ------
Notes to Financial Statements (Continued)
- ------
5. Restricted Securities
(continued)
Valuation
Cost Per Per Unit as of
Security Acquisition Date Unit June 30, 1994
- ------
Compania de Inversiones en Telecomunicaciones
SA, Provisionally Redeemable Income Debt
Exchangeable for Stock, 7%, 3/3/98(1) 2/28/94 $72.00 $ 59.50
- ------
Freeport-McMoRan, Inc., $4.375 Cv. Exch. Preferred Stock(1)
2/26/92 $45.63 $ 37.50
- ------
Intelcom Group, Inc.,
7% Cv. Sub. Nts., 10/30/98 10/26/93--4/27/94 $99.43 $ 50.56
- ------
Kroger Co. (The),
8.25% Cv. Jr. Sub. Debs., 4/15/11(1) 3/6/91 $100.00 $102.50
- ------
Lend Lease Financial International Ltd., 4.75%
Gtd. Cv. Bonds, 6/1/03(1) 6/10/93 $100.00 $107.25
- ------
Occidental Petroleum Corp., $3.875 Cum. Cv.
Preferred Stock(1) 2/10/93 $50.00 $49.31
- ------
Parker & Parsley Capital LLC., 6.25% Cum. Cv.
Guaranteed Monthly Income Preferred Shares(1) 3/24/94 $50.00 $52.38
- ------
Stone Container Corp.,
8.875% Cv. Sr. Sub. Nts., 7/15/00(1) 6/24/93 $99.36 $153.38
- ------
Thomas Nelson, Inc.,
5.75% Cv. Nts., 11/30/99 11/11/92 $100.00 $107.75
- ------
Transco Energy Co., $3.00 Cum. Cv., Series E
Preferred Stock (1) 10/29/93 $50.00 $ 48.25
- ------
Tribasa Toll Road Trust, 10.50% Nts., Series
1993-A, 12/1/11(1) 11/15/93 $100.00 $ 90.25
- ------
UAL Corp., $6.25 Cv., Series A Preferred Stock(1)
2/5/93--2/25/93 $99.55 $ 84.50
- ------
U.S. Surgical Corp., Dividend Enhanced
Convertible Stock, $2.20(1) 3/23/94 $22.55 $ 24.25
- ------
Westinghouse Electric Corp., Participating
Equity Preferred Shares $12.125 Cv., Series C(1) 3/24/94 $14.44 $
12.75
1. Transferable under Rule 144A of the Act.
<PAGE>
Appendix
Ratings of Investments
Description of Moody's Investors Service, Inc. Bond Ratings
Aaa: Bonds which are rated "Aaa" are judged to be the best quality and to
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 which are 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 which are 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 which are rated "Baa" are considered medium grade obligations,
i.e., 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.
The bond investments in which the Fund will principally invest will be in
the lower-rated categories described below.
Ba: Bonds which are 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 which are 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 which are 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 which are rated "Ca" represent obligations which are speculative
in a high degree and are often in default or have other marked
shortcomings.
C: Bonds which are rated "C" can be regarded as having extremely poor
prospects of ever retaining any real investment standing.
Description of Standard & Poor's Bond Ratings
AAA: "AAA" is the highest rating assigned to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.
AA: Bonds rated "AA" also qualify as high quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority
of instances they differ from "AAA" issues only in small degree.
A: Bonds rated "A" have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to adverse effects of change
in circumstances and economic conditions.
BBB: The bond investments in which the Fund will principally invest will
be in the lower-rated categories, described below. Bonds rated "BBB" are
regarded as having an adequate capacity to pay principal and interest.
Whereas they normally exhibit protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay principal and interest for bonds in this category than for
bonds in the "A" category.
BB, B, CCC, CC: Bonds rated "BB," "B," "CCC" and "CC" are regarded, on
balance, as predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in accordance with the terms
of the obligation. "BB" indicates the lowest degree of speculation and
"CC" the highest degree. While such bonds will likely have some quality
and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
C, D: Bonds on which no interest is being paid are rated "C." Bonds
rated "D" are in default and payment of interest and/or repayment of
principal is in arrears.
<PAGE>
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, NY 10015
Independent Auditors
Deloitte & Touche LLP
1560 Broadway
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, & Adams, P.C.
1600 Broadway
Denver, Colorado 80202-4918
<PAGE>
OPPENHEIMER EQUITY INCOME
FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements:
--------------------
(1) Condensed Financial Information: See Part A (Prospectus) -
Filed herewith.
(2) Independent Auditors' Report: See Part B (Statement of
Additional Information) - Filed herewith.
(3) Statement of Investments: See Part B (Statement of
Additional Information) - Filed herewith.
(4) Statement of Assets and Liabilities: See Part B (Statement
of Additional Information) - Filed herewith.
(5) Statement of Operations: See Part B (Statement of
Additional Information) - Filed herewith.
(6) Statements of Changes in Net Assets: See Part B (Statement
of Additional Information) - Filed herewith.
(7) Notes to Financial Statements: See Part B (Statement of
Additional Information) - Filed herewith.
(8) Independent Auditors' Consent: Filed herewith.
(b) Exhibits:
--------
(1) Amended and Restated Declaration of Trust dated August 12,
1993: Filed with Post-Effective Amendment No. 40, 10/4/93,
to Registrant's Registration Statement and incorporated
herein by reference.
(2) Amended By-Laws dated June 26, 1990: Filed with Post
Effective Amendment No. 36, 11/1/91, to Registrant's
Registration Statement, and refiled herewith pursuant to
Item 102 of Regulation S-T.
(3) Not Applicable.
(4) (i) Specimen Class A Share Certificate: Filed with
Post-Effective Amendment No. 40, 10/4/93, to
Registrant's Registration Statement and
incorporated herein by reference.
(ii) Specimen Class B Share Certificate: Filed with
Post-Effective Amendment No. 40, 10/4/93, to
Registrant's Registration Statement and
incorporated herein by reference.
(5) Investment Advisory Agreement dated 10/22/90: Filed with
Post-Effective Amendment No. 34 to Registrant's
Registration Statement dated 11/1/90, and refiled herewith
pursuant to Item 102 of Regulation S-T.
(6) (i) General Distributor's Agreement dated 10/13/92:
Filed herewith.
(ii) Form of Dealer Agreement of Oppenheimer Funds
Distributor, Inc.: Filed with Post-Effective
Amendment No. 12 of Oppenheimer Government
Securities Fund (Reg. No. 33-02769), 12/2/92, and
refiled with Post-Effective Amendment No. 14 of
Oppenheimer Main Street Funds, Inc. (Reg. No. 33-
17850), 9/30/94, pursuant to Item 102 of Regulation
S-T, and incorporated herein by reference.
(iii) Form of Oppenheimer Funds Distributor, Inc. Broker
Agreement: Filed with Post-Effective Amendment No.
12 of Oppenheimer Government Securities Fund (Reg.
No. 33-02769), 12/2/92, and refiled with Post-
Effective Amendment No. 14 of Oppenheimer Main
Street Funds, Inc. (Reg. No. 33-17850), 9/30/94,
pursuant to Item 102 of Regulation S-T, and
incorporated herein by reference.
(iv) Broker Agreement between Oppenheimer Funds
Distributor, Inc. and Newbridge Securities dated
10/1/86: Previously filed with Post-Effective
Amendment No. 25 of Oppenheimer Special Fund (Reg.
No. 2-45272), 11/1/86, and refiled with Post-
Effective Amendment No. 45, of Oppenheimer Special
Fund (Reg. No. 2-45272) 8/22/94, pursuant to Item
102 of Regulation S-T, and incorporated herein by
reference.
(v) Form of Oppenheimer Funds Distributor, Inc. Agency
Agreement: Filed with Post-Effective Amendment No.
12 of Oppenheimer Government Securities Fund (Reg.
No. 33-02769), 12/2/92, and refiled with Post-
Effective Amendment No. 14 of Oppenheimer Main
Street Funds, Inc. (Reg. No. 33-17850), 9/30/94,
pursuant to Item 102 of Regulation S-T, and
incorporated herein by reference.
(7) Not applicable.
(8) Custody Agreement dated October 6, 1992: Filed with Post-
Effective Amendment No. 37, to Registrant's Registration
Statement dated 10/28/93, and refiled herewith pursuant to
Item 102 of Regulation S-T.
(9) Not applicable.
(10) Opinion and Consent of Counsel: Filed with Registrant's
Initial Registration Statement and refiled herewith
pursuant to Item 102 of Regulation S-T.
(11) Not applicable.
(12) Not applicable.
(13) Not applicable.
(14) (i) Form of Individual Retirement Account Trust
Agreement (IRA): Previously filed with Post-
Effective Amendment No. 21 to the Registration
Statement of Oppenheimer U.S. Government Trust
(Reg. No. 2-76645), 8/25/93, and incorporated
herein by reference.
(ii) Form of prototype Standardized and Non-Standardized
Profit Sharing Plans and Money Purchase Plans for
self-employed persons and corporations: Filed with
Post-Effective Amendment No. 3 to the Registration
Statement of Oppenheimer Global Growth & Income
Fund (Reg. No. 33-33799), 1/31/92, and incorporated
herein by reference.
(iii) Form of Tax-Sheltered Retirement Plan and Custody
Agreement for employees of public schools and tax-
exempt organizations: Previously filed with Post-
Effective Amendment No. 47 of Oppenheimer Growth
Fund (File No. 2-45272), 10/21/94, and
incorporated herein by reference.
(iv) Form of Simplified Employee Pension IRA: Filed with
Post-Effective Amendment No. 36, 10/23/91, to
Registrant's Registration Statement and refiled
herewith pursuant to Item 102 of Regulation S-T.
(v) Form of SAR SEP Simplified Employee Pension IRA:
Filed with Post-Effective Amendment No. 19 to the
Registration Statement for Oppenheimer Integrity
Funds (File No. 2-76547), 3/1/94, and incorporated
herein by reference.
(15) (i) Service Plan and Agreement for Class A shares under
Rule 12b-1 of the Investment Company Act dated June
22, 1993: Filed with Post-Effective Amendment No.
38 to Registrant's Registration Statement, 8/3/93,
and incorporated herein by reference.
(ii) Distribution and Service Plan and Agreement for
Class B shares under Rule 12b-1 of the Investment
Company Act dated February 23, 1994: Filed
herewith.
(16) Performance Data Computation Schedule: Filed herewith.
(17) (a) Financial Data Schedule for Class A shares: Filed
herewith.
(b) Financial Data Schedule for Class B shares: Filed
herewith.
-- Powers of Attorney: Filed herewith.
Item 25. Persons Controlled by or Under Common Control with Registrant
-------------------------------------------------------------
None
Item 26. Number of Holders of Securities
-------------------------------
Number of Record
Holders as of
Title of Class September 30, 1994
-------------- -------------------
Shares of Beneficial Interest, Class A 151,612
Shares of Beneficial Interest, Class B 10,986
Item 27. Indemnification
---------------
Reference is made to the provisions of Article SEVENTH of
Registrant's Declaration of Trust.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of Registrant pursuant to the foregoing provisions or
otherwise, Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by Registrant of expenses incurred or
paid by a trustee, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed
in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
(a) Oppenheimer Management Corporation is the investment adviser of
the Registrant; it and affiliates act in the same capacity for
other registered investment companies as described in Parts A
and B.
(b) For information as to the business, profession, vocation or
employment of a substantial nature of each of the principal
officers and directors of Oppenheimer Management Corporation,
reference is made to Part B of this Registration Statement and
to Form ADV filed by Oppenheimer Management Corporation under
the Investment Advisers Act of 1940, which is incorporated
herein by reference.
Item 29. Principal Underwriter
---------------------
(a) Oppenheimer Funds Distributor, Inc. is the Distributor of the
Registrant's shares. It is also the distributor of the shares
of other registered open-end investment companies for which
Oppenheimer Management Corporation is the investment adviser.
(b) The information contained in the registration on Form BD of
Oppenheimer Funds Distributor, Inc., filed under the Securities
Exchange Act of 1934, is incorporated herein by reference.
(c) Not applicable.
Item 30. Location of Accounts and Records
--------------------------------
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act
of 1940 and rules promulgated thereunder are in the possession of
Oppenheimer Management Corporation at its offices at 3410 South
Galena Street, Denver, Colorado 80231.
Item 31. Management Services
-------------------
Not applicable.
Item 32. Undertakings
------------
(a) Not applicable.
(b) Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Denver and State
of Colorado on the 19th day of October, 1994.
OPPENHEIMER EQUITY INCOME 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 on the dates indicated:
Signatures Title Date
- ---------- ----- --------------
/s/ James C. Swain Chairman, Trustee October 19, 1994
- -------------- & Principal Executive
James C. Swain* Officer
/s/ George C. Bowen Vice President; October 19, 1994
- ------------------ Treasurer & Principal
George C. Bowen* Financial and Accounting
Officer
/s/ Jon S. Fossel
- ------------------ President and Trustee October 19, 1994
Jon S. Fossel*
/s/ Robert G. Avis
- ------------------ Trustee October 19, 1994
Robert G. Avis*
/s/ William A. Baker Trustee October 19, 1994
- -----------------
William A. Baker*
/s/ Charles Conrad, Jr. Trustee October 19, 1994
- ------------------
Charles Conrad, Jr.*
/s/ Raymond J. Kalinowski
- ---------------------- Trustee October 19, 1994
Raymond J. Kalinowski*
/s/ C. Howard Kast Trustee October 19, 1994
- -----------------------
C. Howard Kast*
/s/ Robert M. Kirchner Trustee October 19, 1994
- -----------------------
Robert M. Kirchner*
/s/ Ned M. Steel Trustee October 19, 1994
- -----------------------
Ned M. Steel*
*By: /s/ Robert G. Zack
--------------------------------
Robert G. Zack, Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
--------------
Form N-1A
Item No. Description
- ------------- -------------
24(b)(2) Amended By-Laws dated June 26, 1990
24(b)(5) Investment Advisory Agreement dated
October 22, 1990
24(b)(6)(i) General Distributor's Agreement dated
October 13, 1992
24(b)(8) Custody Agreement dated October 6, 1992
24(b)(10) Opinion and Consent of Counsel
24(b)(11) Independent Auditor's Consent
24(b)(14)(iv) Form of Simplified Employee Pension IRA
24(b)(15)(ii) Distribution and Service Plan and
Agreement for Class B shares under Rule
12b-1 of the Investment Company Act dated
February 23, 1994
24(b)(16) Performance Data Computation Schedule
24(b)(17)(a) Financial Data Schedule for Class A shares
of Oppenheimer Equity Income Fund
24(b)(17)(b) Financial Data Schedule for Class B shares
of Oppenheimer Equity Income Fund
- -- Powers of Attorney
Form 5305-SEP
(Rev. June 1991)
Department of the Treasury
Internal Revenue Service
- ------------------------------
Simplified Employee Pension-Individual
Retirement Account Contribution Agreement
(Under Section 408(k) of the Internal Revenue Code)
- ------------------------------
OMB No. 1545-0499
Expires 4-30-94
Do NOT File with
Internal Revenue
Service
- --------------------------------------------------------------------------
(Business name-employer) makes the following agreement under the terms of
section 408(k) of the Internal Revenue Code and the instructions to this
form.
The employer agrees to provide for discretionary contributions in each
calendar year to the Individual Retirement Accounts or Individual
Annuities (IRA's) of all eligible employees who are at least / / years
old (not over 21 years old) (see instruction "Who May Participate") and
worked in at least / / years (enter 1, 2 or 3 years) of the immediately
preceding 5 years (see instruction "Who May Participate"). This / /
includes / / does not include employees covered under a collective
bargaining agreement and / / includes / / does not include employees
whose total compensation during the year is less than $363(1).
The employer agrees that the contributions made on behalf of each eligible
employee will:
- - Be made only on the first $ 222,220(1) of compensation
- - Be made in an amount that is the same percentage of total compensation
for every employee.
- - Be limited to the smaller of $30,000 or 15% of compensation.
- - Be paid to the employee's IRA trustee, custodian, or insurance company
(for an annuity contract).
- ------------------------------- --------------------
Signature of Employer Date
- -------------------------------
By
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Instructions for the Employer
(Section references are to the Internal Revenue Code, unless otherwise
noted.)
Paperwork Reduction Act Notice. - We ask for the information on this form
to carry out the Internal Revenue laws of the United States. You are
required to give us the information. We need it to determine if you are
entitled to a deduction for contributions made to the Simplified Employee
Pension (SEP). Complete this form only if you want to establish a Model
SEP.
The time needed to complete this form will vary depending on individual
circumstances. The estimated average time is:
Recordkeeping.................................7 min.
Learning about the law or the form............24 min.
Preparing the form............................18 min.
If you have comments concerning the accuracy of these time estimates or
suggestions for making this form more simple, we would be happy to hear
from you. You can write to both the Internal Revenue Service, Washington,
DC 20224, Attention: IRS Reports Clearance Officer, T:FP; and the Office
of Management and Budget, Paperwork Reduction Project (1545-0499),
Washington, DC 20503. This form is NOT to be sent to either of these
offices. The Form 5305-SEP is only to be kept for your records.
Purpose of Form. - Form 5305-SEP (Model SEP) is used by an employer to
make an agreement to provide benefits to all employees under a SEP
described in section 408(k). This form is NOT to be filed with IRS.
What is a SEP Plan? - A SEP provides an employer with a simplified way to
make contributions towards an employee's retirement income. Under a SEP,
the employer is permitted to contribute a certain amount (see below) to
an employee's Individual Retirement Account or Individual Retirement
Annuity (IRAs). The employer makes contributions directly to an IRA set
up by an employee with a bank, insurance company, or other qualified
financial institution. When using this form to establish a SEP, the IRA
must be a model IRA established on an IRS form or a master or a prototype
IRA for which IRS has issued a favorable opinion letter. Making the
agreement on Form 5305-SEP does not establish an employer IRA as described
under section 408(c).
This form may not be used by an employer who:
- - Currently maintains any other qualified retirement plan.
- - Has maintained in the past a defined benefit plan, even if now
terminated.
- - Has any eligible employees for whom IRAs have not been established.
- - Uses the services of leased employees (as described in section 414(n)).
- - Is a member of an affiliated service group (as described in section
414(m)), a controlled group of corporations (as described in section
414(b)), or trades or businesses under common control (as described in
section 414(c)), UNLESS all eligible employees of all the members of such
groups, trades, or businesses, participate under the SEP.
- - This form should only be used if the employer will pay the cost of the
SEP contributions. This form is not suitable for a SEP that provides for
contributions at the election of the employee whether or not made pursuant
to a salary reduction agreement.
Who May Participate. - Any employee who is at least 21 years old and has
performed "service" for you in at least 3 years of the immediately
preceding 5 years must be permitted to participate in the SEP. However,
you may establish less restrictive eligibility requirements if you choose.
"Service" is any work performed for you for any period of time, however
short. If you are a member of an affiliated service group, a controlled
group of corporations, or trades or businesses under common control,
"services" includes any work performed for any period of time for any
other member of such group, trades, or businesses. Generally, to make the
agreement, all eligible employees (including all eligible employees, if
any, of other members of an affiliated service group, a controlled group
of corporations, or trades or businesses under common control) must
participate in the plan. However, employees covered under a collective
bargaining agreement and certain nonresident aliens may be excluded if
section 410(b)(3)(A) or 410(b)(3)(C) applies to them. Employees whose
total compensation for the year is less than $363(1) may be excluded.
Amount of Contribution. - You are not required to make any contributions
to an employee's SEP-IRA in a given year. However, if you do make
contributions, you must make them to the IRAs of all eligible employees,
whether or not they are still employed at the time the contributions are
made. The contributions made must be the same percentage of each
employee's total compensation (up to a maximum compensation base of
$222,220(1). The contribution you make in a year for any one employee
must not be more than the smaller of $30,000 or 15% of that employee's
total compensation (figured without considering the SEP-IRA contributions).
For this purpose, compensation includes:
- - Amounts received for personal services actually performed (see
Regulations section 1.219-1(c)); and
- - Earned income as defined under section 401(c)(2).
You may not discriminate in favor of any employee who is highly
compensated if you use Form 5305-SEP.
Under this form you may not integrate your SEP contributions with, or
offset them by, contributions made under the Federal Insurance
Contributions Act (FICA).
Currently, the employers who have established a SEP using this agreement
and have provided each participant with a copy
- ----------------
(1) This amount reflects the cost-of-living increase under section
408(k)(8) effective 1-1-91. This amount is adjusted annually. Each
January, IRS announces the increase, if any, in the Internal Revenue
Bulletin.
Cat. No. 11825J Form 5305-SEP (Rev. 6-91)
<PAGE>
Form 5305-SEP (Rev. 6-91) Page 2
- -------------------------------------------------------------------
of this form, including the questions and answers below, are not required
to file the annual information returns, Forms 5500, 5500-C/R, or 5500EZ
for the SEP.
Deducting Contributions. - You may deduct all contributions to a SEP
subject to the limitations of section 404(h). This SEP is maintained on
a calendar year basis and contributions to the SEP are deductible for your
taxable year with or within which the calendar year ends. Contributions
made for a particular taxable yar and contributed by the due date of your
income tax return (including extensions) shall be deemed made in that
taxable year.
Making the Agreement. - This agreement is considered made when (1) IRAs
have been established for all of your eligible employees, (2) you have
completed all blanks on the agreement form without modification, and (3)
you have given all of your eligible employees copies of the agreement
form, instructions, and questions and answers.
Keep the agreement form with your records; do not file it with IRS.
Information for the Employee
The information provided below explains what a SEP is, how contributions
are made, and how to treat your employer's contributions for tax purposes.
Please read the questions and answers carefully. For more specific
information, also see the agreement form and instructions on page 1 of
this form.
Questions and Answers
1. Q. What is a Simplified Employee Pension, or SEP?
A. A SEP is a retirement income arrangement under which your employer
may contribute any amount each year up to the smaller of $30,000 or 15%
of your compensation into your own Individual Retirement Account/Annuity
(IRA).
Your employer will provide you with a copy of the agreement containing
participation requirements and a description of the basis upon which
employer contributions may be made to your IRA.
All amounts contributed to your IRA by your employer belong to you, even
after you separate from service with that employer.
2. Q. Must my employer contribute to my IRA under my SEP?
A. Whether or not your employer makes a contribution to the SEP is
entirely within the employer's discretion. If a contribution is made
under the SEP, it must be allocated to all the eligible employees
according to the SEP agreement. The Model SEP specifies that the
contribution on behalf of each eligible employee will be the same
percentage of compensation (excluding compensation higher than
$222,220(1)) for all employees.
3. Q. How much may my employer contribute to my SEP-IRA in any year?
A. Under the Model SEP (Form 5305-SEP) that your employer has adopted,
your employer will determine the amount of contribution to be made to your
IRA each year. However, the contribution for any year is limited to the
smaller of $30,000 or 15% of your compensation for that year. The
compensation used to determine this limit does not include any amount
which is contributed by your employer to your IRA under the SEP. The
agreement does not require an employer to maintain a particular level of
contributions. It is possible that for a given year no employer
contribution will be made on an employer's behalf.
Also see Question 5.
4. Q. How do I treat my employer's SEP contributions for my taxes?
A. The amount your employer contributes for years beginning after 1986 is
excludable from your gross income subject to certain limitations including
the lesser of $30,000 or 15% of compensation mentioned in 1.A above and
is not includible as taxable wages on your Form W-2.
5. Q. May I also contribute to my IRA if I am a participant in a SEP?
A. Yes. You may still contribute the lesser of $2,000 or 100% of your
compensation to an IRA. However, the amount which is deductible is
subject to various limitations.
Also see Question 11.
6. Q. Are there any restrictions on the IRA I select to deposit my SEP
contributions in?
A. Under the Model SEP that is approved by IRS, contributions must be made
to either a Model IRA which is executed on an IRS form or a master or
prototype IRA for which IRS has issued a favorable opinion letter.
7. Q. What if I don't want a SEP-IRA?
A. Your employer may require that you become a participant in such an
arrangement as a condition of employment. However, if the employer does
not require all eligible employees to become participants and an eligible
employee elects not to participate, all other employees of the same
employer may be prohibited from entering into a SEP-IRA arrangement with
that employer. If one or more eligible employees do not participate and
the employer attempts to establish a SEP-IRA agreement with the remaining
employees, the resulting arrangement may result in adverse tax
consequences to the participating employees.
8. Q. Can I move funds from my SEP-IRA to another tax-sheltered IRA?
A. Yes, it is permissible for you to withdraw, or receive, funds from your
SEP-IRA, and no more than 60 days later, place such funds in another IRA
or SEP-IRA. This is called a "rollover" and may not be done without
penalty more frequently than at one-year intervals. However, there are
no restrictions on the number of times you may make "transfers" if you
arrange to have such funds transferred between the trustees, so that you
never have possession.
9. Q. What happens if I withdraw my employer's contribution from my IRA?
A. If you don't want to leave the employer's contribution in your IRA, you
may withdraw it at any time, but any amount withdrawn is includible in
your income. Also, if withdrawals occur before attainment of age 59 1/2,
and not on account of death or disability, you may be subject to a penalty
tax.
10. Q. May I participate in a SEP even though I'm covered by another
plan?
A. An employer may not adopt this IRS Model SEP (Form 5305-SEP) if the
employer maintains another qualified retirement plan or has ever
maintained a qualified defined benefit plan. However, if you work for
several employers you may be covered by a SEP of one employer and a
different SEP or pension or profit-sharing plan of another employer.
Also see Questions 11 and 12.
11. Q. What happens if too much is contributed to my SEP-IRA in one year?
A. Any contribution that is more than the yearly limitations may be
withdrawn without penalty by the due date (plus extensions) for filing
your tax return (normally April 15th), but is includible in your gross
income. Excess contributions left in your SEP-IRA account after the time
may have adverse tax consequences. Withdrawals of those contributions may
be taxed as premature withdrawals.
Also see Question 10.
12. Q. Do I need to file any additional forms with the IRS because I
participate in a SEP?
A. No.
13. Q. Is my employer required to provide me with information about SEP-
IRAs and the SEP agreement?
A. Yes, your employer must provide you with a copy of the executed SEP
agreement (Form 5305-SEP), these Questions and Answers, and provide a
statement each year showing any contribution to your IRA.
Also see Question 4.
14. Q. Is the financial institution where I establish my IRA also
required to provide me with information?
A.. Yes, it must provide you with a disclosure statement which contains
the following items in plain, non-technical language:
(1) the statutory requirements which relate to your IRA;
(2) the tax consequences which follow the exercise of various options
and what those options are;
(3) participation eligibility rules, and rules on the deductibility
and nondeductibility of retirement savings;
(4) the circumstances and procedures under which you may revoke your
IRA, including the name, address, and telephone number of the person
designated to receive notice of revocation (this explanation must be
prominently displayed at the beginning of the disclosure statement);
(5) explanations of when penalties may be assessed against you
because of specified prohibited or penalized activities concerning your
IRA and
(6) financial disclosure information which:
(a) either projects value growth rates of your IRA under various
contribution and retirement schedules, or describes the method of
computing and allocating annual earnings and charges which may be
assessed;
(b) describes whether, and for what period, the growth
projections for the plan are guaranteed, or a statement of the earnings
rate and terms on which the projection is based;
(c) states the sales commission to be charged in each year
expressed as a percentage of $1,000; and
(d) states the proportional amount of any nondeductible life
insurance which may be a feature of your IRA.
In addition to this disclosure statement, the financial institution
is required to provide you with a financial statement each year. It may
be necessary to retain and refer to statements for more than one year in
order to evaluate the investment performance of the IRA and for
information on how to report IRA distributions for tax purposes.
<PAGE>
OppenheimerFundsSM
Simplified Employee Pension (SEP-IRA)
Funds Transmittal Form for
Employer Contributions
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Employer Name
- --------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------
City State Zip
- --------------------------------------------------------------------------
Name Of Contact At Employer's Office
( )
- --------------------------------------------------------------------------
Telephone Number Employer Tax Identification Number
To ensure that you employer SEP contributions are allocated correctly,
please list each employee for whom you are making a contribution and
provide the information requested. You may continue on the reverse side,
or attach a photocopy if you need more room to write. Be sure to indicate
the total on the reverse side, and attach a check made payable to
Oppenheimer Funds Distributor, Inc. for the entire amount.
Return this form, along with completed IRA applications for each
participant in your plan, to:
Oppenheimer Funds Distributor, Inc., Group Payments Department, P.O. Box
5390, Denver, CO 80217-5390
Name of Fund Selected
Name of Social Security and Account Number, If Amount of
Participant Number Available Investment
- ----------- --------------- ---------------------- ----------
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
Total SEP Contribution $
----------------.
10.4.94
bzsecy/SEP
INDEPENDENT AUDITORS' CONSENT
Oppenheimer Equity Income Fund:
We consent to the use in this Post-Effective Amendment No. 42 to the
Registration Statement No. 2-33043 of our report dated July 22, 1994 on
the Financial Statements of Oppenheimer Equity Income Fund appearing
in the Statement of Additional Information, which is a part of such
Registration Statement, and to the reference to us under the caption
"Financial Highlights" appearing in the Prospectus, which is also a
part of such Registration Statement.
/s/ Deloitte & Touche LLP
- -------------------------
DELOITTE & TOUCHE LLP
Denver, Colorado
October 28, 1994
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT made as of the 22nd day of October, 1990, by and
between OPPENHEIMER EQUITY INCOME FUND (hereinafter the "Fund"), and
OPPENHEIMER MANAGEMENT CORPORATION (hereinafter the "Manager"):
WHEREAS, the Fund is an open-end, diversified investment company
registered as such with the Securities and Exchange Commission (the
"Commission") pursuant to the Investment Company Act of 1940, as amended
(the "Investment Company Act") and the Manager is a registered investment
adviser;
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 the Manager and the Manager 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. The Manager
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 and 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 and in the Fund's
By-Laws, or as such policies may, from time to time, be amended by the
Fund's shareholders; and (vi) the Prospectus of the Fund in effect from
time to time. The appropriate officers and employees of the Manager shall
be available upon reasonable notice for consultations 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 the valuation of any of the
Fund's portfolio securities which are either not registered for public
sale or not being traded on any securities market.
2. INVESTMENT MANAGEMENT.
(a) The Manager 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. The Manager shall also conduct investigations and research
in the securities field and furnish to the Fund's Board of Trustees
statistical and other factual information and reports on industries,
businesses or corporations, to assist the Manager and the Fund's Board of
Trustees in furthering the investment policies of the Fund; and the
Manager shall compile, for its use and that of the Fund, and furnish to
the Fund's Board of Trustees, information and advice on economic and
business trends, and render such other complete investment management
services as may be necessary or appropriate to effectuate the investment
of the resources of the Fund through the acquisition, holding and
disposition of portfolio securities.
(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, the Manager 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) So long as it shall have acted with due care and in good faith,
the Manager shall not be liable for any loss sustained by reason of any
investment, the adoption of any investment policy, or the purchase, sale
or retention of any security irrespective of whether the determinations
of the Manager relative thereto shall have been based, wholly or partly,
upon the investigation or research of any other individual, firm or
corporation believed by it to be reliable. Nothing herein contained shall,
however, be construed to protect the Manager against any liability to the
Fund or its shareholders by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by reason of its
reckless disregard of its obligations and duties under this Agreement.
(d) Nothing in this Agreement shall prevent the Manager or any
officer thereof from acting as investment adviser or performing management
services for any other person, firm or corporation and shall not in any
way limit or restrict the Manager or any of its directors, officers,
shareholders or employees from buying, selling or trading any securities
for its or their 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 the Manager of its duties
and obligations under this Agreement, nor adversely affect the Fund.
3. OTHER DUTIES OF THE MANAGER.
The Manager shall, at its own expense, provide and supervise the
activities of all executive, 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, and the laws of any state, territory or possession of the
United States or any foreign country; composition of periodic reports with
respect to its operations for the shareholders of the Fund; composition
of proxy materials for meetings of the Fund's shareholders to be held at
least annually; and the composition of such registration statements as may
be required by federal securities laws and the laws of any state,
territory or possession of the United States or any foreign country for
continuous public sale of shares of the Fund. The Manager shall, at its
own cost and expense, provide such officers for the Fund as the Fund's
Board may request and shall also provide the Fund's Trustees, at their
request, with adequate office space, and normal office equipment and
secretarial assistance as may be necessary for them to perform their
functions as such, and the Manager shall, at its own cost and expense,
calculate the daily net asset value of the Fund's shares and maintain the
Fund's general accounting books and records. The cost and expenses of the
Manager set forth in this paragraph 3 do not include the transfer agent
and other costs and expenses set forth in paragraph 4 following.
4. ALLOCATION OF EXPENSES TO THE FUND.
All other costs and expenses not expressly assumed by the Manager
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) insurance
premiums on fidelity and other coverage requisite to its operations; (iv)
compensation and expenses of its Trustees except as qualified further in
this paragraph 4; (v) legal and audit expenses; (vi) custodian and
transfer agent fees and expenses; (vii) expenses incident to the
redemption 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 of the "Funds shares for public sale under
federal securities laws or the laws of any state, territory or possession
of the United States or any foreign country; (x) expenses of printing and
mailing reports and notices and proxy material to shareholders of the
Fund; (xi) except as noted in paragraph 3 hereof, all other expenses
incidental to holding any meetings of the Fund's shareholders; and (xii)
such extraordinary non-recurring expenses as may arise, including
litigation, affecting the Fund and the legal obligation or right which the
Fund may have to indemnify its officers and Trustees with respect thereto
unless the Fund has the right to recover said indemnity payments from the
Manager. Any officers or employees of the Manager or any entity
controlling, controlled by or under common control with the Manager who
may also serve as officers, Trustees or employees of the Fund shall not
receive any compensation by the Fund for their services.
5. LIMITATION OF FUND EXPENSES.
Regardless of the provisions in the foregoing paragraph 4 hereof, the
Manager guarantees that the total expenses of the Fund in any calendar
year, including the compensation of the Manager as provided in paragraph
6 hereof but exclusive of taxes, interest, brokerage commissions and
extraordinary non-recurring expenses shall not exceed, and the Manager
undertakes to pay or refund to the Fund any amount by which such expenses
shall exceed the aggregate of one and one-half percent of the first $30
million of the Fund's average annual net assets plus one percent of the
Fund's average annual net assets in excess of $30 million.
6. COMPENSATION OF THE MANAGER.
The Fund agrees to pay the Manager and the Manager 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 net asset value of the Fund as of the close of each business day
and payable monthly at the following annual rates:
.75% of the first $100 million of net assets;
.70% of the next $100 million;
.65% of the next $100 million;
.60% of the next $100 million;
.55% of the next $100 million;
.50% of net assets in excess of $500 million.
7. PORTFOLIO TRANSACTIONS AND BROKERAGE.
(a) The Manager will render all services for the Fund in connection
with placing orders with brokers and dealers for the purchase, sale or
trade of securities for the Fund's portfolio.
(b) The Manager is authorized, in arranging the purchase and sale of
the fund's portfolio securities, to employ or deal with such members of
securities exchanges, brokers or dealers (hereinafter "broker-dealers"),
including "affiliated" broker-dealers, as that term is defined in the
Investment Company Act, 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
provisions of subparagraph (c) of this paragraph 7, the benefit of such
investment information or research as will be of significant assistance
to the performance by the Manager of its investment management functions.
(c) The Manager 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 the Manager 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.
(d) The Manager 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 and who provide "brokerage and/or research
services" (as such services are defined in Section 28 (e) (3) of the
Securities Exchange Act of 1934) for the Fund and/or other accounts for
which the Manager exercises "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 the
Manager 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 Manager's overall responsibilities with respect to the
accounts as to which it exercises investment discretion. In reaching such
determination, the Manager 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, the Manager shall be prepared
to show that all commissions were allocated for 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.
(e) The Manager shall have discretion in the interests of the Fund
and when consistent with the then effective rules of the Commission and
the National Association of Securities Dealers, Inc., to consider the
sales of shares of the Fund and other Funds managed by the Manager and its
affiliates as a factor in the selection of broker-dealers to execute
portfolio transactions for the Fund. In doing so, the portfolio
transactions must be (i) consistent with obtaining the "best execution"
of the Fund's portfolio transactions (as defined in subparagraph (b) of
this paragraph), and (ii) the commissions paid to brokers selected wholly
or partly on this basis do not exceed the commissions otherwise authorized
by this Investment Advisory Agreement.
(f) The Manager 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.
(g) Transactions with affiliated broker-dealers are required to
conform to a number of restrictions and conditions: (1) affiliated broker-
dealers may effect portfolio transactions for the Fund only if the
commissions, fees or other remuneration received or to be received by them
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; and (2) if required
by Section 11(a) of the Securities Exchange Act of 1934, affiliated
broker-dealers may not receive compensation in connection with any
portfolio transaction effected on a national securities exchange for the
Fund if the affiliated broker-dealers are members of such exchange unless
there is an effective separate written contract between the affiliated
broker-dealers and the Fund expressly providing otherwise and which refers
to said Section 11(a) and the rules promulgated thereunder and provides
that any transactions executed on an exchange of which the affiliated
broker-dealers are members must be executed on the floor of such exchange
by a member which is not an "associated person" of the affiliated broker-
dealers.
8. DURATION.
This Agreement will take effect on the date first set forth above and
shall continue in effect until December 31, 1991, and thereafter, from
year to year, unless earlier terminated by operation of law, so long as
such continuance shall be approved annually by the Fund's Board of
Trustees, including the vote of a majority of the Trustees of the Fund who
are not parties to this Agreement or interested persons 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 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 the Manager at any time
without penalty by giving 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 the Manager (which notice may be waived by
the Manager), 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.
10. ASSIGNMENT OR AMENDMENT.
This Agreement may not be amended or the rights of the Manager
thereunder sold, transferred, pledged or otherwise in any manner
encumbered without the affirmative vote or written consent of the holders
of the majority of the outstanding voting securities of the Fund; this
Agreement shall automatically and immediately terminate in the event of
its assignment.
11. DISCLAIMER OF SHAREHOLDER LIABILITY.
The Manager 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. The Manager
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. USE OF NAME "OPPENHEIMER".
The Manager 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. To the
extent necessary to protect the Manager's rights to the name
"Oppenheimer" under applicable law, such license shall allow the Manager
to inspect and, subject to control by the Fund's Board, control the nature
and quality of services offered by the Fund under such name. Such license
may, upon termination of this Agreement, be terminated by the Manager, 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 by the Manager in connection with any of its activities, or
licensed by the Manager to any other party.
13. 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 and other applicable laws.
OPPENHEIMER EQUITY INCOME FUND
ATTEST:
/s/ Sara L. Badler By:/s/ Robert G. Galli
ATTEST:
OPPENHEIMER MANAGEMENT CORPORATION
/s/ Sara L. Badler By:/s/ Katherine P. Feld
GENERAL DISTRIBUTOR'S AGREEMENT
BETWEEN
OPPENHEIMER EQUITY INCOME FUND
AND
OPPENHEIMER FUND MANAGEMENT, INC.
Date: October 13, 1992
OPPENHEIMER FUND MANAGEMENT, INC.
Two World Trade Center, Suite 3400
New York, NY 10048
Dear Sirs:
OPPENHEIMER EQUITY INCOME FUND, a Massachusetts business trust (the
"Fund"), is registered as an investment company under the Investment
Company Act of 1940 (the "1940 Act"), and an indefinite number of one or
more classes of its shares of beneficial interest ("Shares") have been
registered under the Securities Act of 1933 (the "1933 Act") to be offered
for sale to the public in a continuous public offering in accordance with
the terms and conditions set forth in the Prospectus and Statement of
Additional Information ("SAI") included in the Fund's Registration
Statement as it may be amended from time to time (the "current Prospectus
and/or SAI").
In this connection, the Fund desires that your firm (the "General
Distributor") act in a principal capacity as General Distributor for the
sale and distribution of Shares which have been registered as described
above and of any additional Shares which may become registered during the
term of this Agreement. You have advised the Fund that you are willing
to act as such General Distributor, and it is accordingly agreed by and
between us as follows:
1. Appointment of the Distributor. The Fund hereby appoints you
as the sole General Distributor, pursuant to the aforesaid continuous
public offering of its Shares, and the Fund further agrees from and after
the date of this Agreement, that it will not, without your consent, sell
or agree to sell any Shares otherwise than through you, except (a) the
Fund may itself sell shares without sales charge as an investment to the
officers, trustees or directors and bona fide present and former full-time
employees of the Fund, the Fund's Investment Adviser and affiliates
thereof, and to other investors who are identified in the current
Prospectus and/or SAI as having the privilege to buy Shares at net asset
value; (b) the Fund may issue shares in connection with a merger,
consolidation or acquisition of assets on such basis as may be authorized
or permitted under the 1940 Act; (c) the Fund may issue shares for the
reinvestment of dividends and other distributions of the Fund or of any
other Fund if permitted by the current Prospectus and/or SAI; and (d) the
Fund may issue shares as underlying securities of a unit investment trust
if such unit investment trust has elected to use Shares as an underlying
investment; provided that in no event as to any of the foregoing
exceptions shall Shares be issued and sold at less than the then-existing
net asset value.
2. Sale of Shares. You hereby accept such appointment and agree
to use your best efforts to sell Shares, provided, however, that when
requested by the Fund at any time because of market or other economic
considerations or abnormal circumstances of any kind, or when agreed to
by mutual consent of the Fund and the General Distributor, you will
suspend such efforts. The Fund may also withdraw the offering of Shares
at any time when required by the provisions of any statute, order, rule
or regulation of any governmental body having jurisdiction. It is
understood that you do not undertake to sell all or any specific number
of Shares.
3. Sales Charge. Shares shall be sold by you at net asset value
plus a front-end sales charge not in excess of 8.5% of the offering price,
but which front-end sales charge shall be proportionately reduced or
eliminated for larger sales and under other circumstances, in each case
on the basis set forth in the Fund's current Prospectus and/or SAI. The
redemption proceeds of shares offered and sold at net asset value with or
without a front-end sales charge may be subject to a contingent deferred
sales charge ("CDSC") under the circumstances described in the current
Prospectus and/or SAI. You may reallow such portion of the front-end
sales charge to dealers or cause payment (which may exceed the front-end
sales charge, if any) of commissions to brokers through which sales are
made, as you may determine, and you may pay such amounts to dealers and
brokers on sales of shares from your own resources (such dealers and
brokers shall collectively include all domestic or foreign institutions
eligible to offer and sell the Shares), and in the event the Fund has more
than one class of Shares outstanding, then you may impose a front-end
sales charge and/or a CDSC on Shares of one class that is different from
the charges imposed on Shares of the Fund's other class(es), in each case
as set forth in the current Prospectus and/or SAI, provided the front-end
sales charge and CDSC to the ultimate purchaser do not exceed the
respective levels set forth for such category of purchaser in the Fund's
current Prospectus and/or SAI.
4. Purchase of Shares.
(a) As General Distributor, you shall have the right to accept
or reject orders for the purchase of Shares at your
discretion. Any consideration which you may receive in
connection with a rejected purchase order will be returned
promptly.
(b) You agree promptly to issue or to cause the duly appointed
transfer or shareholder servicing agent of the Fund to
issue as your agent confirmations of all accepted purchase
orders and to transmit a copy of such confirmations to the
Fund. The net asset value of all Shares which are the
subject of such confirmations, computed in accordance with
the applicable rules under the 1940 Act, shall be a
liability of the General Distributor to the Fund to be
paid promptly after receipt of payment from the
originating dealer or broker (or investor, in the case of
direct purchases) and not later than eleven business days
after such confirmation even if you have not actually
received payment from the originating dealer or broker or
investor. In no event shall the General Distributor make
payment to the Fund later than permitted by applicable
rules of the National Association of Securities Dealers,
Inc.
(c) If the originating dealer or broker shall fail to make
timely settlement of its purchase order in accordance with
applicable rules of the National Association of Securities
Dealers, Inc., or if a direct purchaser shall fail to make
good payment for shares in a timely manner, you shall have
the right to cancel such purchase order and, at your
account and risk, to hold responsible the originating
dealer or broker, or investor. You agree promptly to
reimburse the Fund for losses suffered by it that are
attributable to any such cancellation, or to errors on
your part in relation to the effective date of accepted
purchase orders, limited to the amount that such losses
exceed contemporaneous gains realized by the Fund for
either of such reasons with respect to other purchase
orders.
(d) In the case of a canceled purchase for the account of a
directly purchasing shareholder, the Fund agrees that if
such investor fails to make you whole for any loss you pay
to the Fund on such canceled purchase order, the Fund will
reimburse you for such loss to the extent of the aggregate
redemption proceeds of any other shares of the Fund owned
by such investor, on your demand that the Fund exercise
its right to claim such redemption proceeds. The Fund
shall register or cause to be registered all Shares sold
to you pursuant to the provisions hereof in such names and
amounts as you may request from time to time and the Fund
shall issue or cause to be issued certificates evidencing
such Shares for delivery to you or pursuant to your
direction if and to the extent that the shareholder
account in question contemplates the issuance of such
certificates. All Shares when so issued and paid for,
shall be fully paid and non-assessable by the Fund (which
shall not prevent the imposition of any CDSC that may
apply) to the extent set forth in the current Prospectus
and/or SAI.
5. Repurchase of Shares.
(a) In connection with the repurchase of Shares, you are
appointed and shall act as Agent of the Fund. You are
authorized, for so long as you act as General Distributor
of the Fund, to repurchase, from authorized dealers,
certificated or uncertificated shares of the Fund
("Shares") on the basis of orders received from each
dealer ("authorized dealer") with which you have a dealer
agreement for the sale of Shares and permitting resales of
Shares to you, provided that such authorized dealer, at
the time of placing such resale order, shall represent (i)
if such Shares are represented by certificate(s), that
certificate(s) for the Shares to be repurchased have been
delivered to it by the registered owner with a request for
the redemption of such Shares executed in the manner and
with the signature guarantee required by the then-
currently effective prospectus of the Fund, or (ii) if
such Shares are uncertificated, that the registered
owner(s) has delivered to the dealer a request for the
redemption of such Shares executed in the manner and with
the signature guarantee required by the then-currently
effective prospectus of the Fund.
(b) You shall (a) have the right in your discretion to accept
or reject orders for the repurchase of Shares; (b)
promptly transmit confirmations of all accepted repurchase
orders; and (c) transmit a copy of such confirmation to
the Fund, or, if so directed, to any duly appointed
transfer or shareholder servicing agent of the Fund. In
your discretion, you may accept repurchase requests made
by a financially responsible dealer which provides you
with indemnification in form satisfactory to you in
consideration of your acceptance of such dealer's request
in lieu of the written redemption request of the owner of
the account; you agree that the Fund shall be a third
party beneficiary of such indemnification.
(c) Upon receipt by the Fund or its duly appointed transfer or
shareholder servicing agent of any certificate(s) (if any
has been issued) for repurchased Shares and a written
redemption request of the registered owner(s) of such
Shares executed in the manner and bearing the signature
guarantee required by the then-currently effective
Prospectus or SAI of the Fund, the Fund will pay or cause
its duly appointed transfer or shareholder servicing agent
promptly to pay to the originating authorized dealer the
redemption price of the repurchased Shares (other than
repurchased Shares subject to the provisions of part (d)
of Section 5 of this Agreement) next determined after your
receipt of the dealer's repurchase order.
(d) Notwithstanding the provisions of part (c) of Section 5 of
this Agreement, repurchase orders received from an
authorized dealer after the determination of the Fund's
redemption price on a regular business day will receive
that day's redemption price if the request to the dealer
by its customer to arrange such repurchase prior to the
determination of the Fund's redemption price that day
complies with the requirements governing such requests as
stated in the current Prospectus and/or SAI.
(e) You will make every reasonable effort and take all
reasonably available measures to assure the accurate
performance of all services to be performed by you
hereunder within the requirements of any statute, rule or
regulation pertaining to the redemption of shares of a
regulated investment company and any requirements set
forth in the then-current Prospectus and/or SAI of the
Fund. You shall correct any error or omission made by you
in the performance of your duties hereunder of which you
shall have received notice in writing and any necessary
substantiating data; and you shall hold the Fund harmless
from the effect of any errors or omissions which might
cause an over- or under-redemption of the Fund's Shares
and/or an excess or non-payment of dividends, capital
gains distributions, or other distributions.
(f) In the event an authorized dealer initiating a repurchase
order shall fail to make delivery or otherwise settle such
order in accordance with the rules of the National
Association of Securities Dealers, Inc., you shall have
the right to cancel such repurchase order and, at your
account and risk, to hold responsible the originating
dealer. In the event that any cancellation of a Share
repurchase order or any error in the timing of the
acceptance of a Share repurchase order shall result in a
gain or loss to the Fund, you agree promptly to reimburse
the Fund for any amount by which any loss shall exceed
then-existing gains so arising.
6. 1933 Act Registration. The Fund has delivered to you a copy of
its current Prospectus and SAI. The Fund agrees that it will use its best
efforts to continue the effectiveness of the Registration Statement under
the 1933 Act. The Fund further agrees to prepare and file any amendments
to its Registration Statement as may be necessary and any supplemental
data in order to comply with the 1933 Act. The Fund will furnish you at
your expense with a reasonable number of copies of the Prospectus and SAI
and any amendments thereto for use in connection with the sale of Shares.
7. 1940 Act Registration. The Fund has already registered under
the 1940 Act as an investment company, and it will use its best efforts
to maintain such registration and to comply with the requirements of the
1940 Act.
8. State Blue Sky Qualification. At your request, the Fund will
take such steps as may be necessary and feasible to qualify Shares for
sale in states, territories or dependencies of the United States, the
District of Columbia, the Commonwealth of Puerto Rico and in foreign
countries, in accordance with the laws thereof, and to renew or extend any
such qualification; provided, however, that the Fund shall not be required
to qualify shares or to maintain the qualification of shares in any
jurisdiction where it shall deem such qualification disadvantageous to the
Fund.
9. Duties of Distributor. You agree that:
(a) Neither you nor any of your officers will take any long or
short position in the Shares, but this provision shall not
prevent you or your officers from acquiring Shares for
investment purposes only; and
(b) You shall furnish to the Fund any pertinent information
required to be inserted with respect to you as General
Distributor within the purview of the Securities Act of
1933 in any reports or registration required to be filed
with any governmental authority; and
(c) You will not make any representations inconsistent with
the information contained in the current Prospectus and/or
SAI; and
(d) You shall maintain such records as may be reasonably
required for the Fund or its transfer or shareholder
servicing agent to respond to shareholder requests or
complaints, and to permit the Fund to maintain proper
accounting records, and you shall make such records
available to the Fund and its transfer agent or
shareholder servicing agent upon request; and
(e) In performing under this Agreement, you shall comply with
all requirements of the Fund's current Prospectus and/or
SAI and all applicable laws, rules and regulations with
respect to the purchase, sale and distribution of Shares.
10. Allocation of Costs. The Fund shall pay the cost of composition
and printing of sufficient copies of its Prospectus and SAI as shall be
required for periodic distribution to its shareholders and the expense of
registering Shares for sale under federal securities laws and under state
blue sky laws pursuant to paragraph 8. You shall pay the expenses
normally attributable to the sale of Shares, other than as paid under the
Fund's Distribution Plan under Rule 12b-1 of the 1940 Act, 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.
11. Duration. This Agreement shall take effect on the date first
written above, and shall supersede any and all prior General Distributor's
Agreements by and among the Fund and you. Unless earlier terminated
pursuant to paragraph 12 hereof, this Agreement shall remain in effect
until September 30, 1993. This Agreement shall continue in effect from
year to year thereafter, provided that such continuance shall be
specifically approved at least annually: (a) by the Fund's Board of
Trustees or by vote of a majority of the voting securities of the Fund;
and (b) by the vote of a majority of the Trustees, who are not parties to
this Agreement or "interested persons" (as defined the 1940 Act) of any
such person, cast in person at a meeting called for the purpose of voting
on such approval.
12. Termination. This Agreement may be terminated (a) by the
General Distributor at any time without penalty by giving sixty days'
written notice (which notice may be waived by the Fund); (b) by the Fund
at any time without penalty upon sixty days' written notice to the General
Distributor (which notice may be waived by the General Distributor); or
(c) by mutual consent of the Fund and the General Distributor, provided
that such termination by the Fund shall be directed or approved by the
Board of Trustees of the Fund or by the vote of the holders of a
"majority" of the outstanding voting securities of the Fund. In the event
this Agreement is terminated by the Fund, the General Distributor shall
be entitled to be paid the CDSC under paragraph 3 hereof on the redemption
proceeds of Shares sold prior to the effective date of such termination.
13. Assignment. This Agreement may not be amended or changed except
in writing and shall be binding upon and shall enure to the benefit of the
parties hereto and their respective successors; however, this Agreement
shall not be assigned by either party and shall automatically terminate
upon assignment.
14. Disclaimer of Shareholder Liability. The General Distributor
understands and agrees that the obligations of the Fund under this
Agreement are not binding upon any Trustee or shareholder of the Fund
personally, but bind only the Fund and the Fund's property; the General
Distributor represents that it has notice of the provisions of the
Declaration of Trust of the Fund disclaiming Trustee and shareholder
liability for acts or obligations of the Fund.
15. Section Headings. The heading of each section is for
descriptive purposes only, and such headings are not to be construed or
interpreted as part of this Agreement.
If the foregoing is in accordance with your understanding, so
indicate by signing in the space provided below.
OPPENHEIMER EQUITY INCOME FUND
By: /s/ James C. Swain
------------------
James C. Swain, Chairman
Accepted:
OPPENHEIMER FUND MANAGEMENT, INC.
By: /s/ George C. Bowen
-------------------
George C. Bowen, Vice President
OPPENHEIMER EQUITY INCOME FUND
CUSTODY AGREEMENT
Agreement made as of this 6th day of October, 1992, between
OPPENHEIMER EQUITY INCOME FUND, a business trust organized and existing
under the laws of the Commonwealth of Massachusetts, having its principal
office and place of business at 3410 South Galena Street, Denver, Colorado
80231 (hereinafter called the "Fund"), and THE BANK OF NEW YORK, a New
York corporation authorized to do a banking business, having its principal
office and place of business at 48 Wall Street, New York, New York 10286
(hereinafter called the "Custodian").
W I T N E S S E T H
that for and in consideration of the mutual promises hereinafter set
forth, the Fund and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
shall have the following meanings:
1. "Agreement" shall mean this Custody Agreement and all Appendices
and Certifications described in the Exhibits delivered in connection
herewith.
2. "Authorized Person" shall mean any person, whether or not such
person is an Officer or employee of the Fund, duly authorized by the Board
of Trustees of the Fund to give Oral Instructions and Written Instructions
on behalf of the Fund and listed in the Certificate annexed hereto as
Appendix A or such other Certificate as may be received by the Custodian
from time to time, provided that each person who is designated in any such
Certificate as an "Officer of 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 de-
nominated 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 ob-
ligations 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 Oppenheimer Shareholder Services,
a division of Oppenheimer Management Corporation, its successors and as-
signs.
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 col-
lected, 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 per-
formance 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 Custo-
dian 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 dis-
tributions due or payable;
(b) Promptly give notice to the Fund and promptly present
for payment and collect the amount of money or other consideration payable
upon such Securities which are called, but only if either (i) the
Custodian receives a written notice of such call, or (ii) notice of such
call appears in one or more of the publications listed in Appendix D
annexed hereto, which may be amended at any time by the Custodian without
the prior consent of the Fund, provided the Custodian gives prior notice
of such amendment to the Fund;
(c) Promptly present for payment and collect for the
Fund's account the amount payable upon all Securities which mature;
(d) Promptly surrender Securities in temporary form in
exchange for definitive Securities;
(e) Promptly execute, as custodian, any necessary de-
clarations 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 Custo-
dian 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 ex-
ercised, 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 Certi-
ficate.
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 with-
drawn 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 Clear-
ing 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 pre-
viously 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 Cer-
tificate. 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 Cus-
todian 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 de-
posits, 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 Certi-
ficate, 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, specifi-
cally allocated to such Series to be deposited in a Senior Security Ac-
count 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 Repur-
chase 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 iden-
tified, 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 distribu-
tion, 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 insuffi-
cient 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 Ser-
ies, (except a borrowing for investment or for temporary or emergency
purposes using Securities as collateral pursuant to a separate agreement
and subject to the provisions of paragraph 2 of this Article), such
overdraft or indebtedness shall be deemed to be a loan made by the
Custodian to the Fund for such Series payable on demand and shall bear
interest from the date incurred at a rate per annum (based on a 360-day
year for the actual number of days involved) equal to the Federal Funds
Rate plus 1/2%, such rate to be adjusted on the effective date of any
change in such Federal Funds Rate but in no event to be less than 6% per
annum. In addition, unless the Fund has given a Certificate that the
Custodian shall not impose a lien and security interest to secure such
overdrafts (in which event it shall not do so), the Custodian shall have
a continuing lien and security interest in the aggregate amount of such
overdrafts and indebtedness as may from time to time exist in and to any
property specifically allocated to such Series at any time held by it for
the benefit of such Series or in which the Fund may have an interest which
is then in the Custodian's possession or control or in possession or con-
trol 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 For-
eign 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 subcus-
todian, 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 Sub-
custodian 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 Cus-
todian 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. Fur-
ther, 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 share-
holders' 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 mis-
conduct 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 accor-
dance with Article X hereof or any Certificate, Oral Instructions or
Written Instructions given in accordance with this Agreement. The Custo-
dian 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. How-
ever, 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 Secu-
rities 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 limi-
tation, 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 par-
ticular 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 identi-
fies 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 ab-
sence 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 deliv-
ered 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 EQUITY INCOME FUND
By: _______________________________
Robert G. Galli, Vice President
(SEAL)
Attest:
___________________________________
Robert G. Zack, Assistant Secretary
THE BANK OF NEW YORK
(SEAL) By__________________________________
Attest:
___________________________________
<PAGE>
APPENDIX A
I, President and I,
, of Oppenheimer Fund,
a Massachusetts business trust (the "Fund") do hereby certify that:
The following individuals have been duly authorized by the Board of
Trustees of the Fund in conformity with the Fund's Declaration of Trust
and By-Laws to give Oral Instructions and Written Instructions on behalf
of the Fund, except that those persons designated as being an "Officer of
OSS" shall be an Authorized Person only for purposes of Articles XII and
XIII. The signatures set forth opposite their respective names are their
true and correct signatures:
Name Position Signature
__________________ _______________________ __________________
<PAGE>
APPENDIX B
I, President and I,
, of Oppenheimer Fund, a
Massachusetts business trust (the "Fund"), do hereby certify that:
The following individuals for whom a position other than "Officer of
OSS" is specified serve in the following positions with the Fund and each
has been duly elected or appointed by the Board of Trustees of the Fund
to each such position and qualified therefor in conformity with the Fund's
Declaration of Trust and By-Laws. With respect to the following
individuals for whom a position of "Officer of OSS" is specified, each
such individual has been designated by a resolution of the Board of
Trustees of the Fund to be an Officer for purposes of the Fund's Custody
Agreement with The Bank of New York, but only for purposes of Articles XII
and XIII thereof and a certified copy of such resolution is attached
hereto. The signatures of each individual below set forth opposite their
respective names are their true and correct signatures:
Name Position Signature
__________________ _______________________ __________________
<PAGE>
APPENDIX C
The undersigned, hereby
certifies that he or she is the duly elected and acting
of Oppenheimer 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 __________________, 199
, 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 dated as of 199 (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
, as of the day of , 199 .
<PAGE>
APPENDIX D
I, Richard P. Lando, an Assistant Vice President with THE BANK OF NEW
YORK do hereby designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
<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:
<PAGE>
EXHIBIT A
CERTIFICATION
The undersigned, , hereby
certifies that he or she is the duly elected and acting
of Oppenheimer 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 199
, 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 dated as of , 199 (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 col-
lateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal
of , as of the day of
, 199 .
__________________________
(SEAL)
<PAGE>
EXHIBIT B
CERTIFICATION
The undersigned , hereby certifies
that he or she is the duly elected and acting
of Oppenheimer 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
, 199 , 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 dated as of , 199 (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 there-
under, 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
as of the day of , 199 .
___________________________
(SEAL)
<PAGE>
EXHIBIT B-1
CERTIFICATION
The undersigned, hereby certifies that he or she
is the duly elected and acting
of Oppenheimer 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
, 199 , 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 dated as of 199 , (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
, as of the day of , 199 .
_______________________
(SEAL)
<PAGE>
EXHIBIT C
CERTIFICATION
The undersigned, , hereby certifies that
he or she is the duly elected and acting
of Oppenheimer 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
, 199 , 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 dated as of , 199 (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 ac-
cept, 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 , as of the day of , 199 .
____________________________
(SEAL)
<PAGE>
EXHIBIT D
(FORM OF FOREIGN SUBCUSTODIAN AGREEMENT)
<PAGE>
Appendix A
Article XIX.149
Appendix B
Article XIX.250
Exhibit A
Article III.17
Exhibit B
Article III.18
Exhibit C
Article III.18
Exhibit D34
Article XV.434
Schedule A
Article XV.133
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
FOR CLASS B SHARES OF
OPPENHEIMER EQUITY INCOME FUND
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the 23rd
day of February, 1994 by and between OPPENHEIMER EQUITY INCOME FUND (the
"Fund") and OPPENHEIMER FUNDS DISTRIBUTOR, INC. (the "Distributor").
1. The Plan. This Plan is the Fund's written distribution and service
plan for Class B shares of the Fund (the "Shares"), contemplated by Rule
12b-1 (the "Rule") under the Investment Company Act of 1940 (the "1940
Act"), pursuant to which the Fund will compensate the Distributor for a
portion of its costs incurred 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 Distributor is authorized under the Plan to
pay "Recipients," as hereinafter defined, for rendering (1) distribution
assistance in connection with the sale of Shares and/or (2) administrative
support services with respect to Accounts. Such Recipients are intended
to have certain rights as third-party beneficiaries under this Plan. The
terms and provisions of this Plan shall be interpreted and defined in a
manner consistent with the provisions and definitions contained in (i) the
1940 Act, (ii) the Rule, (iii) Article III, Section 26, of the Rules of
Fair Practice of the National Association of Securities Dealers, Inc., or
its successor (the "NASD Rules of Fair Practice") and (iv) any conditions
pertaining either to distribution-related expenses or to a plan of
distribution, to which the Fund is subject under any order on which the
Fund relies, issued at any time by the Securities and Exchange Commission.
2. Definitions. As used in this Plan, the following terms shall have
the following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other
institution which: (i) has rendered 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. Notwithstanding
the foregoing, a majority of the Fund's Board of Trustees (the
"Board") who are not "interested persons" (as defined in the 1940
Act) and who have no direct or indirect financial interest in the
operation of this Plan or in any agreements relating to this Plan
(the "Independent Trustees") may remove any broker, dealer, bank or
other institution as a Recipient, whereupon such entity's rights as
a third-party beneficiary hereof shall terminate.
(b) "Qualified Holdings" shall mean, as to any Recipient, all Shares
owned beneficially or of record by: (i) such Recipient, or (ii) such
customers, clients and/or accounts as to which such Recipient is a
fiduciary or custodian or co-fiduciary or co-custodian (collectively,
the "Customers"), but in no event shall any such Shares be deemed
owned by more than one Recipient for purposes of this Plan. In the
event that two entities would otherwise qualify as Recipients as to
the same Shares, the Recipient which is the dealer of record on the
Fund's books shall be deemed the Recipient as to such Shares for
purposes of this Plan.
3. Payments for Distribution Assistance and Administrative Support
Services.
(a) The Fund will make payments to the Distributor, (i) within
forty-five (45) days of the end of each calendar quarter, in the
aggregate amount of 0.0625% (0.25% 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 (the "Service
Fee"), plus (ii) within ten (10) days of the end of each month, in
the aggregate amount of 0.0625% (0.75% on an annual basis) of the
average during the month of the aggregate net asset value of Shares
computed as of the close of each business day (the "Asset-Based Sales
Charge") outstanding for six years or less (the "Maximum Holding
Period"). Such Service Fee payments received from the Fund will
compensate the Distributor and Recipients for providing
administrative support services of the type approved by the Board
with respect to Accounts. Such Asset- Based Sales Charge payments
received from the Fund will compensate the Distributor and Recipients
for providing distribution assistance in connection with the sales
of Shares.
The administrative support services in connection with the
Accounts to be rendered by Recipients 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.
The distribution assistance in connection with the sale of
Shares to be rendered by the Distributor and Recipients may include,
but shall not be limited to, the following: distributing sales
literature and prospectuses other than those furnished to current
holders of the Fund's Shares ("Shareholders"), and providing such
other information and services in connection with the distribution
of Shares as the Distributor or the Fund may reasonably request.
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 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 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 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.
(b) The Distributor shall make service fee payments to any 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, to be set from
time to time by a majority of the Independent Trustees.
Alternatively, the Distributor may, at its sole option, make service
fee payments ("Advance Service Fee Payments") to any Recipient
quarterly, within forty-five (45) days of the end of each calendar
quarter, at a rate not to exceed (i) 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) 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, subject
to reduction or chargeback so that the Advance Service Fee Payments
do not exceed the limits on payments to Recipients that are, or may
be, imposed by Article III, Section 26, of the NASD Rules of Fair
Practice. In the event Shares are redeemed less than one year after
the date such Shares were sold, the Recipient is obligated and will
repay to 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 Advance Service Fee Payments described in
part (i) of the preceding sentence may, at the Distributor's sole
option, be made more often than quarterly, and sooner than the end
of the calendar quarter. 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 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 direct the Distributor to increase or decrease the Maximum
Holding Period, the Minimum Holding Period or the Minimum Qualified
Holdings. The Distributor shall notify all Recipients of the Minimum
Qualified Holdings, Maximum Holding Period or Minimum Holding Period,
if any, and the rate of payments hereunder applicable to Recipients,
and shall provide each Recipient with written notice within thirty
(30) days after any change in these provisions. Inclusion of such
provisions or a change in such provisions in a revised current
prospectus shall constitute sufficient notice. 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.
(c) The Distributor is entitled to retain from the payments
described in Section 3(a) the aggregate amount of (i) the Service Fee
on Shares outstanding for less than the Minimum Holding Period plus
(ii) the Asset-Based Sales Charge on Shares outstanding for not more
than the Maximum Holding Period, in each case computed as of the
close of each business day during that period and subject to
reduction or elimination of such amounts under the limits to which
the Distributor is, or may become, subject under Article III, Section
26, of the NASD Rules of Fair Practice. Such amount is collectively
referred to as the "Quarterly Limitation." The distribution
assistance and administrative support services in connection with the
sale of Shares to be rendered by the Distributor may include, but
shall not be limited to, the following: (i) paying sales commissions
to any broker, dealer, bank or other institution that sells Shares,
and/or paying such persons Advance Service Fee Payments in advance
of, and/or greater than, the amount provided for in Section 3(a) of
this Agreement; (ii) paying compensation to and expenses of personnel
of the Distributor who support distribution of Shares by Recipients;
(iii) paying of or reimbursing the Distributor for interest and
other borrowing costs on unreimbursed Carry Forward Expenses (as
hereafter defined) at the rate paid by the Distributor or, if such
amounts are financed by the Distributor from its own resources or by
an affiliate, at the rate of 1% per annum above the prime rate (which
shall mean the most preferential interest rate on corporate loans at
large U.S. money center commercial banks) then being reported in the
Eastern edition of the Wall Street Journal (or if such prime rate is
no longer so reported, such other rate as may be designated from time
to time by the Distributor with the approval of the Independent
Trustees); (iv) other direct distribution costs of the type approved
by the Board, including without limitation the costs of sales
literature, advertising and prospectuses (other than those furnished
to current Shareholders) and state "blue sky" registration expenses;
and (v) any service rendered by the Distributor that a Recipient may
render pursuant to part (a) of this Section 3. The Distributor's
costs of providing the above-mentioned services are hereinafter
collectively referred to as "Distribution and Service Costs." "Carry
Forward Expenses" are Distribution and Service Costs that are not
paid in the fiscal quarter in which they arise because they exceed
the Quarterly Limitation. In the event that the Board should have
reason to believe 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.
(d) The excess in any fiscal quarter of (i) the Quarterly Limitation
plus any contingent deferred sales charge ("CDSC") payments recovered
by the Distributor on the proceeds of redemption of Shares over (ii)
Distribution and Service Costs during that quarter, shall be applied
in the following order of priority: first, to interest on
unreimbursed Carry Forward Expenses, second, to reduce any
unreimbursed Carry Forward Expenses, third, to reduce Distribution
and Service Costs during that quarter, and fourth, to reduce the
Asset-Based Sales Charge payments by the Fund to the Distributor in
that quarter. Carry Forward Expenses shall be carried forward by the
Fund until payment can be made under the Quarterly Limitation.
(e) Under the Plan, payments may be made to Recipients: (i) by
Oppenheimer Management Corporation ("OMC") 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 OMC),
from its own resources, from Asset-Based Sales Charge payments or
from its borrowings.
4. Selection and Nomination of Trustees. While this Plan is in effect,
the selection and nomination of those persons to be Trustees of the Fund
who are not "interested persons" of the Fund ("Disinterested Trustees")
shall be committed to the discretion of such Disinterested Trustees.
Nothing herein shall prevent the Disinterested 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 Disinterested 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 distribution expenditures properly attributable to
the Shares, including the amount of all payments made pursuant to this
Plan, the identity of the Recipient of each such payment, the amount paid
to the Distributor and the Distribution and Service Costs and Carry
Forward Expenses for that period. 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 and its total expenses incurred in prior years
and not previously recovered with respect to the distribution of Shares
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 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 securities of
the Class, on not more than sixty days written notice to any other party
to the agreement; (ii) such agreement shall automatically terminate in the
event of its assignment (as defined in the 1940 Act); (iii) it shall go
into effect when approved by a vote of the Board and its Independent
Trustees cast in person at a meeting called for the purpose of voting on
such agreement; and (iv) it shall, unless terminated as herein provided,
continue in effect from year to year only so long as such continuance is
specifically approved at least annually by 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 February 23, 1994 for the purpose of
voting on this Plan, and replaces the Fund's Distribution and Service Plan
and Agreement dated July 1, 1993. Unless terminated as hereinafter
provided, it shall continue in effect until October 31, 1994 and from year
to year thereafter or as the Board may otherwise determine only so long
as such continuance is specifically approved at least annually by a vote
of the Board and its Independent Trustees cast in person at a meeting
called for the purpose of voting on such continuance. This Plan may not
be amended to increase materially the amount of payments to be made
without approval of the Class B Shareholders, in the manner described
above, and all material amendments must be approved by a vote of the Board
and of the Independent Trustees. This Plan may be terminated at any time
by vote of a majority of the Independent Trustees or by the vote of the
holders of a "majority" (as defined in the 1940 Act) of the Fund's
outstanding voting securities of the Class. In the event of such
termination, the Board and its Independent Trustees shall determine
whether the Distributor shall be entitled to payment from the Fund of any
Carry Forward Expenses and related costs properly incurred in respect of
Shares sold prior to the effective date of such termination, and whether
the Fund shall continue to make payment to the Distributor in the amount
the Distributor is entitled to retain under part (c) of Section 3 hereof,
until such time as the Distributor has been reimbursed for all or part of
such amounts by the Fund and by retaining CDSC payments.
8. Disclaimer of Shareholder Liability. The Distributor understands
that the obligations of the Fund under this Plan are not binding upon any
Trustee or shareholder of the Fund personally, but bind only the Fund and
the Fund's property. The Distributor represents that it has notice of the
provisions of the Declaration of Trust of the Fund disclaiming shareholder
and Trustee liability for acts or obligations of the Fund.
OPPENHEIMER EQUITY INCOME FUND
By: ________________________________________
Andrew J. Donohue, Vice President
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
By: ________________________________________
Katherine P. Feld, Vice President
& Secretary
OPPENHEIMER EQUITY INCOME FUND
BY-LAWS
(as amended through June 26, 1990)
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 Declaration of Trust, 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 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 by leaving the same with him or at his residence or usual
place of business or by mailing it, postage prepaid and addressed to him
at his address as it appears upon the books of the Fund.
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, and not exceeding 120 days preceding
any dividend payment date or any date and entitled to receive such
dividends or rights for the allotment of rights, as a record date for the
determination of the Shareholders entitled to receive such dividend or
rights, as the case may be; and only Shareholders of record on such date
and entitled to receive such dividends or rights 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 (who have been such for at least
six months) holding Shares of the Fund valued at $25,000 or more at
current offering price (as defined in the Fund's Prospectus), or holding
not less than 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 II 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 agents, 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, or by taking alternate actions as permitted by Section 16(c)
of the Investment Company Act of 1940.
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 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 as might have
been lawfully transacted had the meeting not been adjourned.
Section 7. Voting and Inspectors. At all meetings of Shareholders,
every Shareholder or record entitled to vote thereat shall be entitled to
vote at such meeting either in person or by proxy appointed by instrument
in writing subscribed by such Shareholder or his duly authorized attorney-
in-fact.
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 percent (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 certificate
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 of the matter, and such vote shall be taken upon the
request of the holders of ten percent (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 if neither the Chairman
of the Board of Trustees, the President nor any Vice-President 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, or if neither the Secretary
nor an Assistant Secretary is present, then the meeting shall elect its
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; Removal. 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 occurring for any reason, including
vacancies created by any such increase in the number of Trustees until the
next annual meeting 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. 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 becomes
incapacitated, 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.
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 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,
provided that a quorum is present. 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.
Section 3. 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 they may from time to time by resolution determine or as
shall be specified or fixed in the respective notices or waivers of notice
thereof.
Section 4. 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 5. 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, 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 6. Quorum. One-third 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 or by these
By-Laws.
Section 7. 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 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 and may fill vacancies in the Committee by election from
the Trustees. 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 and except
the power to increase or decrease the size of, or fill vacancies on, the
Board. 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 8. 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 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 powers of any such committee, to fill vacancies, and to
discharge any such committee.
Section 9. 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 a committee 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 10. Compensation of Trustees. Trustees 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 11. Dividends. Dividends or distributions payable on the
Shares of any Series of the Fund 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 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.
Section 12. Indemnification. The Declaration of Trust shall not be
deemed to affect any other indemnification rights to which an indemnitee
may be entitled to the extent permitted by applicable law. Such rights
to indemnification shall not be deemed exclusive of any other rights to
which such indemnitee may be entitled under any statue, By-Law, contract
or otherwise.
ARTICLE III
OFFICERS
Section 1. Executive Officers. The executive officers of the Fund
shall include a Chairman of the Board of Trustees, 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 and the
President shall be selected from among the Trustees. The Board of
Trustees may also in its discretion appoint Assistant Secretaries,
Assistant Treasurers, and other officers, agents and employees, who shall
have 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 Chairman
of the Board and Secretary and 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. Unless otherwise
ordered by the Board of Trustees, the Chairman of the Board shall be the
Chief Executive Officer.
ARTICLE IV
SHARES
Section 1. Share Certificates. 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 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, 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 of the Fund and
the number of shares of that Series, 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.
OPPENHEIMER CASH RESERVES
CENTENNIAL AMERICA FUND, L.P.
CENTENNIAL CALIFORNIA TAX-EXEMPT TRUST
CENTENNIAL GOVERNMENT TRUST
CENTENNIAL MONEY MARKET TRUST
CENTENNIAL NEW YORK TAX-EXEMPT TRUST
CENTENNIAL TAX-EXEMPT TRUST
OPPENHEIMER CHAMPION HIGH YIELD FUND
DAILY CASH ACCUMULATION FUND, INC.
OPPENHEIMER EQUITY INCOME FUND
OPPENHEIMER GOVERNMENT SECURITIES FUND
OPPENHEIMER HIGH YIELD FUND
OPPENHEIMER INTEGRITY FUNDS
OPPENHEIMER MAIN STREET FUNDS, INC.
THE NEW YORK TAX-EXEMPT INCOME FUND, INC.
OPPENHEIMER STRATEGIC INCOME FUND
OPPENHEIMER STRATEGIC INCOME & GROWTH FUND
OPPENHEIMER STRATEGIC INVESTMENT GRADE BOND FUND
OPPENHEIMER STRATEGIC SHORT-TERM INCOME FUND
OPPENHEIMER TAX-EXEMPT BOND FUND
OPPENHEIMER TAX-EXEMPT CASH RESERVES
OPPENHEIMER TOTAL RETURN FUND, INC.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
CERTIFIED RESOLUTIONS OF THE BOARDS
October 26, 1993
At a meeting of the Boards for the above referenced funds (the
"Funds") held on October 26, 1993, the members thereof by unanimous vote
of those present adopted and approved the following resolutions:
"RESOLVED, that Andrew J. Donohue or Robert G. Zack, and
each of them, be, and the same, is hereby appointed the
attorney-in-fact and agent of James C. Swain, as Chairman of the
Funds, and George C. Bowen, as Vice President, Secretary and
Treasurer (Principal Financial and Accounting Officer) of the
Funds, to sign on behalf of such officers any and all
Registration Statements (including any post-effective amendments
to such Registration Statements) under the Securities Act of
1933 and the Investment Company Act of 1940 and any amendments
and supplements thereto, and to file the same, with all exhibits
thereto, with the Securities and Exchange Commission; and be it
further
RESOLVED, that Andrew J. Donohue or Robert G. Zack, and
each of them hereby is authorized, empowered and directed, in
the name and on behalf of the Funds, to take such additional
action and to execute and deliver such additional documents and
instruments as any of them may deem necessary or appropriate to
implement the provisions of the foregoing resolution, the
authority for the taking of such action and the execution and
delivery of such documents and instruments to be conclusively
evidenced thereby. These resolutions supersede and replace the
resolutions adopted June 22, 1993.
In witness whereof, the undersigned has hereunto set his hand this
26th day of October, 1993.
/s/ George C. Bowen
-----------------------------------
George C. Bowen, Secretary
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Andrew J. Donohue or Robert G. Zack, and each of them, his true
and lawful attorneys-in-fact and agents, for him and in his capacity as
a trustee of OPPENHEIMER EQUITY INCOME FUND, a Massachusetts business
trust (the "Fund"), to sign on his behalf any and all Registration
Statements (including any post-effective amendments to Registration
Statements) under the Securities Act of 1933, the Investment Company Act
of 1940 and any amendments and supplements thereto, and to file the same,
with all exhibits thereto, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully as
to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, and
each of them, may lawfully do or cause to be done by virtue hereof. This
power of attorney shall not terminate in the event of my disability or
incapacity and replaces and supersedes all previous powers of attorney
executed by me for these purposes.
Dated this 26th day of October, 1993.
/s/ Ned M. Steel
Ned M. Steel
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Andrew J. Donohue or Robert G. Zack, and each of them, his true
and lawful attorneys-in-fact and agents, for him and in his capacity as
a trustee of OPPENHEIMER EQUITY INCOME FUND, a Massachusetts business
trust (the "Fund"), to sign on his behalf any and all Registration
Statements (including any post-effective amendments to Registration
Statements) under the Securities Act of 1933, the Investment Company Act
of 1940 and any amendments and supplements thereto, and to file the same,
with all exhibits thereto, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully as
to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, and
each of them, may lawfully do or cause to be done by virtue hereof. This
power of attorney shall not terminate in the event of my disability or
incapacity and replaces and supersedes all previous powers of attorney
executed by me for these purposes.
Dated this 26th day of October, 1993.
/s/ Robert M. Kirchner
Robert M. Kirchner
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Andrew J. Donohue or Robert G. Zack, and each of them, his true
and lawful attorneys-in-fact and agents, for him and in his capacity as
a trustee of OPPENHEIMER EQUITY INCOME FUND, a Massachusetts business
trust (the "Fund"), to sign on his behalf any and all Registration
Statements (including any post-effective amendments to Registration
Statements) under the Securities Act of 1933, the Investment Company Act
of 1940 and any amendments and supplements thereto, and to file the same,
with all exhibits thereto, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully as
to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, and
each of them, may lawfully do or cause to be done by virtue hereof. This
power of attorney shall not terminate in the event of my disability or
incapacity and replaces and supersedes all previous powers of attorney
executed by me for these purposes.
Dated this 26th day of October, 1993.
/s/ C. Howard Kast
C. Howard Kast
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Andrew J. Donohue or Robert G. Zack, and each of them, his true
and lawful attorneys-in-fact and agents, for him and in his capacity as
a trustee of OPPENHEIMER EQUITY INCOME FUND, a Massachusetts business
trust (the "Fund"), to sign on his behalf any and all Registration
Statements (including any post-effective amendments to Registration
Statements) under the Securities Act of 1933, the Investment Company Act
of 1940 and any amendments and supplements thereto, and to file the same,
with all exhibits thereto, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully as
to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, and
each of them, may lawfully do or cause to be done by virtue hereof. This
power of attorney shall not terminate in the event of my disability or
incapacity and replaces and supersedes all previous powers of attorney
executed by me for these purposes.
Dated this 26th day of October, 1993.
/s/ Raymond J. Kalinowski
Raymond J. Kalinowski
<PAGE> POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Andrew J. Donohue or Robert G. Zack, and each of them, his true
and lawful attorneys-in-fact and agents, for him and in his capacity as
a trustee of OPPENHEIMER EQUITY INCOME FUND, a Massachusetts business
trust (the "Fund"), to sign on his behalf any and all Registration
Statements (including any post-effective amendments to Registration
Statements) under the Securities Act of 1933, the Investment Company Act
of 1940 and any amendments and supplements thereto, and to file the same,
with all exhibits thereto, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully as
to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, and
each of them, may lawfully do or cause to be done by virtue hereof. This
power of attorney shall not terminate in the event of my disability or
incapacity and replaces and supersedes all previous powers of attorney
executed by me for these purposes.
Dated this 26th day of October, 1993.
/s/ Jon S. Fossel
Jon S. Fossel
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Andrew J. Donohue or Robert G. Zack, and each of them, his true
and lawful attorneys-in-fact and agents, for him and in his capacity as
a trustee of OPPENHEIMER EQUITY INCOME FUND, a Massachusetts business
trust (the "Fund"), to sign on his behalf any and all Registration
Statements (including any post-effective amendments to Registration
Statements) under the Securities Act of 1933, the Investment Company Act
of 1940 and any amendments and supplements thereto, and to file the same,
with all exhibits thereto, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully as
to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, and
each of them, may lawfully do or cause to be done by virtue hereof. This
power of attorney shall not terminate in the event of my disability or
incapacity and replaces and supersedes all previous powers of attorney
executed by me for these purposes.
Dated this 26th day of October, 1993.
/s/ Charles Conrad, Jr.
Charles Conrad, Jr.
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Andrew J. Donohue or Robert G. Zack, and each of them, his true
and lawful attorneys-in-fact and agents, for him and in his capacities as
Vice President, Secretary and Treasurer (Principal Financial and
Accounting Officer) of OPPENHEIMER EQUITY INCOME FUND, a Massachusetts
business trust (the "Fund"), to sign on his behalf any and all
Registration Statements (including any post-effective amendments to
Registration Statements) under the Securities Act of 1933, the Investment
Company Act of 1940 and any amendments and supplements thereto, and to
file the same, with all exhibits thereto, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as
fully as to all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and
agents, and each of them, may lawfully do or cause to be done by virtue
hereof. This power of attorney shall not terminate in the event of my
disability or incapacity and replaces and supersedes all previous powers
of attorney executed by me for these purposes.
Dated this 26th day of October, 1993.
/s/ George C. Bowen
George C. Bowen
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Andrew J. Donohue or Robert G. Zack, and each of them, his true
and lawful attorneys-in-fact and agents, for him and in his capacity as
a trustee of OPPENHEIMER EQUITY INCOME FUND, a Massachusetts business
trust (the "Fund"), to sign on his behalf any and all Registration
Statements (including any post-effective amendments to Registration
Statements) under the Securities Act of 1933, the Investment Company Act
of 1940 and any amendments and supplements thereto, and to file the same,
with all exhibits thereto, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully as
to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, and
each of them, may lawfully do or cause to be done by virtue hereof. This
power of attorney shall not terminate in the event of my disability or
incapacity and replaces and supersedes all previous powers of attorney
executed by me for these purposes.
Dated this 26th day of October, 1993.
/s/ William A. Baker
William A. Baker
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Andrew J. Donohue or Robert G. Zack, and each of them, his true
and lawful attorneys-in-fact and agents, for him and in his capacity as
a trustee of OPPENHEIMER EQUITY INCOME FUND, a Massachusetts business
trust (the "Fund"), to sign on his behalf any and all Registration
Statements (including any post-effective amendments to Registration
Statements) under the Securities Act of 1933, the Investment Company Act
of 1940 and any amendments and supplements thereto, and to file the same,
with all exhibits thereto, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully as
to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, and
each of them, may lawfully do or cause to be done by virtue hereof. This
power of attorney shall not terminate in the event of my disability or
incapacity and replaces and supersedes all previous powers of attorney
executed by me for these purposes.
Dated this 26th day of October, 1993.
/s/ Robert G. Avis
Robert G. Avis
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Andrew J. Donohue or Robert G. Zack, and each of them, his true
and lawful attorneys-in-fact and agents, for him and in his capacity as
a trustee of OPPENHEIMER EQUITY INCOME FUND, a Massachusetts business
trust (the "Fund"), to sign on his behalf any and all Registration
Statements (including any post-effective amendments to Registration
Statements) under the Securities Act of 1933, the Investment Company Act
of 1940 and any amendments and supplements thereto, and to file the same,
with all exhibits thereto, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully as
to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, and
each of them, may lawfully do or cause to be done by virtue hereof. This
power of attorney shall not terminate in the event of my disability or
incapacity and replaces and supersedes all previous powers of attorney
executed by me for these purposes.
Dated this 26th day of October, 1993.
/s/ James C. Swain
James C. Swain
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Andrew J. Donohue or Robert G. Zack, and each of them, his true
and lawful attorneys-in-fact and agents, for him and in his capacity as
the Chairman of OPPENHEIMER EQUITY INCOME FUND, a Massachusetts business
trust (the "Fund"), to sign on his behalf any and all Registration
Statements (including any post-effective amendments to Registration
Statements) under the Securities Act of 1933, the Investment Company Act
of 1940 and any amendments and supplements thereto, and to file the same,
with all exhibits thereto, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully as
to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, and
each of them, may lawfully do or cause to be done by virtue hereof. This
power of attorney shall not terminate in the event of my disability or
incapacity and replaces and supersedes all previous powers of attorney
executed by me for these purposes.
Dated this 26th day of October, 1993.
/s/ James C. Swain
James C. Swain
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000045156
<NAME> OPPENHEIMER EQUITY INCOME FUND
<SERIES>
<NUMBER> 1
<NAME> CLASS A SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-START> JUL-01-1993
<PERIOD-END> JUN-30-1994
<INVESTMENTS-AT-COST> 1766951808
<INVESTMENTS-AT-VALUE> 1875170644
<RECEIVABLES> 23850331
<ASSETS-OTHER> 85909
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1899106884
<PAYABLE-FOR-SECURITIES> 22666668
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 15645566
<TOTAL-LIABILITIES> 38312234
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1733061217
<SHARES-COMMON-STOCK> 187840921
<SHARES-COMMON-PRIOR> 178819338
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (3381130)
<ACCUMULATED-NET-GAINS> 22864901
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 108249662
<NET-ASSETS> 1772944207
<DIVIDEND-INCOME> 50544683
<INTEREST-INCOME> 54718271
<OTHER-INCOME> 0
<EXPENSES-NET> 17213975
<NET-INVESTMENT-INCOME> 88048979
<REALIZED-GAINS-CURRENT> 23085323
<APPREC-INCREASE-CURRENT> (101601423)
<NET-CHANGE-FROM-OPS> 9532879
<EQUALIZATION> 546821
<DISTRIBUTIONS-OF-INCOME> 85741017
<DISTRIBUTIONS-OF-GAINS> 22569711
<DISTRIBUTIONS-OTHER> 10423428
<NUMBER-OF-SHARES-SOLD> 26551307
<NUMBER-OF-SHARES-REDEEMED> 28698217
<SHARES-REINVESTED> 11168493
<NET-CHANGE-IN-ASSETS> 70448858
<ACCUMULATED-NII-PRIOR> 29426684
<ACCUMULATED-GAINS-PRIOR> 25827727
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 10114770
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 17213975
<AVERAGE-NET-ASSETS> 1831606000
<PER-SHARE-NAV-BEGIN> 10.01
<PER-SHARE-NII> .47
<PER-SHARE-GAIN-APPREC> (.39)
<PER-SHARE-DIVIDEND> .48
<PER-SHARE-DISTRIBUTIONS> .17
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.44
<EXPENSE-RATIO> 90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000045156
<NAME> OPPENHEIMER EQUITY INCOME FUND
<SERIES>
<NUMBER> 2
<NAME> CLASS B SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-START> AUG-17-1993
<PERIOD-END> JUN-30-1994
<INVESTMENTS-AT-COST> 1766951808
<INVESTMENTS-AT-VALUE> 1875170644
<RECEIVABLES> 23850331
<ASSETS-OTHER> 85909
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1899106884
<PAYABLE-FOR-SECURITIES> 22666668
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 15645566
<TOTAL-LIABILITIES> 38312234
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1733061217
<SHARES-COMMON-STOCK> 9340898
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (3381130)
<ACCUMULATED-NET-GAINS> 22864901
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 108249662
<NET-ASSETS> 87850443
<DIVIDEND-INCOME> 50544683
<INTEREST-INCOME> 54718271
<OTHER-INCOME> 0
<EXPENSES-NET> 17213975
<NET-INVESTMENT-INCOME> 88048979
<REALIZED-GAINS-CURRENT> 23085323
<APPREC-INCREASE-CURRENT> (101601432)
<NET-CHANGE-FROM-OPS> 9532879
<EQUALIZATION> 546821
<DISTRIBUTIONS-OF-INCOME> 2115733
<DISTRIBUTIONS-OF-GAINS> 515610
<DISTRIBUTIONS-OTHER> 241474
<NUMBER-OF-SHARES-SOLD> 9581829
<NUMBER-OF-SHARES-REDEEMED> 507125
<SHARES-REINVESTED> 266194
<NET-CHANGE-IN-ASSETS> 70448858
<ACCUMULATED-NII-PRIOR> 29426684
<ACCUMULATED-GAINS-PRIOR> 25827727
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 10114770
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 17213975
<AVERAGE-NET-ASSETS> 47414000
<PER-SHARE-NAV-BEGIN> 10.22
<PER-SHARE-NII> .36
<PER-SHARE-GAIN-APPREC> (.58)
<PER-SHARE-DIVIDEND> .43
<PER-SHARE-DISTRIBUTIONS> .17
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.40
<EXPENSE-RATIO> 182
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
Oppenheimer Equity Income Fund
Exhibit 24(b)(16) to Form N-1A
Performance Data Computation Schedule
The Fund's average annual total returns and total returns are calculated
as described below, on the basis of the Fund's distributions, for the
past 10 years which are as follows:
Distribution Amount from Amount from
Reinvestment Ordinary Long and Short-Term Reinvestment
(Ex) Date Income Capital Gains Price
Class A Shares
07/06/84 $0.1125 $0.5475 $6.180
10/05/84 0.1125 0.0000 6.500
01/14/85 0.1125 0.0000 6.800
04/12/85 0.1125 0.0000 7.250
07/15/85 0.1125 0.1510 7.650
10/14/85 0.1125 0.0000 7.400
01/13/86 0.1125 0.0000 8.080
04/14/86 0.1200 0.0000 9.010
07/14/86 0.1200 0.5200 8.380
10/13/86 0.1200 0.0000 8.340
12/19/86 0.0000 0.0900 8.490
01/12/87 0.1200 0.0000 8.760
04/06/87 0.1200 0.0000 9.740
07/06/87 0.1200 0.5200 9.230
10/09/87 0.1200 0.0000 9.350
12/24/87 0.1200 0.3550 7.940
03/25/88 0.1200 0.0000 8.200
06/24/88 0.1200 0.0000 8.500
09/23/88 0.1200 0.0000 8.330
12/23/88 0.1200 0.0150 8.420
03/23/89 0.1200 0.0000 8.660
06/23/89 0.1200 0.0000 9.310
09/21/89 0.1200 0.0000 9.600
12/22/89 0.1400 0.2400 9.150
03/29/90 0.1200 0.0000 9.110
06/21/90 0.1200 0.0000 9.230
09/27/90 0.1200 0.0000 8.460
12/27/90 0.1200 0.1450 8.470
03/21/91 0.1200 0.0000 8.990
06/26/91 0.1200 0.0000 8.850
09/26/91 0.1200 0.0000 9.210
12/26/91 0.1250 0.1185 9.120
03/26/92 0.1200 0.0000 9.110
06/25/92 0.1200 0.0000 9.090
09/24/92 0.1200 0.0000 9.220
12/24/92 0.0990 0.1450 9.320
03/25/93 0.1200 0.0000 9.840
06/24/93 0.1200 0.0000 9.880
09/23/93 0.1200 0.0000 10.200
12/27/93 0.1200 0.1721 10.010
03/24/94 0.1200 0.0000 9.860
06/23/94 0.1200 0.0000 9.490
Class B Shares
09/23/93 0.1150 0.0000 10.180
12/27/93 0.1060 0.1721 9.990
03/24/94 0.1030 0.0000 9.830
06/23/94 0.1020 0.0000 9.460
<PAGE>
Oppenheimer Equity Income Fund
Page 2
1. AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 06/30/94:
The formula for calculating average annual total return is as follows:
1 ERV n
- ----------- = n (-----) - 1 = average annual total return
number of years P
Where: ERV = ending redeemable value of a hypothetical $1,000
payment bade at the beginning of the period.
P = hypothetical initial investment of $1,000
Class A Shares
Examples, assuming a maximum sales charge of 5.75%:
One Year Five Year
$948.63 1 $1,381.09 0.2
(-------) -1 = -5.14% (---------) -1 =6.67%
$1,000.00 $1,000.00
Ten Year
$3270.28 0.1
(-------) -1 = 12.58%
$1,000.00
Class B Shares
Examples, assuming a maximum contingent deferred sales charge of 5.00% for
the first year:
Inception
$927.66 1.1500
(--------) -1 = -8.27%
$1,000.00
Examples at NAV:
Class A Shares
One Year Five Year
$1,006.51 1 $1,465.35 0.2
(---------) -1 =0.65% (---------) -1 =7.94%
$1,000.00 $1,000.00
Ten Year
$3,469.79 0.1
(--------) -1 = 13.25%
$1,000.00
Class B Shares
Inception
$976.48 1.1500
(----------) -1 = -2.70%
$1,000.00
<PAGE>
Oppenheimer Equity Income Fund
Page 3
2. CUMULATIVE TOTAL RETURNS FOR THE PERIODS ENDED 06/30/94:
The formula for calculating cumulative total return is as follows:
ERV - P
-------- = Cumulative Total Return
P
Class A Shares
Examples, assuming a maximum sales charge of 5.75%:
One Year Five Year
$948.63 - 1,000 $1,381.09 - 1,000
- -------------- = -5.14% -------------- = 38.11%
$1,000 $1,000
Ten Year
$3,270.28 - $1,000
- ------------------- = 227.03%
$1,000
Class B Shares
Examples, assuming a maximum contingent deferred sales charge of 5.00% for
the first year:
Inception
$927.66 - 1,000
------------------ = -7.23%
$1,000
Examples at NAV:
Class A Shares
One Year Five Year
$1,006.51 - 1,000 $1,465.35 - 1,000
- ---------------- = 0.65% -------------- = 46.53%
$1,000 $1,000
Ten Year
$3,469.79 - 1,000
- ------------- = 246.98%
$1,000
Class B Shares
Inception
$976.48 - 1,000
------------------ = -2.35%
$1,000
September 30, 1970
Hamilton Income Fund, Inc.
777 Grant Street
Denver, Colorado
Gentlemen:
This is to certify that I have examined the Certificate of Incorporation
of Hamilton Income Fund, Inc. and all amendments thereto; its by-laws; the
Custody Agreement with the First National Bank of Denver, and the minute
books of the corporation, with a view to determining the legality of the
issuance of Ten Million (10,000,000) shares of said corporation, and from
such investigation, I can advise as follows:
1. That Hamilton Income Fund, Inc. is duly organized under the laws
of the State of Delaware and is a de jure corporation in good standing
under the laws of the State of Delaware.
2. That Hamilton Income Fund, Inc. is authorized by its Certificate
of Incorporation as amended to issue One Hundred Million (100,000,000)
shares of stock having a par value of One Dollar ($1.00) per share, the
same being all of one class.
3. That the issuance by Hamilton Income Fund, Inc. of Ten Million
(10,000,000) shares in no manner conflicts with the laws of the States of
Delaware or Colorado.
4. That upon being properly registered with the United States
Securities and Exchange Commission, and when issued and paid for upon the
terms shown in the registration statements of Hamilton Income Fund, Inc.,
said Ten Million (10,000,000) shares covered in said registration will be
validly issued, fully paid and non-assessable shares.
I do further consent and agree that the foregoing opinion given by me in
connection with the registration of Ten Million (10,000,000) shares may
be used by Hamilton Income Fund, Inc. for the purpose of registering such
shares with the United States Securities and Exchange Commission and that
the name of our firm, Neef, Swanson and Myer, may be included in the
prospectus as legal counsel for Hamilton Income Fund, Inc.
Very truly yours,
/s/ Rendle Myer
Rendle Myer, Legal Counsel for Hamilton
Income Fund, Inc.
